EUROPEAN FIXED UPDATE: NVDA pressure lifts the complex to highs pre-FOMC, Gilts outperform post-CPI

USTs: +2 ticks, 113-19+

• Initially in a holding pattern into the FOMC. Unchanged in a very thin band for the first part of the European morning.


• Specifics this morning for the US were initially light, obviously the FOMC looms but otherwise US-China talks and in particular TikTok features heavily after the US extended its enforcement delay. Elsewhere, the latest reports suggest the House could vote on a continuing resolution, with reference to the end-September shutdown.


• In terms of the Fed, a 25bps cut is the base case though markets continue to imply a slim chance of a larger 50bps move. Attention thereafter will be on forward guidance, to see if the FOMC implies further easing or retains a data-dependent stance; the vote split and dots of interest on this point. Note, during Chair Powell’s press conference President Trump will be speaking to the media as part of his UK state visit.


• More recently, a bout of strength was spurred by the FT reporting that China has ordered its large tech firms to stop ordering the China-specific NVIDIA chip. An update that has weighed on the broader risk tone and spurred USTs to a 113-21 peak with gains of 4 ticks at best.

Gilts: +22 ticks, 91.61

• A firmer start to the day following on from UK CPI. Gilts opened with gains of 13 ticks before extending another 10 to an initial 91.62 peak.


• Upside that was driven by the August inflation report. In brief (see feed for more detail) the majority of the release was as expected though, the services components came in cooler-than-expected and have spurred the morning’s modest dovish move. The release does not change the narrative of unchanged this week from the BoE or the view that inflation will likely tick higher in the months ahead.


• Market pricing has seen a very slight dovish adjustment, with a bp or two of extra easing implied by the end of the market forecast horizon.


• Countering the bullish impetus, and possibly factoring into the pullback towards and below opening levels seen as the morning progressed (before the NVDA update, at least), was renewed focus on the Autumn Budget. Overnight, multiple press reports suggest the OBR will be downgrading their assessment of UK productivity, a cut which will amplify the already difficult fiscal situation Chancellor Reeves finds herself in.


• As mentioned above, the NVDA update spurred a bout of risk off and strength in fixed income. For Gilts, this took the benchmark to above its post-CPI best, notching a 91.70 high, looking to 91.75 and 91.82 from last week.


• Ahead, the UK docket is light with markets generally awaiting the FOMC tonight before focus returns to home on Thursday with the BoE due. In brief, the base rate is expected to be maintained at 4.0% with focus on the vote split given the historic division last time and also the Bank’s QT plans; set to slow from the current GBP 100bln/yr pace to around GBP 70bln. Full Newsquawk preview available.

Bunds: +14 ticks, 128.85

• Initially in-fitting with USTs with specifics light. Thereafter, some modest upside was seen after UK CPI, but this proved fleeting.


• As the morning progressed, the benchmark began to pull back a little more and notched a 128.71 low. However, this was superseded by the risk move seen on the FT-NVDA report, propelling Bunds to a 128.98 peak with gains of 27 ticks at best.


• No move seen to the final EZ HICP, revised down to 2% (prelim. 2.1%) for the headline Y/Y while the core and super-core figures were unrevised.


• Ahead, dual-tranche supply is due and should pass without issue given the limited amount entering the market, though the discussed rally means that around half of the concession built into Bunds from last Friday has now been eroded.

17 Sep 2025 - 10:15- Fixed IncomeEU Research- Source: Newsquawk