EUROPEAN FIXED UPDATE: OATs lead, awaiting the French PM announcement

JGBs +7 ticks, 135.97

• Traded in tandem with peers overnight but with slightly larger gains than those seen in USTs/Bunds despite a set of firmer-than-expected PPI data.


• Overnight, the benchmark got to a 135.95 peak early doors with gains of 23 ticks at best.


• Since, the action has been superseded by Komeito announcing it will be leaving the LDP-Komeito coalition. An update that adds further risk to the Japanese political landscape and potentially limits the scope of Takachi’s stimulus, lifting JGBs to a 136.16 peak with gains of 44 ticks at most.


• Since, the move has pared back to c. 136.00 as we await further details from Takachi on her next steps, with the LDP seeking talks with Komeito next week on the subject.

OATs: +24 ticks, 121.73

• The deadline for Macron to announce his next PM is fast approaching. France needs to present its 2026 budget proposal by Monday, October 13th for a vote on it by the end of the year to be possible. While a full government cabinet is not needed to make a proposal, a PM is.


• Politico this morning reported that Macron is leaning towards giving caretaker Lecornu another chance. While the likes of Borloo remain an option, but a lesser one.


• An update that appears to have been relatively well received as OATs outperform Bunds modestly, with the spread holding around 82bps and marginally narrower than yesterday’s levels. One possible narrative for this narrowing is that Macron wanting to re-appoint Lecornu potentially implies that he perhaps made more progress than initially outlined in his talks with other parties on finding common ground.


• On that, Macron has since summoned all parties except RN and LFI to talks at 13:30BST today.

Gilts: +25 ticks, 90.71

• Opened higher by 21 ticks, following and marginally extending on the bias set by USTs and Bunds overnight. Though, similarly, the current 90.73 peak is shy of yesterday’s 90.83 best and by extension the 90.93 WTD peak.


• For the UK, focus remains on the upcoming budget as the NIESR outlines that an increase to income tax to plug the fiscal gap would be the least damaging way for Chancellor Reeves to deal with the situation.


• Elsewhere, the complex begins to look at next week’s data, including the labour report and GDP. Though, the data is unlikely to have much sway on the November decision with a hold very much the base case, and while it may factor into pricing for end-2025, with 6bps of easing currently implied, the market is very much waiting for the fiscal update to finalise its view.

Bunds: +21 ticks, 128.87

• Lifting off Thursday’s 128.63 low and posting gains of c. 24 ticks at most. To a 128.91 high, eyeing the 129.01 peak from Thursday and then the 129.06 WTD best.


• Specifics light. No move to a dire set of Italian industrial data for August. Focus for EGBs firmly on the situation around France, as outlined above.

USTs: +6 ticks, 112-21+

• Firmer, in-fitting with the above. At a 112-23 peak, a tick+ shy of yesterday’s 112-24+ best and by extension the 112-27 WTD high.


• Thus far, specifics light as we digest overnight Fed speak, updates concerning the BLS and the continued lack of substantial shutdown progress.


• On the BLS, the NY Times reported that some staff are being recalled to work only on the September CPI report (technically scheduled for next week, but shelved during shutdown). The series is required to determine the annual Social Security adjustment, which needs to be published by November 1st; as such, the narrative is that the BLS is preparing the release in anticipation of the gov’t reopening before month-end. For clarity, the staff are reportedly only working on CPI.


• Later, we hear from Fed’s Goolsbee (2025) and Musalem (2025); remarks have focused on alternative labour market measures and increased risk of labour market weakening, respectively.

10 Oct 2025 - 09:55- Fixed IncomeEU Research- Source: Newsquawk