EUROPEAN FIXED UPDATE: Pressured as the risk tone sees pockets of improvement, no move to supply

USTs: -7 ticks, 113-16

• Softer, in APAC trade and continued to dip into and throughout the European morning. Initially, pressure seemingly a function of participants digesting the overnight trade updates and concluding the US-China situation perhaps wasn’t quite as bad as initially thought.


• A point added to by the fact the US’ Bessent and China’s He are still set to meet in Malaysia from tomorrow.


• Overnight, the bearish skew was only enough to send USTs lower by a tick or two. Action that has intensified modestly this morning to a 113-18 trough with downside of 7+ ticks at most. If the move extends, we look to Tuesday’s 113-17 low before the 113-10+ WTD base.


• Ahead, we get Barr and Bowman but as the Fed is in blackout the remarks should be a non-event. Data wise, the shutdown continues to limit the schedule but the Kansas City Fed will publish its latest manufacturing survey. Within this, inflation-related commentary will draw attention; as a reminder, the September series featured “Price growth for finished products and raw materials fell slightly from last month, while raw materials prices grew at a faster pace from this time last year.”


• Price commentary under greater focus as we start to look at the September CPI report which will be released tomorrow for social security adjustment purposes, despite the shutdown.

Bunds: -15 ticks, 129.95

• In the red, hit by the better tone around trade as outlined above. Further pressure for fixed income also stemming from the continued advances in energy prices, biasing yields higher.


• Thus far, Bunds to a 129.96 low with downside of 14 ticks at most. A base that takes out yesterday’s 130.05 trough but has stopped short of 129.94 and 129.76 from the two sessions beforehand.


• Specifics for the bloc focused on the Russian sanctions package and the growing acceptance that some form of carveout to appease Belgium around the use of frozen assets will be required.


• Elsewhere, and from a European firm but pertinent to fixed generally, CMB Tech decided not to proceed with a USD-denominated 5yr note offering due to less favourable terms under current conditions vs other available alternatives. An update that adds to the general narrative that demand for debt is starting to wane; a point echoed by the performance of recent auctions via, for example, Germany.


• For Germany, the tax expert council says they see no change in tax revenue for the Federal gov't over the forecast horizon to 2029, despite an increase in overall tax revenue; as the government is bearing most of the costs of bolstering growth.

Gilts: -15 ticks, 93.41

• A softer start to the day after the benchmark closed out Thursday with gains of near 60 ticks. Gilts opened lower by a handful of ticks, acknowledging price action in peers, but did briefly rebound above yesterday’s close to gains of two ticks at 93.56.


• However, the move proved fleeting with specific newsflow light and Gilts then conformed to and extended on the bearish bias in pers, dipping to a 93.39 low as the risk tone saw some tentative signs of an improvement.


• Gilts found themselves at that low into supply which was received well enough but spurred no reaction.


• Elsewhere, the domestic press continues to digest yesterday’s inflation data, yield moves and the potential implications of that on Chancellor Reeves' fiscal position; but, overall, nothing particularly groundbreaking has emerged thus far.

23 Oct 2025 - 10:15- Fixed IncomeEU Research- Source: Newsquawk