EUROPEAN FIXED UPDATE: Regional banking concerns drive a FTQ for fixed

USTs: +5 ticks, 113-29

• Firmer, as the US regional banking backdrop remains at the forefront of market focus for today. USTs peaked at 114-02 early doors, sending the US 10yr yield below the 4% mark for the first time since April; for reference, the April low was 3.86%.


• Since, the benchmark has pulled back to just below the 114-00 mark but holds onto gains of c. 5 ticks on the session and around 25 on the week, as things stand.


• The docket ahead features Fed’s Musalem (2025). However, the focus will likely remain on the banking situation, particularly as a handful of names are due to report in the US equity pre-market, beginning with Regions Financial and Truist Financial at 11:00BST. As a marker, the S&P Regional Banking ETF (KRE) is lower by c. 2% in pre-market trade, after closing Thursday lower by 6.2%.

Bunds: +29 ticks, 130.29

• Bid, given the general risk tone and FTQ seen after the US regional banking flareup on Thursday. Bunds peaked at 130.59 early doors before seeing a relatively sharp pullback as the European morning got underway, to a 130.22 low; but, still firmer on the session.


• While Bunds have pulled back, they remain comfortably clear of Thursday’s 129.88 open and are currently only just beneath that session's 130.43 high. If the retreat picks up steam, support resides at the figure before 129.88, 129.68 and 129.36 from the last three sessions.


• European specific newsflow of note for fixed income a little light. The docket ahead features ECB’s Nagel and Rehn while the final HICP print for September is due around the time of publication, but is unlikely to be a significant driver.


• Elsewhere, OATs trade broadly in-line with Bunds and while the OAT-Bund 10yr yield spread has widened a touch from the narrowest points seen on Thursday after the confidence motions, it remains comfortably below the 80bps mark.

Gilts: +18 ticks, 92.81

• Gapped higher by 46 ticks, acknowledging the upside seen in peers on Thursday after the Gilt close as the US regional banking situation reverberated to the broader risk tone.


• Opened at 93.10 and extended to a 93.17 peak, notching a new high for the week and taking the benchmark to its highest since July when Gilts briefly traded above 93.50. Amidst this, the UK 10yr yield found itself under pressure and to a 4.45% low; the lowest since July when 4.41% printed.


• A yield pullback that will be welcomed by Chancellor Reeves; though, one that comes too late to impact next week’s September PSNB data, where interest payments are expected to drive another borrowing increase. Nonetheless, the one way traffic for the 10yr yield since October 10th will be reflected in the series due just before Reeves’ budget is published.


• Since the open, Gilts have also copied the direction for EGBs and USTs this morning and have pulled back modestly from highs. Currently, the benchmark holds at the lower end of a 92.74-93.17 band but is still comfortably firmer on the session.


• Ahead, we have a handful of BoE speakers due. On the hawkish side, Pill and Greene feature and are followed by the usually more neutral Breeden.

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