EUROPEAN FIXED UPDATE: Relatively contained trade into a session of central bank speak and the ISM Manufacturing series

USTs: +4+ ticks, 112-26

• We are yet to get the formal dissent speech from Miran, who once again sought a 50bps cut, but he has provided some remarks to the NY Times. Miran said “if you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession”, explaining that he does not “see a reason to run that risk if I’m not concerned about inflation on the upside”.


• Remarks that are not particularly surprising from the outspoken dove. As a reminder, his September dissent speech hit at 17:00GMT/12:00ET on the Monday after the policy announcement, in which he described policy as being “well into” restrictive territory and saw the appropriate rate as being in the mid-2% area.


• On Friday, Waller (voter) said he still advocates a December cut as the data fog does not tell you to stop, pointing to the Fed having lots of data despite the shutdown, a weak labour market and only minor tariff effects on inflation.


• Miran aside, we also get Cook (voter) and Daly (2027) later today, in addition to the refinancing estimates ahead of Wednesday’s Quarterly Refunding Announcement. Before that, ISM Manufacturing hits and given the lack of NFP on Friday owing to the shutdown the employment component may draw even-greater attention than usual. This week, we will get ADP and Challenger but no JOLTs, weekly claims or as mentioned, NFP.


• Price action this morning was limited for USTs at first owing to the Japanese closure for Culture Day. USTs picked up a bit more into the European day alongside benchmarks generally and despite an uptick in equity performance. Action that took USTs to a 112-27 peak, nearly matching Friday’s 112-27+ high, last week’s 112-29+ best just above.

OATs: +7 ticks, 122.64

• Friday’s Zucman tax measures failed to garner support in the National Assembly on Friday, though a slight adjustment was made to a real estate tax to target “unproductive wealth”. Supported by the Socialist Party, but markedly shy of the measures they seek.


• The fiscal schedule sees the start of the debate/voting process on the Revenue Bill (PLF) from November 4th to the 12th. However, the Socialist's in-focus measures and those suggested as areas of potential concession by PM Lecornu are under the Social Security Bill (PLFSS); as such, Politico reports that discussion will not recommence until the 13th, potentially providing a reprieve for Lecornu and an opportunity for talks to continue behind the scenes.


• After the failed votes on Friday re. Zucman, discussion continued over the weekend with PS seemingly now somewhat mixed on the next steps. Politico surmises that some are willing to let the debates run their course before making a decision on a no-confidence motion, as Lecornu is seemingly willing to make concessions. However, others highlight the lack of progress on tax increase concessions and a concern around balancing the measures at the end.


• Therefore, we await more timely updates from Socialist leader Faure on the mood music within his party, and what Lecornu sees as the next steps, though if the Socialists are willing to give more time for discussions, we may not get a significant development until the PLF window passes.


• Amidst this, the OAT-Bund 10yr yield spread has narrowed a touch to just above the 78bps mark, potentially trading off the c. 10 day reprieve Lecornu may very well have.

Bunds: -4 ticks, 129.35

• Drifted lower overnight and then came under pressure this morning on the announcement of six-part EUR denominated Alphabet issuance, an update that sent Bunds to a 129.24 trough with downside of 15 ticks at most.


• However, the move proved somewhat short-lived with Bunds bouncing thereafter to 129.41, but still shy of the overnight early doors 129.46 peak. Upside that started around the European cash equity open and despite the equity tone picking up at the time amid the MOFCOM announcing in-depth China-EU talks.


• While firmer the action, as is the case with USTs (see above), leaves Bunds just shy of Friday’s 129.49 best and last week’s peak at 129.73. No substantial move to the Final Manufacturing PMIs this morning, neatly surmised by HCOB as “fragile in Germany, in recession in France, persistently weak in Italy, and showing only subdued growth in Spain.“.


• Ahead, we await a slide release from ECB’s Lane.

Gilts: +5 ticks, 93.67

• Opened with upside of a handful of ticks at 93.65 before extending to a 93.74 peak in tandem with peers as outlined above, a high that just about eclipses Friday’s 93.71 best but stopped shy of 93.89 and 93.96 from earlier that week.


• No move to a slight upward revision to the Final Manufacturing PMI, but one that left it in contractionary territory. The release highlighted that manufacturing is in a holding pattern, awaiting clarity on the domestic fiscal and geopolitical backdrop.


• Weekend press reports focussed on the fiscal situation, as Reeves is said to be preparing a pension tax raid of as much as GBP 4bln, according to The Telegraph. Additionally, the FT reports that the Treasury is looking into higher council tax bands, a tweak that could raise several billion pounds.


• This week though, the focus will be on the BoE where a hold is likely though almost certainly subject to a split decision and as such a cut cannot be entirely ruled out, with markets ascribing just over a 30% chance of a move. Further out, a December cut is more likely, though we await the next inflation report and crucially the Autumn Budget before a firm call can be made.

03 Nov 2025 - 10:00- Fixed IncomeEU Research- Source: Newsquawk