EUROPEAN FIXED UPDATE: Under modest pressure given the earnings-driven US risk tone & Meta issuance, Fed speak looms

USTs: -2+ ticks, 112-20

• Under modest pressure early doors amid the constructive performance of US equity futures as numbers from Amazon and Apple drive the region, and particularly the NQ, higher. Additionally, the debt space has been hit by Meta announcing USD 30bln of issuance, the largest corporate HG offering this since 2023 and the largest Meta has ever tapped the market for.


• Newsflow this morning has been light as we await upcoming Fed speakers. Into those, UST are towards the trough of a 112-17+ to 112-23+ band with downside of 5+ ticks at most. The low is just a tick above Thursday’s 112-16 post-Powell base.


• The Fed docket begins this afternoon, featuring Logan (2027), Bostic (2027) and Hammack (2026); however, the topics don’t appear to be directly pertinent to current/future monetary policy. Instead, the main focus will likely be on the dissent texts from Miran (voted for a 50bps cut, again) and Schmid (voted for U/C).


• Remarks, particularly the explainer from Schmid, that may help to inform the conversation around December, after Powell’s hawkish language in the press conference. As it stands, markets imply around a 65% chance of a 25bps cut in December.

Bunds: -11 ticks, 129.24

• Weighed on in-fitting with the above. Down to a 129.16 trough into the flash EZ HICP print, posting losses of c. 20 ticks at worst. Overall, no move to the inflation print with Bunds slightly off worst but still firmly in the red into a busy US agenda of Fed speak.


• The EZ series follows the French harmonised Y/Y figure cooling from the prior by more than expected. Conversely, the German series was hotter than forecast but still moderated marginally from the prior. While the Spanish measure was hotter than previous and consensus. As such, the risk into the EZ wide print was for a slightly hotter than forecast series, particularly for the core measures given the hotter Spain and sticky German figure.


• EZ Flash HICP Y/Y printed at 2.1% as expected (prev. 2.2%), both the core and super core remained at 2.4% vs exp. 2.3%. Pertinently, and potentially of concern for the ECB and a slight knock to the narrative around a Dec. cut (see below), the Services figure jumped to 3.4% (prev. 3.2%).


• Ultimately, the print does not change the narrative for the ECB that inflation remains near target and the outlook is broadly unchanged, though the sticky core and hotter services will be keenly watched. As a reminder, post-ECB Reuters sources added to the known narrative around December; that the 2028 inflation forecasts could spark a ‘showdown’ on inflation and by extension interest rates, as the projection could print in favour of easing. Market pricing currently implies just under a 5% chance of a cut, unchanged vs pre-HICP levels.


• ECB speak this morning has, thus far, not added much to the debate. Though, but unsurprisingly, those on the hawkish side have pushed back on the December cut debate, e.g. Kazaks saying they need to avoid being ‘jumpy’ on rates and the 2028 outlook should not be overinterpreted.

Gilts: -19 ticks, 93.53

• Opened lower by 18 ticks at the benchmark reacted to the overnight pressure from US earnings and Meta issuance. Thereafter, Gilts fell another 10 to a 93.44 trough but still clear of Thursday’s 93.29 base and the WTD low of 93.15 from Monday.


• Specifics for the UK are relatively light, domestic press remains focussed on the rental blunder by Chancellor Reeves. As it stands, PM Starmer is standing by her but the scandal could ultimately lead to her dismissal; given how close we are to the Autumn Budget, if that occurs before the replacement would likely be a continuity-appointment to essentially deliver Reeves’ budget.


• If she is replaced after the budget, a change in fiscal direction is possible, though the proximity of key officials from Reeves’ staff to PM Starmer (particularly Darren Jones) diminishes the odds of a significant change in direction.


• Elsewhere, this morning, Nationwide House Prices came in above consensus both M/M and Y/Y.

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