EUROPEAN FIXED UPDATE: USTs contained into a packed agenda, Gilts continue to ease from Tuesday's best

USTs: +3 ticks, 112-28

• A firmer start to the day but only modestly so. Action for USTs overnight occurred in tandem with the broader risk tone, as a move lower in equity futures was seen around the beginning of the APAC session, the fixed benchmark picked up, taking USTs to an overnight 113-02 high.


• Thereafter, the benchmark drifted as the risk tone picked up off lows and stabilised. Nonetheless, USTs hold onto modest gains but are at the lower-end of a narrow 112-26 to 113-02 band.


• The docket ahead is packed from a US perspective. Firstly, the monthly ADP (reminder, they also do a weekly update now on non-NFP weeks) series is due and expected to come in at 28k (prev. -32k). A print in focus given Chair Powell’s hawkish press conference; as such, an in-line or stronger print could push back further on the odds of a December cut with around a 73% chance currently implied. On the flip side, a soft ADP and particularly if we get another negative figure could unwind some of the post-Powell hawkishness seen in pricing.


• Shortly after, the Quarterly Refunding Announcement hits and is expected to maintain the nominal coupon auction sizes for the November-January period, in-line with the strategy under Treasury Secretary Bessent of maintaining auction sizes for the foreseeable future. If there is a change, it will likely be in TIPS. Morgan Stanley expects the 10yr (re-open) size to be maintained, but the 5yr (re-open) and 10yr (new) to be increased.


• Thereafter, ISM Services hits and is seen ticking higher on the headline, to 50.8 (prev. 50.0).


• Finally, the Supreme Court tariff hearing begins today with oral arguments to be presented for the first time. A hearing that could see the IEEPA tariffs measures potentially rescinded, though reports suggest the White House is working on a Plan B, just in case. The arguments begin today, but a ruling is not expected for several months, possibly around end-Q1 2026.

Bunds: +1 ticks, 129.28

• Echoing USTs in terms of overnight direction, though the magnitude of action has been slightly more pronounced, Bunds are in a 129.26-47 band but ultimately remain in the green by a tick or two, as is the case with USTs.


• No move to the morning’s final PMIs, posting upward revisions to the services and composite measures. The latest ECB wage tracker maintained the annual rate and did not spark any price action. One point to watch, though is the uptick in the quarterly components, action that factors on the hawkish side of the equation into the December ECB.


• The only major auction scheduled this morning is from Germany. As a reminder, German taps have been soft in recent weeks; however, the 2041 and 2044 lines on offer today have been the exception to that, supported by the limited amount offered at each outing.

Gilts: -16 ticks, 93.50

• Underperforming peers. Opened unchanged 93.66 before lifting a few ticks higher to 93.69, acknowledging the overnight move, and then slipping into the red and currently to a 93.50 trough, posting downside of 16 ticks at most.


• Pressure that sends Gilts back to the 93.49 low from Tuesday, but still above Monday’s 93.37 close and thus retaining some of the support derived from the late-Monday/early-Tuesday press briefings around potential UK tax moves; as a reminder, the benchmark extended during Chancellor Reeves’ speech on Tuesday, but ended her Q&A out towards pre-speech levels.


• Overnight updates include The Times reporting that Reeves is considering removing the 5p cut to fuel duty (introduced in 2022, after Russia invaded Ukraine), as it is not being passed onto individual customers. That cut, alongside the duty freeze that has been in place since 2011 costs c. GBP 3bln/yr.

05 Nov 2025 - 10:05- Fixed IncomeEU Research- Source: Newsquawk