EUROPEAN FIXED UPDATE: USTs sink on US Government shutdown related progress

USTs: -9.5 ticks, 112-18+

• USTs are underperforming today and currently reside at session lows within a 112-15 to 112-23 range. Downside comes after a week of safe haven-related inflows after a string of poor private labour market figures, downbeat UoM sentiment metrics, AI-bubble related fears and ongoing US government shutdown; the latter has recently shown signs of progress, which has boosted risk sentiment today.


• In terms of details, the US Government shutdown is showing some early signs of progress after eight democrats voted with Republicans to advance a deal which would reopen the government and keep it funded until the end of January. Other details include a reversal of White House-related lay-offs and a guarantee that furloughed workers receive back pay. Now the deal is subject to debate by the Senate and then a final sign-off by the House of Representatives. The POTUS said “You’ll know very soon”, in relation to shutdown-related progress.


• Price action today has only really been one direction today, and that’s downwards; overnight saw the USTs open at 112-23 (highest today) and continue to trundle lower to make a fresh trough of 112-15 in early European hours. Further pressure for US paper could see a test of the trough from the 6th of November at 112-10 and then 112-09+ a day earlier. However, it is worth highlighting that there is a lack of US-specific data releases scheduled for today and tomorrow, the US will be on holiday on account of Veterans’ Day. ING opines that given the lack of data, money markets may continue to unwind odds of a December cut, as policymakers appear to throw caution on that confab.


• Elsewhere, trade-related progress may also be helping sentiment today. The USTR announced the suspension of its Section 301 investigation targeting maritime logistics and shipbuilding sectors.

Bunds: -10 ticks, 129.02

• Bunds are weaker today, albeit to a lesser extent than global peers; currently trading off by around 10 ticks in a 128.80 to 128.96. Gapped below 129.00 at the open, and continued to drip lower overnight and into the European open. However, the German paper then caught a slight bid just after the cash open, which took Bunds back a couple of ticks above opening levels, to make a current peak of 129.02.


• Really not much from a European perspective today, aside from a downbeat EZ Sentix print, which printed below the most pessimist of analyst expectations. Over the weekend, ECB’s Sleijpen cautioned against signing off too easily on joint European bonds and said they ultimately only lead to higher debt, according to Bloomberg. More focus has been on the geopolitical landscape, on which Russia launched a large attack on Ukraine’s energy sector and infrastructure over the weekend.

Gilts: -22 ticks, 92.99

• Gilts are on the backfoot, in-fitting global peers but to a lesser magnitude than their US counterparts. Newsflow ultimately solely focused on the looming UK budget at the end of this month; on that, Chancellor Reeves is reportedly set to increase the rate of dividend tax, according to The Telegraph. This follows on from reports via the same press which suggested that Reeves was looking to hike income tax by 2%, whilst simultaneously cutting NI by that same magnitude.


• Gilts have seemingly been getting accustomed to continued reports of tax-related newsflow, after Reeves provided a slight reprieve to markets are she failed to reiterate her tax-related pledges at a presser in recent weeks.


• UK data non-existent today, but will pick-up in the form of a jobs report on Tuesday. On that, September’s Unemployment rate is expected to tick up to 4.9% (prev. 4.8%) while the headline earnings metric is forecast to remain at 5.0% and the ex-wage figure moderating to 4.6% (prev. 4.7%). Overall, whilst the figures will provide the BoE with some added colour on the UK economy, Governor Bailey (who appears to be the deciding vote for December) highlighted concerns related to inflation at the most recent BoE meeting. Money markets currently assign a 57% chance of a cut in December.

10 Nov 2025 - 09:55- Fixed IncomeEU Research- Source: Newsquawk