[MARKET ANALYSIS] A firmer week for fixed income, amid central bank inaction and a tech sell-off

A firmer final session of the week so far for fixed, with benchmarks at/towards fresh WTD highs in the early morning, but since slipping just off those as energy continues to inch higher. Upside for the space is generally a function of the week’s major central banks not tightening and a tech sell-off, with the Fed, ECB and BoJ all on hold and to varying degrees outlining focus on the growth narrative and tighter financial market conditions, which could theoretically serve to limit the need for tightening ahead. However, all are on track for a hike by end-2026; currently, CME has a 74% implied chance of a December Fed hike, for instance. Policy aside, the other main focus point for today is geopolitics. The main update is a Qatari delegation arriving in Tehran for mediation efforts. Though given the dismissive approach US President Trump reportedly took to VP Vance’s outreach, and recent reporting keeping post-midterm strikes very much in play, it remains to be seen whether this effort can progress the situation. USTs are at a 106-27 high for the week, firmer by 20 ticks on the day at best and around 25 ticks WTD. Bunds also bid, though off highs as Dutch TTF continues to climb. As it stands, firmer by about 15 ticks, but some 40 off the 122.64 WTD peak. As above, the path for the ECB is towards a December hike, but risks to tightening then, but more so thereafter, are present from the yield and growth backdrop; see Thursday’s post-meeting analysis for more. Gilts in-fitting with the above directionally, but as usual have been a touch more susceptible to the energy upside, with the benchmark back to flat at the time of publication, in 85.44 to 86.12 confines. Finally, OATs and BTPs are both under pressure this morning, weighed on by the firmer than expected preliminary inflation reads from the nations, and as EZ-wide growth for Q3 proves resilient. A combination that theoretically gives the ECB policy space to take action, while the inflation prints may well be revised higher given the marked energy upside, particularly in Dutch TTF, seen towards month-end.