• The Fed hiked rates as expected by a quarter point after the European close, though focus was rightly on the rhetoric that followed by Fed Chair Kevin Warsh, who pointed toward at least one further hike before year end. Focus now shifts to the Bank of England today with Governor Andrew Bailey expected to hold rates at noon. Again, what he says thereafter will be what the market is focused on.
• Yesterday, € IG priced only €3.95bn in fresh supply from 8 deals (6 x Corp, 1 x FIG & 1 x SSA) via 9 tranches, with the average deal size across all sectors notably small at only €494m.
• The Swiss Franc market was active again with Chf580m of supply from 2 deals (1 x Corp dual-tranche & 1 x FIG) via 3 tranches.
• There was no activity in neither the Sterling (£) nor the US$ Reg S markets.
• Brent Crude fell overnight, currently trading at c.$105.27 (versus c.$108.1 this time yesterday).
• Unlike other indices the VIX has remained steady currently at 17.1 (versus 17.2 this time yesterday).
• iTraxx Europe & iTraxx Senior & Sub financial indices are all notably tighter heading into the open versus this point yesterday, at 53.661 (-2.22%), 56.03 (-2.31%) & 90.073 (-2.64%) respectively.
• Pipeline: The European IG pipeline cleared all it could yesterday with only 2 SSA trades pending - neither slated for today.
  • 2 x € SSA (1 x EuGB)

Contact Stuart Aylward with questions or comments on stuart@creditflowresearch.com

Key € IG Supply Stats for yesterday

• Corporate
  • Total IG: €2.7bn
  • Avg. tranche size €386m
  • Avg. IPT to Pricing -28.68
  • Avg. cover X 4.32
• FIG
  • Total IG: €750m
  • Avg. tranche size €750m
  • Avg. IPT to Pricing NA (covered) - €0
  • Avg. IPT to Pricing -25 (unsecured) - €750m
  • Avg. cover X 4.32
• SSA
  • Total IG: €500m
  • Avg. tranche size €500m
  • Avg. IPT to Pricing 0
  • Avg. cover X 1.08

Geo-Political News

• US Federal Reserve tightened with further hikes to come. Fed Chair Kevin Warsh implemented the Feds 1^st rate increase in 3yrs (+25bps), elevating benchmark rates to suppress inflation. Warsh emphasised institutional autonomy when he was sworn in, clarifying that monetary settings must remain focused on price stability objectives despite explicit pressures from the administration. Trump, who appointed Warsh, immediately criticised the policy decision, contending that borrowing costs ought to be significantly lower (c.1.0%) due to the nation's superior credit standing. Warsh indicated the likelihood of at least one more rate hike before year end is likely to curb inflation & head back towards the Fed’s 2.0% target. Officials reaffirmed that policy trajectory will depend strictly upon incoming economic metrics rather than external political pressures.
• Trump threatens the EU with trade tariffs. Washington issued explicit economic threats towards the EU if it pursues its invitation to Canada to join the block as an associate member. Trump said he would view it as a hostile act. Direct retaliatory measures were highlighted, including punitive tariffs or comprehensive trade embargos. European Commission leaders welcomed Canadian delegates in Brussels, emphasising closer strategic ties despite unilateral pressure from Washington. Canada’s PM Mark Carney is on a UK & European tour, having met with the UK’s PM yesterday.
• Strait of Hormuz US-contracted vessel hit by Iran. An Iranian barrage of 4 drones & a guided missile hit a US-contracted commercial supply vessel yesterday carrying American personnel. The direct strike occurred off the coast of Iran near Qeshm Island & Bandar Abbas, causing a shipboard fire & minor crew injuries. The barrage follows the recent shelling of the commercial tanker El Gaia off Oman, prompting the US State Department to issue security warnings for commercial shipping lanes connecting the Persian Gulf & Gulf of Oman.
• Indo-Pakistani maritime boundary incident. Government authorities in New Delhi formally summoned Pakistani diplomatic leadership following a direct collision involving naval vessels operating in international waters. Official state communications characterised the maritime encounter as highly unprofessional & unacceptable conduct by foreign naval units. While physical damage to both naval assets was confirmed as minimal, diplomatic protests highlighted growing operational friction across strategic sea lanes.
• UN AI governance summit. Global leadership gathered under international auspices with a view to establishing binding regulatory frameworks governing the emerging tech. The Secretary-General cautioned against an unregulated international race regarding advanced systemic capabilities, urging mandatory human oversight mechanisms. Defence representatives from major global economies emphasised the necessity of shared risk evaluation framework agreements to prevent accidental escalations.
• Philippine electoral violence. Sovereign electoral proceedings concluded across southern provincial districts, marking a historical milestone toward localised self-governance following protracted internal friction. Regional voter participation exceeded 80% despite significant security disruptions that resulted in several fatalities. Thousands of armed security personnel were deployed across voting stations to secure infrastructure & maintain order. International observers acknowledged the technical execution of parliamentary polling while citing persistent factional volatility. Regional leadership expressed commitment toward administrative transition, targeting long-term stability & economic investment across previously disputed territorial zones.

Markets

• US Equity markets experienced sold off yesterday in the wake of the rate hike & further hawkish monetary policy signals. The Dow declined by 631 points or -1.21% to close at 51,461, while the S&P fell 34 points or -0.45% to finish at 7,552. The Nasdaq demonstrated relative resilience, dipping just 3 points or -0.01% to end at 25,978 as tech buying offset broader market weakness. Investor sentiment was predominantly weighed down by the policy rate increase & the prospect of prolonged monetary tightening, though late-session interest in large-cap tech equities curtailed steeper losses across the benchmark indices.
• Asian Equity bourses present a mixed picture this morning during current trading, reacting to overnight US rate adjustments & localised economic catalysts. The Nikkei is up 194 points or 0.30% to reach 64,117, supported by domestic currency dynamics. Conversely, the Hang Seng is down 180 points or -0.73% to trade at 24,533 amid ongoing cautiousness regarding regional growth prospects. The Kospi is up 48 points or 0.71% to hit 6,766, buoyed by targeted buying in export-oriented manufacturing shares. Overall market sentiment across Asia remains cautious as market participants digest global interest rate trajectories & regional geopolitical developments.
• European & UK Equity futures are pointing toward a positive open, indicating underlying market resilience despite global monetary tightening pressures. FTSE Futures are signalling a gain of 0.24%, while Dax Futures are up 0.47% & CAC 40 Futures point to an advance of 0.60%. Market participants appear to be shrugging off hawkish transatlantic spillovers, turning their focus instead to corporate valuation metrics & key domestic central bank announcements. Crucially, attention centres on the BofE interest rate announcement scheduled for midday today. The likely outcome is for the BofE to maintain rates at 3.75%, given persistent CPI inflation running at 3.1%. However, a hawkish split is anticipated within the Monetary Policy Committee, as persistent domestic price pressures & elevated energy costs keep open the possibility of future monetary tightening.
• UK & Eurozone Bond Markets Forward-looking sentiment for the UK & Eurozone sovereign bond markets is heavily anchored by transatlantic monetary policy spillovers & incoming regional inflation metrics. European debt markets face upward yield pressures (despite yesterday’s rally) as fixed-income traders reprice global term premia following explicit policy tightening signals from Washington. For today's session, attention shifts directly to upcoming European macroeconomic data releases & sovereign issuance schedules, which will test buyer appetite across longer-dated paper. In the UK gilt market, fixed-income sentiment remains constrained by elevated yield levels & fiscal supply considerations ahead of upcoming debt auctions. Institutional investors are monitoring whether the BofE will signal future rate hikes, with forward curve pricing reflecting heightened sensitivity to wage growth & service-sector inflation prints.
• Currency Snapshot: 
  • Sterling trades at 1.338 against the US Dollar & 0.857 against the Euro. Cable continues to navigate shifting monetary policy differentials following the Fed hike, while cross-rate pricing against European currency peers remains anchored within familiar trading ranges. Domestic rate expectations & upcoming macroeconomic releases continue to dictate near-term sentiment for the British currency.
  • Euro is trading at 1.147 against the US Dollar & 0.947 against the Swiss Franc. The single currency reflects cautious sentiment against the greenback amid broader international trade policy tensions & interest rate differentials. Cross-currency flows against regional safe-haven assets reflect ongoing market adjustment to European economic growth forecasts.
  • Swiss Franc trades at 0.826 against the US Dollar & 0.946 against the Euro. Safe-haven demand continues to provide underlying support for the currency amid international geopolitical developments & regional trade frictions. Monetary conditions remain well-balanced, keeping the Franc resilient across major currency pairs.

Economic Data (Western European Today)

Govt Bond Auctions (Western European Today)

Holidays

• There are no public or national holidays scheduled across the UK, & the Eurozone this week. The next major public holidays are:
  • Germany - 3rd October (German Unity Day)
  • USA - 12th October (Columbus Day / Indigenous Peoples' Day).
  • Spain - 12th October (National Day of Spain)
  • Eurozone - 1st November (All Saints Day)

Pending Deals & Mandates

Euro (€)

• 11th September: The State of Baden-Wuerttemberg (rated Aaa / AA+ / AAA by Moodys, S&P & Scope) mandated Deutsche Bank & DZ Bank as Joint ESG Structuring Coordinators & BNP Paribas, Crédit Agricole CIB, Deutsche Bank, DZ Bank, LBBW & Nordea as Joint Lead Managers for its upcoming inaugural €600m (wng), 10yr, European Green Bond ‘EuGB’ LSA format. The transaction will be launched in the near future, subject to market conditions. The target market for the bonds are retail, professional & eligible counterparties, each as defined in MiFID II & UK MiFIR product governance (all channels for distribution of the Bonds are appropriate).
• 16th September: Watercare Services Limited (exp. Issue rating of Aa3 by Moody’s), mandated Citi, HSBC, MUFG & Société Générale as Joint Lead Managers to arrange a series of fixed income investor meetings commencing on 17th of September. Citi is coordinating logistics for Amsterdam, Frankfurt & London, Société Générale is coordinating logistics for Paris. An inaugural 7yr € benchmark, fixed rate, senior secured Reg S transaction may follow, subject to market conditions. 

Recent Supply

Key Market Data