Rates Weekly: Not so obvious for the Fed

EUR rates:Recap of the week:  This week, the Federal Reserve's decision to cut rates by 25 bp was overshadowed by Jerome Powell's remarks, which dampened hopes for further rate cuts in the near future. Meanwhile, the ECB maintained stable rates while signaling a slightly more favorable outlook for growth, but the risks surrounding inflation remain unchanged. In the bond market, the Bund resumed its rise while still retaining its dearness to swap; the Spanish spread continued to tighten to historical levels, reflecting positive momentum following recent rating upgrades.Tactical view:  Despite the volatility in US rates, the Bund remained stable at 2.65%. The low volatility continues to limit any meaningful rebuilding of the Bund term premium, which remains close to 100bps. Our year-end target for the 10Y Bund remains at 2.80%. On the front-end, following the October ECB meeting, we now expect no rate cut in December, while keeping the door open for a final 25bp reduction in Q1 2026 if growth momentum weakens. Regarding OATs, we maintain a neutral bias as some factors, including potential shifts in fiscal narratives, could lead to modest re-widening.Insights of the week: 2026 EGBs supply outlook: a new record high!US Rates:Powell’s pushback on market pricing leaves rates vulnerable and us tactically bearish, be patient on re-initiating front end longs (~3.75-3.80%).  This week saw the curve flatten to levels last see after the July FOMC and before the August NFP report that contained the large revisions and changed the outlook for the Fed: we like 3s10s steepeners here.