Fixed Income Briefing October 2025

Renée Friedman, Global Head of Research

•  Despite the dearth of official data due to the US government shutdown, US Treasuries rallied in October on expectations of a rate cut and on expectations of a softer growth. The Fed did indeed cut rates by 25 bps to 3.75% However, Fed Chair Jerome Powell moderated expectations for a rate cut in December, stressing that monetary easing is not guaranteed given policymakers' divergent perspectives on the economic outlook and policy direction.
• The dollar has recovered in October with the US dollar index +1.37% so far in October. It is -8.63% YTD. The advance in the Treasury market has pushed yields across the curve lower in October as inflation, while still above target in the UK and US and rising in Japan, appears to be under control.
• On the consumer side, confidence weakened. The Consumer Confidence Index dropped by 1.0 point in October to 94.6 from an upwardly revised 95.6 in September. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—gained 1.8 points to 129.3. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 2.9 points to 71.5. The UoM’s final October consumer sentiment was largely unchanged, posting a reading of 53.6 versus consensus expectations of 55.0 and September’s final 55.1. Month-over-month inflation expectations remained stable, with October’s one-year expectation finalised at 4.6% (matching the preliminary reading and slightly below September’s 4.7%). Five-year inflation expectations for October were finalised at 3.9%, compared to the preliminary 3.7% and September’s 3.7%. The report notes that consumers continue to express concern about inflation, although only 2% spontaneously referenced the government shutdown as a source of concern during interviews.
• Business activity was up in October. The October Flash S&P PMI composite reading reached 54.8, up from September’s 53.9. The Flash PMI Manufacturing came in at 52.2, closely aligning with consensus estimates of 52.3 and slightly above September’s 52.0. The Flash PMI Services came in at 55.2, surpassing both consensus and September’s figure of 54.2. Overall employment growth remains subdued, while business confidence deteriorated further amid ongoing tariff concerns. Prices charged increased at the slowest rate since April.

Download the report