Bondcast - The Rates Podcast

After a busy week of central bank meetings, Imogen Bachra turns her attention to the US mid-term elections, the Bank of England’s latest policy decision and fresh euro area inflation data. While the Fed, ECB and Bank of Japan all kept interest rates unchanged, their tightening bias remains intact. Could next week’s events reinforce expectations of further rate hikes in December?

What to watch:

1. Central banks hold firm on hawkish outlook

The Fed, ECB and Bank of Japan all left interest rates unchanged, as expected, but retained a tightening bias. Despite ongoing concerns about technology stocks, which have supported demand for safe-haven government bonds, the base case remains for all three central banks to raise rates in December.

2. US mid-terms: What next for technology regulation?

A Democrat sweep is the base case, in line with polling expectations, and is unlikely to trigger a major market reaction in itself. However, the prospect of tighter technology regulation could add to pressure on US equities, particularly given recent weakness in tech stocks. Any resulting flight to quality could support Treasuries and weigh on the dollar, although Democratic efforts to introduce tougher regulation would face the prospect of a presidential veto.

3. Bank of England: The focus shifts to forward guidance

A November rate hike is now almost fully priced into markets, following a gradual shift in expectations towards tightening. The bigger question is how hawkish the Monetary Policy Committee sounds about the inflation outlook. There is a risk that the MPC remains too focused on whether rates need to rise at all, rather than the scale of tightening that might ultimately be necessary. Insufficiently hawkish guidance could undermine the Bank’s credibility and prompt markets to price in more rate increases further along the curve.

4. Euro area inflation: Are higher energy prices spreading?

Euro area headline inflation is expected to rise to 4.0% year-on-year in October, from 3.8% in September, while core inflation is forecast to remain broadly unchanged at 2.5%. The key question is whether higher energy costs are beginning to feed through into the wider consumer price basket. Markets will scrutinise the figures for evidence of more persistent underlying price pressures.

5. December rate hikes remain the base case

Neither the euro area inflation figures nor the latest central bank decisions are expected to change the outlook for December. The expectation remains that the Fed, ECB and BoJ will all raise interest rates, although next week’s BoE guidance could prove particularly important for shaping expectations further along the UK yield curve.

In this episode of Bondcast, we share our recent client webinar examining the economic and market impacts of this week's Budget. Jenny Edwards (Head of Venture Banking) was joined by Seb Burnside (Group Chief Economist), Stuart Burt (Head of Public Policy) and Imogen Bachra (Global Head of Economics and Market Strategy) to unpack the Budget’s implications for business costs, investment, economic growth and financial markets.

They explored the measures offering targeted support, the challenges facing employers and house-builders, and the longer-term implications of devolving more economic powers to regional mayors.

Key takeaways

1. A holding budget, rather than a major reset

The Budget was designed to offer some breathing space without fundamentally changing the government’s economic strategy. The changing economic outlook has reduced the Chancellor’s fiscal headroom from around £24bn to £12bn. Rather than introducing sweeping tax or spending changes, the government opted for targeted measures while deferring several difficult decisions until next year.

2. Business costs remain under pressure

There is some targeted support for businesses, including changes to business rates and measures to reduce energy costs for energy-intensive industries. However, the 3.9% increase in the National Living Wage from April adds to existing pressures from employment costs, National Insurance changes and the implementation of employment rights legislation. Labour-intensive sectors, including hospitality and retail, may find the balance particularly challenging.

3. Markets remain calm, but fiscal risks persist

Sterling and UK government bond yields were broadly unchanged immediately after the Budget, suggesting the government avoided the sharp market reaction associated with some previous fiscal events. However, borrowing forecasts have increased, with the cumulative revision to the central government net cash requirement reaching around £20bn by 2030–31. The panel warns that optimistic growth assumptions and difficult future spending decisions could leave the public finances vulnerable to further deterioration.

4. Growth opportunities are uneven across the economy

UK GDP has proved more resilient than might have been expected, with the economy almost 2% larger than at the time of the previous fiscal event in March. Technology and professional services have been important contributors to growth, while the outlook remains challenging for other sectors. The government has introduced measures intended to support entrepreneurs and investors, but the panel notes that targeted incentives alone will not resolve the broader constraints on business investment and productivity.

5. Regional devolution could reshape investment decisions

The Budget’s plans to give mayors greater control over funding and local tax revenues could have significant long-term implications. Greater certainty over resources may help regional leaders plan and invest in local growth projects. However, the benefits will depend on local investment pipelines, implementation and how funding arrangements work in practice. Areas without devolved powers may also face different opportunities and constraints.

This episode was recorded on 29 October 2026.

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Imogen Bachra shares her take on to watch in the week commencing 26 October. 

What to watch:

• Market fragility and tech spillover: Earnings have revealed cracks, with weakness in tech stocks prompting a flight to quality in fixed income.  
• Fed meeting timing: Wednesday and Thursday are pivotal, coinciding with a likely unchanged Fed stance and minimal policy statement.  
• French spreads and ECB focus: Widening French spreads place the ECB under scrutiny; verbal intervention is expected before more active measures, with a hawkish hold anticipated.  
• BoJ outlook: The Bank of Japan is expected to keep rates unchanged, with attention on whether the quarterly report shows underlying inflation at 2%.  
• UK Budget and gilts: The Prime Minister’s first Budget on Wednesday is expected to be cautious, with potential gilt underperformance despite modest fiscal shifts.

In this special crossover episode of Currency Exchange and Bondcast, host Imogen Bachra is joined by Brian Daingerfield and Ross Walker to explore the market implications of the upcoming UK Budget and US mid-term elections.

The discussion examines the UK’s fragile fiscal position, expectations for borrowing and gilt issuance, and the growing likelihood of a Bank of England rate hike. The guests also assess the potential outcome of the US midterms, considering what a Democratic victory in Congress could mean for fiscal policy, Federal Reserve appointments and geopolitical risks.

Key takeaways

The UK Budget is expected to be cautious, with limited scope for major policy changes
The government faces tight fiscal constraints, pressure from higher borrowing costs and limited room for manoeuvre under its existing fiscal rules. Ross expects a largely holding-operation Budget, with targeted support for energy costs and relatively modest tax increases. The implications for markets are likely to be limited unless the borrowing outlook or debt issuance plans disappoint expectations.

The UK’s fiscal position remains fragile despite improved market sentiment
Markets have become more comfortable with the UK’s fiscal outlook, but the underlying challenges remain significant. Public debt is high, debt-servicing costs are elevated and the promised fiscal consolidation remains heavily backloaded. The Budget could remind investors that the government has limited room to respond to future economic shocks.

Gilt issuance plans could disappoint markets expecting a significant shift towards shorter maturities
Investors are anticipating that the UK Debt Management Office will reduce the proportion of long-dated gilt issuance and potentially increase Treasury bill issuance. However, changes may be incremental rather than substantial. Market expectations have moved ahead of what the Budget is likely to deliver, potentially limiting the recent outperformance of gilts.

Democrats are strongly favoured to win the US House of Representatives, but the Senate remains competitive
Historical mid-term election patterns and polling suggest Democrats have a significant advantage in the House. The Senate is a closer contest, with Democrats needing a net gain of four seats to secure a majority. The outcome matters particularly for the confirmation of Federal Reserve appointments.

The US midterms are unlikely to trigger a major shift in economic policy
Even if Democrats win control of Congress, President Trump will retain considerable influence over trade and foreign policy. A Democratic victory could constrain the scope for additional fiscal stimulus, but it is unlikely to produce a decisive shift towards fiscal consolidation.

Markets should be able to assess the US election result relatively quickly
Although the final count may take longer, Brian expects the early results from key congressional races to provide a reasonably clear indication of the likely outcome. This should allow markets to price the result without a prolonged period of uncertainty.

Host: Imogen Bachra, Head of Economics and Markets Strategy
Guests: Brian Daingerfield, Co-Head of G10 FX
Ross Walker, Chief UK Economist & Co-Head of Global Economics at NatWest 
 
This episode was recorded on 21 October 2026.
 
You can also find this episode of Bondcast on Spotify and Apple Podcasts. 
 
Remember to hit subscribe so you can listen to the latest episodes in this series as soon as they're available and get our views on the big themes and events moving markets and shaping the economy.
 
For any terms used please refer to this glossary: https://www.natwest.com/corporates/insights/markets/glossary.html
 
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Imogen Bachra shares her take on to watch in the week commencing 5 October. 

Highlights:

1. France remains the key driver of European market sentiment

• Initial optimism around fiscal consolidation commitments from the Rassemblement National’s Marine Le Pen and supportive comments from the ECB has faded.
• France’s budget draft reaches parliament this week, with the possibility of an immediate attempt to block it through a confidence vote.
• While the base case remains that a budget will eventually pass, further political uncertainty could weigh on markets and keep French government bond spreads elevated.

2. Euro weakness may be nearing its limits

• Political and fiscal concerns in France have contributed to the euro’s recent underperformance against sterling and the US dollar.
• However, with the expectation that a French budget will eventually pass and significant risk already priced into European assets, the euro’s underperformance may be approaching its end.

3. Heavy European bond issuance adds to market pressures

• European government bond issuance is expected to reach its highest level in more than a month.
• The combination of increased supply and persistent fiscal concerns could make it more difficult for markets to absorb new issuance.
• Investors will be watching closely for signs that political uncertainty is feeding into demand for European government debt.

4. US CPI takes centre stage

• Headline US CPI is expected to rise by 0.6% month on month, driven largely by higher gasoline prices.
• Core CPI is forecast to increase by 0.2% month on month, down from 0.3% in the previous month.
• Despite the moderation in monthly core inflation, annual core CPI is expected to edge up from 2.4% to 2.5%.
• Unless inflation significantly exceeds expectations, the data is unlikely to force the Federal Reserve into a rate hike as soon as October.

5. UK growth could strengthen the case for a November rate rise

• UK GDP data for August is expected to show some moderation following stronger preceding months, but should still point to robust growth in the third quarter.
• While the figures may have limited immediate market impact, continued economic strength could bolster the case for a Bank of England rate rise as soon as November.
• Several Bank of England policymakers are scheduled to speak this week, although limited new guidance is expected given their recent public comments.

6. UK fiscal risks could challenge the recent resilience of gilts

• UK government bonds have held up relatively well during the recent market sell-off, with the UK viewed as being in a comparatively favourable fiscal position relative to other major economies.
• However, this resilience may become harder to sustain as the 28 October Budget approaches.
• With much of the positive news already reflected in prices, the balance of risks appears skewed towards further pressure on UK government bonds.
• Investors will be watching Budget-related headlines for clues about proposed policy measures and, crucially, how they will be funded.

Good luck!

In this episode of Bondcast, host Imogen Bachra is joined by Giovanni Zanni to explore France’s escalating fiscal and political challenges, and their implications for government bond markets.

With French bond spreads experiencing significant volatility, attention is turning to the country’s ability to deliver meaningful fiscal consolidation ahead of the 2027 presidential election. Giovanni explains why the passage of the budget is only part of the story, how the European Central Bank (ECB) could respond to further market stress, and why Europe may have more room to manage rising bond yields than either the UK or the US.

The discussion also examines the political developments that could help restore investor confidence and the longer-term fiscal adjustments France will need to make.

Highlights:

* France’s fiscal challenge goes beyond passing the budget. The government needs to reduce the deficit against a backdrop of political instability, higher energy prices and the approaching 2027 presidential election. Markets are focused on whether the proposed consolidation will be sufficient and how much of it can realistically be implemented.

* A budget failure is unlikely to trigger a US-style government shutdown. France has constitutional mechanisms that allow the government to maintain state financing and, in certain circumstances, implement a budget without full parliamentary approval. The bigger uncertainty is the scale and credibility of the fiscal adjustment.

* Political commitments need to translate into credible policy. Marine Le Pen’s comments on deficit reduction and the possibility of introducing a constitutional deficit rule have attracted market attention. However, questions remain over the feasibility and costing of proposed measures, as well as whether the necessary parliamentary support could be secured.

* The ECB has several options to contain market stress. Verbal intervention could be the first line of defence, with the ECB highlighting how tighter financial conditions affect the economic outlook. Further options include flexibility in its balance-sheet policies and the Transmission Protection Instrument (TPI), which is designed to address unwarranted market fragmentation. Any intervention would not eliminate France’s underlying need for fiscal consolidation.

* Political risk is a key source of European market vulnerability. Giovanni argues that Europe’s main weakness is not necessarily its aggregate macroeconomic position, but the political difficulty of securing agreement and compliance across member states. Developments that reduce uncertainty ahead of the French election could help narrow bond spreads.

* France’s problems are serious but manageable. Despite its fiscal challenges, France benefits from a diversified economy and a high household saving ratio, among other strengths. The ECB may be able to limit volatility, but lasting improvements in market confidence will depend on credible fiscal action and greater political stability.

Host: Imogen Bachra, Head of Economics and Markets Strategy
Guest: Giovanni Zanni, Chief Euro Area Economist 
 
This episode was recorded on 8 October 2026.
 
You can also find this episode of Bondcast on Spotify and Apple Podcasts. 
 
Remember to hit subscribe so you can listen to the latest episodes in this series as soon as they're available and get our views on the big themes and events moving markets and shaping the economy.
 
For any terms used please refer to this glossary: https://www.natwest.com/corporates/insights/markets/glossary.html
 
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Imogen Bachra shares her take on to watch in the week commencing 5 October. 

Key takeaways

1. France remains the key source of market risk
The French budget process moves forward this week, with debate beginning in Assembly committees before the budget enters Parliament for broader review and debate on 13 October. Markets will be watching closely for signs that political and fiscal risks are becoming more manageable – or, conversely, that pressure on French government bonds could intensify.

2. ECB intervention could become an important catalyst
The ECB’s first line of defence is likely to remain verbal intervention. President Christine Lagarde has already called for a “measured response” and noted that higher long-term rates would weigh on growth and reduce pass-through. More forceful intervention appears unlikely while contagion remains limited, but a broader deterioration could change that assessment.

3. Wider French spreads remain the direction of travel
The market is likely to need clearer evidence that France’s political and fiscal risks are receding before French spreads can sustainably narrow. For now, wider spreads remain the expected direction of travel.

4. UK fiscal policy comes back into focus
UK markets have continued to outperform in recent weeks, with investors viewing the UK as the “best of a bad bunch” when it comes to fiscal risks. As the Budget approaches, markets will be watching for potential policy “kite flying” around the fiscal rules and borrowing for investment – and how markets respond to those signals.

5. Fed and BoJ provide the monetary policy focus
In the US, the Fed minutes will offer clues on how patient policymakers are about the timing of the next rate hike. Following softer inflation and payrolls data, the call for the next hike has shifted from October to December. In Japan, Governor Ueda’s speech on Tuesday will be closely watched after the Tankan survey and BoJ minutes reduced the perceived risk of an October hike.

Imogen Bachra shares her take on to watch in the week commencing 21 September. 

• Fed speakers take centre stage
  A full slate of Federal Reserve speakers will provide further insight following this week’s more hawkish-than-expected Fed meeting. Markets watch for signs of how closely policymakers’ views align with the latest dot plot and whether the more hawkish tone is broadly shared. NatWest has revised its Fed call and now expects an additional rate hike by the end of 2026, while removing its previously expected 2027 rate cut.
• Bank of England speakers in focus
  Sarah Breeden and, in particular, Clare Lombardelli will be closely watched following last week’s BoE meeting. Lombardelli is seen as an important swing voice within the MPC, so comments on the potential triggers and timing for a rate hike will be particularly relevant. NatWest retains its call for a November rate hike, although conviction has fallen from around 85% before the meeting to approximately 70%.
• UK public finances ahead of the Budget
  The latest public finance figures will be one of the final key data points before the October Budget. Borrowing so far this fiscal year is running above the OBR’s March projections. Higher bond yields and inflation have also reduced the government’s fiscal headroom, increasing the focus on the data. Public finances are not normally a major market mover, but the proximity to the Budget means they are likely to receive greater attention.
• European data takes a back seat
  The European data calendar is relatively light, with survey indicators dominating. The week’s releases are unlikely to materially change the broader macroeconomic narrative.
• France and political risk
  Political and fiscal developments in France remain an important market focus, with French assets having underperformed significantly. Investors will be watching for any budget-related headlines and developments as discussions evolve.

The Federal Reserve and Bank of England have both been in focus this week, with the Fed delivering a rate hike and the BoE keeping rates unchanged. In this episode, Imogen Bachra and Stuart Sparks examine what the decisions tell us about the outlook for inflation, interest rates and government bond yields – and why the BoE’s latest quantitative tightening (QT) announcement could have longer-term implications for the gilt market.

Key takeaways:

* The Fed delivered a hawkish-leaning rate hike, with the Chair offering little forward guidance and emphasising that future decisions will depend on the evolution of inflation and economic conditions.

* Markets are pricing a significant further tightening cycle, with close to 100bp of additional Fed rate hikes priced by the end of 2027. But the Fed’s projections imply a surprisingly benign path for inflation, with a return to target minus a meaningful rise in unemployment. 

* The Bank of England held Bank Rate at 3.75%, with the Monetary Policy Committee voting 6–3 in favour of no change. A November BoE rate hike remains the base case, although conviction has fallen.

* QT was the bigger market-moving announcement. The Bank plans to continue active gilt sales at £20bn a year, but will change how those sales are conducted and which maturities are involved.

* This could reduce some near-term pressure on long-dated gilt yields, however QT continues to create fiscal costs.

Host: Imogen Bachra, Head of Economics and Markets Strategy
Guest: Stuart Sparks, Head of US Rate Strategy
 
This episode was recorded on 17 September 2026.
 
You can also find this episode of Bondcast on Spotify and Apple Podcasts. 
 
Remember to hit subscribe so you can listen to the latest episodes in this series as soon as they're available and get our views on the big themes and events moving markets and shaping the economy.
 
For any terms used please refer to this glossary: https://www.natwest.com/corporates/insights/markets/glossary.html
 
Please view our full disclaimer here: https://www.natwest.com/corporates/disclaimer.html

Imogen Bachra shares her take on to watch in the week commencing 14th of September. 

* Friday's US inflation data was sufficiently firm that it feels like a 25 basis point hike from the Fed next week looks like the path of least resistance. Our base case is still that this is a one and done move. We still see labour market weakness emerging into 2027, which could ultimately pave the way for rate cuts, but clearly persistently elevated energy prices present an upside risk to this view. 

* We have the BoJ at the end of the week that's likely to follow suit with a 25 basis point hike at its meeting, we think, but we're sceptical that Governor Ueda will offer much forward guidance beyond that – instead repeating what he said in July, that in-depth deliberations will be held at every meeting. From a markets perspective, this may be a little bit disappointing with participants left wondering what exactly it is that Treasury Secretary Besson knows that they do not. This might not be the sort of hawkish surprise that they were looking for.

* The Bank of England could be the only major central bank not to raise rates next week, though we do look for the guidance to formally acknowledge upside risks to the inflation outlook, which would mark quite a hawkish shift from the July MPR, but it would reflect the tone from some of the central bank speakers at the Treasury Select Committee hearing last week. This could ultimately pave the way for a rate hike to be delivered in November, which is now fully priced by markets, but regular listeners will know that that's been our base case since March. More important from a markets perspective at the BOE meeting could be the annual vote on QT, and we see a greater risk than consensus that the pace is  maintained at £70bn compared with consensus that it will be reduced to £50bn. This could add another bearish catalyst for longer yields, which are now well above our long held 5.25% 10-year target. Global factors have been the main driver of that rise in yields, but we have long seen domestic reasons, both on the more hawkish monetary policy side, and the more bearish fiscal policy side that can't keep yields at these levels. 

* While we're on central banks, it's worth reflecting on the ECB last week that it was hawkish enough that we now see the short term terminal rate at 3% up from 2.5% previously. We think they will get there in the first half of 2027. But it's important to note that that's driven solely by credibility in the face of an energy shock, despite weak evidence so far of any contagion to core inflation. We did also upgrade our 10-year bund target from 3.3 to 3.6% both on the more hawkish ECB outlook, but also a bearish structural outlook into the end of the year. 

* Away from central banks, in the UK, it's also the big data week. It perhaps takes on a little bit less importance when it coincides with the week of the central bank decision, but nonetheless, it's another month of data on the inflation front and the labour market front that will feed into the BoE's assessment of the risks of second round effects. We see headline inflation ticking up. This is largely about energy prices. In fact, core inflation is expected to edge down, albeit that's largely a rounding error more than anything else. It doesn't change the fact that the long-term path we still think is towards higher core inflation into 2027, where we have a peak of 3.1%. Although central banks and inflation risks were the theme last week and probably likely to be the theme in the week ahead, we also remained squarely focussed on fiscal risks too.

* Next week brings about a cabinet reshuffle in Japan and we'll most closely be watching whom is announced as the minister of state for economic and fiscal policy. And although there's nothing on the calendar as such, we'll watch any headlines related to potential policies announced in the UK as we near the Labour Party conference, as well as any other announcements from President Trump as we near midterms. 

Good luck.