Bonds: Gilts steady ahead of MPC, quarterly Inflation Report
By Alexander Bueso
Date: Wednesday 31 Oct 2018
(Sharecast News) - There were the movements in some of the most widely-followed 10-year sovereign bond yields:
US: 3.11% (+3bp)
UK: 1.40% (+0bp)
Germany: 0.37% (-1bp)
France: 0.74% (+0bp)
Spain: 1.57% (+2bp)
Italy: 3.48% (+14bp)
Portugal: 1.88% (+1bp)
Greece: 4.25% (+4bp)
Japan: 0.12% (+1bp)
Gilts were steady on Tuesday, as investors waited on the Monetary Policy Committee's rate-setting meeting on Thursday, despite weakness in Sterling as ratings agency Standard&Poor's warned that it would have to begin factoring-in the risk of a hard Brexit when deciding on the UK's credit worthiness.
In the background meanwhile, yields were lower across the board, as equities around the world managed to find a bid ahead of the close of the third quarter, with China's national regulator said overnight it wanted to boost investment in the country's local markets, by fostering corporate share buybacks and M&A activity.
For longer-term Italian bonds on the other hand it was a completely different story, after the country's national statistics office, ISTAT, reported that the economy flat-lined over the three months to September, falling short of a median forecast from economists for a rate of expansion of 0.2%.
Also weighing on 10-year Italian BTPs, was an underwhelming government debt auction, which saw the price of the bonds on sale decline below that in secondary markets.
Later in the session, Eurostat reported that the pace of expansion in the euro area halved over the three months to the end of September, to just a 0.2% quarter-on-quarter clip (consensus: 0.4%).
Nevertheless, according to UniCredit's Edoardo Campanella, the figures from Eurostat were subject to possible upwards revisions and the final reading was likely to show that it was in fact German growth which was weakest.
In parallel, other data revealed much softer-than-expected household consumption in France, where it fell by 1.7% on the month, and in Spain, where retail sales shrank by 0.4%.
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