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GOLD

Steady After Powell Pressure

US TSY FUTURES

TYH2 Blocked

OIL

Firmer Since Settlement

CROSS ASSET

Commodity-Tied Dollar Bloc Leads

JGBS

Cheaper On Wider Impetus

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  • There have been two Ps driving fixed income markets this morning: Pill and PMIs.
  • BOE Chief Economist said in an FT interview published late last night UK time that a November rate discussion would be "live" but also said that markets were getting a bit overexcited. Short sterling has seen a small move higher this morning, particularly at the very front end with two rate hikes in 2021 no longer quite fully priced (but still almost fully priced). Since then, we have seen the UK PMI point to record price pressures and also a pick up in service sector growth - both elements that will probably make MPC members more comfortable about raising rates. Despite this, Pill's warning about overexcitement is stopping markets get too carried away here, particularly with so much already priced in. The gilt curve has steepened, and dragged the Treasury curve with it.
  • The European PMIs also focused on price pressures, but pace of output continues to decline. The German curve has steepened with higher inflation expectations rather than a policy response driving the response.
  • Looking ahead, Powell and Daly are due to speak while the US PMI is due for release.
  • TY1 futures are down -0-3+ today at 130-02+ with 10y UST yields down -1.7bp at 1.686% and 2y yields unch at 0.456%.
  • Bund futures are down -0.17 today at 168.08 with 10y Bund yields up 2.0bp at -0.83% and Schatz yields unch at -0.672%.
  • Gilt futures are up 0.14 today at 123.68 with 10y yields down -0.6bp at 1.194% and 2y yields down -1.7bp at 0.685%.