Firmer & Flatter On Geopolitical Tension, U.S. Matters & Decent Demand At Gilt Auction

Two-way missile fire between Israel and Lebanon has been at the fore thus far, which allowed the early London core global FI bid to develop further.

• Flattener flow in U.S. Tsy futures and Fedspeak also provided support.
• The latest ECB consumer survey revealed a modest mark higher in inflation expectations, although there wasn’t a tangible market reaction given other drivers.
• Elsewhere, ECB Governing Council member Knot provided familiar rhetoric.
• Bund futures tag fresh session highs in recent trade, with bulls now eying 130.40, the 50-dma. German cash benchmarks are little changed to 9bp richer. Supply results will cross imminently.
• EGB spreads to Bunds are generally tighter on the day, with Portugal the exception (0.5bp wider).
• Gilt futures have also broken initial technical resistance levels, as flagged elsewhere, with a solid launch of the new 10-year 4.625% Jan-34 gilt helping support prices in recent dealing. Cash benchmarks run flat to 9bp richer.
• Overnight REC/KPMG labour market data revealed that starting salaries and pay for temporary workers saw the slowest increase in two and a half years during September, while a swifter rate of job cuts was also flagged in the survey. This is the latest sign of a cooling domestic labour market.