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Key events today

MARKET INSIGHT

Bunds have been pretty flat overnight and Treasuries saw a mild bid ahead of the Biden-Xi phone call, but without any meaningful progress TY1 has fallen off its high.

  • Looking ahead to today's session, the highlight is likely to be US retail sales. The advance reading is forecast to come in at 1.5%M/M in October which would be the fastest pace of growth since March. Our data team point out that overall growth in US retail is largely attributable to heightened inflation expectations and a turnaround in sales of new vehicles, rising for the first time since April. Retail ex automobiles and gas is expected to remain stable at 0.7%M/M for October. The control group reading used in the GDP print is expected at 0.9%M/M, but there are a real range of estimates, with most coming in between +0.5% to +2.0%.
  • A strong print later would likely see further downside pressure to the Eurodollar strip and EURUSD.
  • Elsewhere, supply is fairly light today with the UK and Finland selling 25-year bonds and Finland also selling its 10-year benchmark. Bills will be offered by Spain and the ESM.
  • On the open, the short sterling strip is focusing on the positives of the UK data (an increase in payrolls) but we are a bit more cautious with the underlying pace of wage growth slowing somewhat this month. We would look ahead to next month, but we are not sure this data is quite strong enough for the MPC to go in December, despite reducing some downside risks. Recall that we get one more labour market report before the December MPC meeting. December is heavily priced by markets at present.

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