Bonds: Gilts play catch-up with Treasury market after FOMC
These were the movements in some of the most widely-followed 10-year sovereign bond yields:
US: 2.27% (+0bp)
UK: 1.31% (+3bp)
Germany: 0.46% (+1bp)
France: 0.74% (+1bp)
Italy: 2.11% (+4bp)
Spain: 1.62% (+4bp)
Portugal: 2.43% (+4bp)
Greece: 5.56% (+2bp)
Japan: 0.04% (+4bp)
Gilts slipped as traders played catch-up with the results of what several analysts described as a hawkish US central bank policy meeting overnight.
That was despite quite favourable public lending figures which, according to analysts at Capital Economics, pointed to a potential £13bn undershoot in the government's deficit for this fiscal year, leaving the Chancellor with some money to play with.
"As a result, some easing back on austerity to help households struggling in the face of the squeeze on real incomes looks likely. However, this won’t be the end of austerity, rather a slight relaxation in the pace," the consultancy said.
Stateside, investors took a breather following moderate selling the day before at both the two and ten year tenors. That was despite a raft of better than expected readings on the US economy, including high-frequency data such as weekly unemployment claims and the Philly Fed's regional manufacturing index.
Jobless claims in the US printed at 259,000 for the latest week, coming in well below the 302,000 consensus forecast.
In parallel, the Federal Reserve bank of Philadelphia's mid-Atlantic manufacturing sector gauge printed at 23.8 for September, up by 4.7 points from the previous month, on the back of strong readings for new oders and shipments.
Over in the euro area, analysts at Deutsche Bank took note of remarks from European Central Bank chief Mario Draghi's keynote address as the chair of the European Systemic Risk board.
For Draghi, "the use of monetary policy is not the right instrument to address financial imbalances."
On a more negative note, local reports in Spain appeared to indicate footdragging from the country's Basque nationalist party on approving the 2018 budget law in reaction to recent events in Catalonia.
Elsewhere, Standard&Poor's downgraded its credit rating on China's long-term debt from AA- to A+.