Bonds: Gilts slip amid rally in Italian government debt
These were the movements in some of the most widely-followed 10-year sovereign bond yields:
US: 2.90% (+4bp)
UK: 1.43% (+3bp)
Germany: 0.36% (+2bp)
France: 0.69% (-0bp)
Spain: 1.43% (-2bp)
Italy: 3.02% (-14bp)
Portugal: 1.87% (-4bp)
Greece: 4.56% (+11bp)
Japan: 0.12% (+1bp)
Gilts dipped with prices hit by a much stronger-than-expected reading on US manufacturing sector activity.
The US Institute for Supply Management's factory sector Purchasing Managers' Index jumped to a 14-year high of 61.3 in August, following a reading of 58.1 for July.
Ian Shepherdson at Pantheon Macroeconomics expressed a degree of surprise at the result, telling clients: "Overall, this is a very strong report, though manufacturing sentiment will be sorely tested if the administration follows through its threat hugely to expand tariffs on Chinese imports. For now, though, the sector is in very good shape."
Tellingly perhaps, the shorter-end of the Treasury curve was also under pressure, with the yield on the benchmark two-year US Treasury note adding three basis points to 2.65%.
Losses in government debt markets on Tuesday was counter to expectations, given expectations for reduced issuance from Washington over the week.
Not helping matters either were remarks from one of Italy's Deputy Prime Ministers, Matteo Salvini, who rowed back on his threat of pushing for a public deficit worth 3% of gross domestic product in the country's 2019 Budget law.
According to Italian daily La Stampa, Salvini said he was now pushing for a deficit of up to 2.0% of GDP, trigerring a rally in the country's debt and hence reduce safe haven flows towards the likes of the US or Germany.
To take note of, the day before the Financial Times had called attention to the Italian Treasury's need to increase its pace of debt issuance in what remained of 2018.