(CercleFinance.com) – European bond markets were at their worst this Friday morning, before recovering a bit, but Italian BTPs remain very tense.
The yield of our OATs rose to around 2.67% and Bunds to 2.11% (a 9-year record), but the fear of new dramatic events on the geopolitical front (a large mobilization in Russia that could foreshadow the intensification of the fighting in Ukraine ) encourage a trade-off in favor of safe means.
Our OATs returned to 2.58%, Bunds to 2.01% ie. +4 points ‘only’ (vs. +13 this morning), Spain’s Bonos post +5 points to 3.155% (vs. 3.24% at peak).
Italian BTPs do not benefit from this with a deterioration of +11 points to 4.31% (high 4.367%), investors fear that the EU will take retaliatory measures if Italians ‘vote badly’, as Ursula von der Leyen stated in the half – in other words, in an attempt to interfere with the democratic voting in Europe with serious and unprecedented threats.
The worst performance of the day was suffered by British Gilts, whose yield rose by +32 points to 3.815% and exceeded by 10 points that of US Treasuries (3.72%, or +2 points): a £200 billion plan could be launched to support the buying household power and avoid thousands of business bankruptcies, burdened by rising energy prices.
This has been a real crash in UK bonds since Gilts posted +70 points in a week, +50 points in 48 hours and +120 points since September 1st: historic collapse!
The day will end without major differences on T-bonds, which are not too sensitive to the US PMI, which remains anchored in the contraction zone (below 50), confirming here again the reality of the recessionary threat across the Atlantic.
The U.S. private sector, however, slowed its contraction slightly in September as orders returned to growth, according to a PMI survey released Friday by S&P Global.
The composite index was 49.3 this month, compared to 44.6 in August, but it is still in the contraction zone.
In the services sector, the ‘flash’ PMI rose sharply to 49.2, after 43.7 in August, well above the consensus target of 45.
The manufacturing PMI rose to 51.8 from 51.5 last month, again beating economists’ projections that had targeted an average of 51.3.
The contraction continues, but this time in the euro zone: it intensified in September, against the background of intensifying inflationary pressures.
The latest PMI survey released by S&P Global on overall activity in the region thus fell to 48.2 this month, from 48.9 in August, the research office said: a new 20-month low.
In France, the preliminary composite index measuring overall activity in France rebounded to 51.2 this month, up from 50.4 in August.
With rising energy prices, rapidly rising interest rates and slowing global growth, the Eurozone composite PMI fell below 50 points in August.
One of the ‘facts of the day’ is the new record set by the dollar (+1.4%) around 0.9700 against the euro… which invites us to question both the geopolitical context and the economic outlook.
But this is almost anecdotal given the pound’s fall against the dollar -3.2% to 108.98 (despite Gilts at 3.84%): a major crisis of confidence appears to be underway in the UK.