Bonds: Weak economic data pushes yields lower in UK, US
Weak data on China´s services sector and manufacturing data out of the Eurozone and the United States weighed on 'core' long-term sovereign bond yields.
The Caixin Chinese services sector purchasing managers' index for August fell to a reading of 51.5 after a print of 53.8 for the month before. That, in turn, dragged the so-called composite PMI down by 1.4 points to 48.8 - the first sub-50 reading for this year.
That saw the yield on the benchmark 10-year Gilt slip by three basis points to 1.93% and that on similarly-dated US Treasuries by another three basis points to 2.19%.
Data out on the state of manufacturing in the rest of the world´s main economic blocks on Tuesday was similarly weak.
Markit´s manufacturing sector PMI for the UK slowed down to 51.5 in August after a print of 51.9 in the previous month (consensus: 52).
That prompted Fabrice Montagne, economist at Barclays, to tell clients that: "we acknowledge risks to the downside given the continued deterioration in new export orders [...], which is likely to worsen given expected continued currency strength and recent global economic uncertainty."
Out in the Eurozone periphery, the story was different, the yield on 10-year Spanish government bonds rose by four basis points to 2.15% while that on portuguese debt jumped by eight basis points to 2.73%.
Speaking in the afternoon, the president of the Federal Reserve bank of Boston, Eric Rosengren, said: “there’s an awful lot of uncertainty about inflation,” adding that “our best guess is that we’re on a path that will get us to 2% inflation.”
According to the results of the latest survey carried out by Bloomberg, 48% of the 54 economists surveyed between 27 to 31 August expect the US FOMC to raise rates come September.
That is considerably less than the 77% who said the same thing in a similar survey undertaken between 7 to 12 of August. Another 24% of respondents see the first hike arriving in December while 17% see that occurring in October.