PERU: Consumer Prices Rise 0.01% M/M in September

• MNI: EUROZONE AUG MANUF PMI 50.7 (50.5 FLASH, 49.8 JUL)

Gilts follow peers lower early today, with early focus on impending EUR supply, French political risk and ongoing questions surrounding Fed independence.

• Note that manufacturing PMI readings released as of now point to upside risks in the final Eurozone reading (due shortly).
• Fiscal risks continue to dominate locally.
• Futures pierce but fail to consolidate below initial support at the August 27 low (90.22), recovering to ~90.30 as of typing.
• Bears remain in technical control. More meaningful support comes in at the May 22 low (90.11).
• Yields 1.0-3.5bp higher curve bear steepens.
• 5s30s is on track for its first close above 150bp in the current cycle, trading less than 2bp off the Feb ’17 high (152.63bp).
• Final manufacturing PMI data headlines the UK calendar today (see our early morning STIR bullet for more on this week’s calendar).
• A reminder that the DMO will introduce the new 4.75% Oct-35 gilt via syndication this week.

• The Italian manufacturing PMI also outperformed expectations in August, albeit to a lesser extent than Spain earlier, at 50.4 (49.8 consensus, 49.8 prior). Release highlights below:
• "Improvement in the health of the sector for the first time in nearly one-and-a-half years [...] noticeable rise in production volumes in August, which was the most marked in almost two-and-a-half years. The renewed uplift in overall order books was only mild, however, as the drag from export performance widened. Net employment decreased again, while business optimism faded."
• "Of the five PMI components, four imparted positive directional influences. However, most prominently, the headline reading was supported by renewed growth in output and new orders."
• "It was clear that the improvement in overall sales was domestic focused, as export business declined at a sharper rate. Panellists noted that trade and geopolitical tensions had continued to dampen international sales."
• On prices: "Latest data showed renewed reductions in input prices and output charges, both of which were only mild in
  nature, however. Survey respondents noted that lower energy prices and favourable exchange rate movements had reduced some pressure on costs, which they had pass through to customers in the form of lower charges."