CANADA DATA: Core Inflation Moderation Seen Continuing In November (1/2)

Building permits rose more quickly than anticipated in September at 4.5% M/M SA (0.9% expected), but this was largely offset by a downward revision to prior (-4.0%, vs -1.2%) in this volatile series.

• Residential permitting rose 4.8% to a 5-month high level, with non-residential up 4.0% rising for the first time in 5 months.
• However note these figures are in value and not volume terms, making the 11.2% Y/Y overall drop particularly poor. The real rise in September was 4.2% M/M. But for Q3 as a whole, the value of housing permits in constant terms fell to the lowest in series history back to 2018.
• For the 3rd quarter, permits fell 5.4% in nominal terms for a 2nd consecutive quarterly decline, with Ontario non-residential permitting driving the Q3 decrease (after jumping in Q2).
• Overall despite the September pickup, the softness in broader permits bodes for some softer readings ahead in housing starts and overall construction.
• The BOC's latest Monetary Policy Report notes "Residential investment is anticipated to grow modestly over the projection horizon.  Housing starts are anticipated to remain elevated and grow modestly" though for business capex "Tariffs and trade policy uncertainty are expected to remain a significant headwind to investment into 2026."

• RES 4: 0.8875 High Apr 25    
• RES 3: 0.8868 61.8% retracement of the 2022 - 2024 bear leg  
• RES 2: 0.8848 1.618 proj of the Sep 15 - 25 - Oct 8 price swing 
• RES 1: 0.8838 High Nov 12
• PRICE: 0.8825 @ 17:13 GMT Nov 12
• SUP 1: 0.8763 Low Nov 3   
• SUP 2: 0.8761 20-day EMA 
• SUP 3: 0.8722 50-day EMA
• SUP 4: 0.8656 Low Oct 8 and a key support  

The trend cycle in EURGBP remains bullish and the cross has traded higher today, resulting in a breach of 0.8830, the Nov 5 high. The break confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 0.8848, a Fibonacci projection. On the downside, initial key short-term support to watch lies at  0.8761, the 20-day EMA. A break would highlight a possible short-term reversal.    

OATs outperformed the broader space Wednesday, with Gilts underperforming.

• EGBs and Gilts weakened on early trade. UK instruments led the broader sell-off after having outperformed Tuesday, suffering in part from rumours surrounding a potential leadership challenge in the ruling Labour Party. The high in yields was hit in late morning trade.
• But French Finance MInister Lescure's comments that he was "fairly confident" parliament would approve the contentious budget saw EGBs gain, and the national assembly's passing a suspension of the pension age rise, boosted perceptions of political stability and saw OATs extend outperformance.
• Weaker oil prices (an OPEC+ report showed price-negative supply-demand dynamics) also helped keep a lid on yields through the session.
• On the day, the German curve bull flattened, with Gilts bear steepening. Periphery spreads tightened alongside the OAT gains.
• Thursday's schedule includes UK Q3 / September GDP and monthly activity data, along with French labour market and Eurozone industrial production. In central bank communications, the BOE's Greene and ECB's Villeroy and Elderson make appearances, while we also get the ECB's latest Economic Bulletin release.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 1.998%, 5-Yr is down 1.2bps at 2.247%, 10-Yr is down 1.5bps at 2.643%, and 30-Yr is down 2.6bps at 3.228%.
• UK: The 2-Yr yield is up 0.4bps at 3.728%, 5-Yr is up 1bps at 3.867%, 10-Yr is up 1.1bps at 4.398%, and 30-Yr is up 1.9bps at 5.191%.
• Italian BTP spread down 1.7bps at 72.8bps / French OAT down 2.8bps at 73.6bps