EM LATAM CREDIT: Cosan: Capital Increase approved - Positive

*ZELENSKIY: WILL DISCUSS SECURITY GUARANTEES WITH TRUMP

• *ZELENSKIY SPEAKS ALONGSIDE TRUMP IN NEW YORK
• *TRUMP: NATO COUNTRIES SHOULD SHOOT DOWN AIRCRAFT ENTERING SPACE
• *TRUMP: WE'LL KNOW ABOUT PUTIN IN A MONTH
• *TRUMP: THINK ORBAN WILL STOP BUYING RUSSIAN OIL
• *TRUMP: UKRAINE IS DOING VERY GOOD JOB STOPPING LARGE ARMY
• *TRUMP: RUSSIAN ECONOMY IS TERRIBLE RIGHT NOW
• *TRUMP ON BACKING UP NATO SHOOTING RUSSIAN JETS: IT DEPENDS
• Source: Bbg

Gilts outperformed Bunds Tuesday amid mixed European PMIs.

• September Flash PMI data was the scheduled highlight of the session, and it turned out to be the biggest market mover.
• Overall Eurozone composite PMIs were in-line with expectations. However a French PMI miss across both Services and Manufacturing with softer inflationary readthrough saw core FI boosted, after which more mixed German readings including a return to expansion for Services with more solid output prices saw Bunds retrace lower.
• The UK saw softer-than-expected PMI readings on both Manufacturing and Services, seeing Gilts move through Monday's strongest levels, albeit the report noted solid prices charged.
• A subsequent pickup in oil prices and equities had little impact, but in-line US PMIs later drove an uptick in global yields before they faded into the European close.
• The UK curve bull flattened, with Germany's twist flattening. Periphery/semi-core EGB spreads were mixed, with Italy and Spain slightly tighter to Bunds and Greece and France slightly wider.
• Wednesday's calendar includes German IFO data, with BOE's Greene speaking after the cash close.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.4bps at 2.022%, 5-Yr is up 0.8bps at 2.328%, 10-Yr is up 0.1bps at 2.749%, and 30-Yr is down 1.4bps at 3.343%.
• UK: The 2-Yr yield is down 2.6bps at 3.954%, 5-Yr is down 2.6bps at 4.104%, 10-Yr is down 3.2bps at 4.68%, and 30-Yr is down 5.1bps at 5.497%.
• Italian BTP spread down 0.3bps at 79.4bps / French OAT up 0.7bps at 81.7bps 

Fed Chair Powell doesn't deviate much from the September FOMC message in a Q&A appearance Tuesday. He repeats his comment from last week's press conference that he can no longer describe the labor market as "solid", while they'll be assessing "vast quantities" of data to make a decision at the October meeting: 

• "So what we've done all year is, our policy rate has been tight because inflation has been above our target, but the labor market was very solid. Now over the last really four months, really over the summer, the labor market has softened. Payroll jobs have dropped a lot, so we can't really say that anymore. And I think what that told us, is that stance of really having a tight focus on inflation really needs to moderate toward a more balanced approach. And so that's why we took the action we took at our at our last meeting. And as we go to our next meeting, we'll be asking ourselves, we'll be looking at the data very carefully -  labor market data, growth data, inflation data, all the vast quantities of data that we get and asking ourselves, is policy in the right place, and if not, we move it there."
• He says "I would say we do see meaningful weakness in the labor market now, very low job creation."
• Powell says the latest Beige Book showed a fairly consistent economic picture across Fed regions: "All around the country... you saw a pretty modest growth, wage and price inflation at modest to moderate levels. The economy growing, but not fast, and significant uncertainty ...  federal public policy is kind of weighing on investments and decisions about investment and hiring, except in the area of the AI buildout which is just going really strong pretty much many parts of the country."
• He repeats what he said last week about how it doesn't appear that overseas exporters are eating the cost of tariffs, but rather importers/retailers - "and they're not passing along to consumers that much of the cost. So the actual effects on inflation have been quite modest."
• "The question is, are companies, then are they going to eventually be able to pass that stuff through? And then that might drive inflation up a little higher?... I would say that that the passthrough to consumers has been later and less than we expected. How much of that will continue, I don't know, but the responsible thing, from our standpoint, was to watch and wait, because, you know, it's our job to make sure we don't make a mistake on inflation."
• On the balance of risks: "We may find out in a year that inflation actually wasn't under control, and it's back up to three and a half or 4%. No one thinks this is the base case, but that's the risk of cutting too early or too much... of course, the risk of cutting too late is that the labor market weakens unnecessarily. There's no risk free path, and you know, it's just, it's a very difficult policy environment when your two goals are telling you two different things, you've got to make a compromise."