TURKEY: Foreign Minister Discusses Syria Tensions at NATO Meetings

Weakness in bonds outlined elsewhere (seemingly driven by a confluence of minor factors) weighs on gilts this morning.

• Futures through yesterday’s low, bearish trend intact.
• Lows of 93.56 seen thus far, initial support at the Oct 31 low (93.18).
• Yields 3bp higher across the curve, in a parallel shift.
• 30+-Year yields register fresh cycle highs.
• Gilts track Bunds on the opening move, with the 10-Year spread steady at 206bp.
• No reaction to lower tier UK data/BBG inflation calculations released overnight, which read dovishly.
• GBP/STIRs roughly in line with levels flagged ahead of the gilt open, see that bullet for greater colour on pricing and some background information heading into Thursday’s BoE decision.
• Final services & composite PMI data due today.
• Supply-wise, the DMO will come to market with GBP3.75bln of the 4.25% July-34 gilt.
• Eyes also on spillover from any potential last minute pre-U.S. election positioning.

Spanish October registered unemployment claims were in line with consensus at 26.8k (vs 27.0k cons, 3.2k prior). The data are not seasonally adjusted, but the rise is less than the 2010-2023 October average of 63.5k.

• Similarly, the 67.8k monthly rise in registered employment was above the 28.5k October average from 2010-2013.
• A key tenet of Spain’s economic outperformance post-covid has been strong population growth, which has fed through into falling unemployment rates.
• In Q2, Spanish LFS unemployment was 11.2%, its lowest since 2008.

France Industrial Production in September was weaker than expected at -0.9% M/M (vs -0.6% consensus, 1.1% prior revised down from 1.4%) and -0.6% Y/Y (vs -0.4% consensus, 0.1% prior revised down from 0.5%).

• The weakness was driven by both manufacturing and 'extractive industries' production. The former declined 0.8% M/M (albeit less than consensus of -1.3% from 4 analysts estimates, 1.4% prior). Extractive industries production fell 1.2% M/M (vs -0.1% prior).
• Within manufacturing, the decline was largely due to a decline in the pharmaceutical industry which partially reversed August's climb printing -11.7% M/M, after rising 18.8% in August - the weakest print since March 2023. There was also weakness in "wood, paper and printing" which fell 1.6% M/M after a fall of 1.8% M/M last month and "other manufacturing industries" which fell 1.4% M/M.
• Manufacturing of transportation increased 0.7% M/M (following the 3.4% M/M rise in August and the soft July). However, automobile manufacturing fell 2.0%M/M with "other transport" up 2.4% M/M.
• Manufacture of capital goods also declined 0.9% M/M (following a fall of 1.7% in August), whilst Food and "coking and refining" rose in September.