OIL: Libya Raises Es Sider and Sharara Crude OSPs for Dec

Wednesday's Europe rates/bond options flow included:

• RXZ5 130.00/130.50cs, bought for 10 in 4.2k
• RXZ5 129/128.5/128p ladder vs 131c, bought the ladder for 5 in 3k
• RXG6 128.50/127.50ps vs 131.00/132.00cs, bought the ps for 2 in 1.5k
• ERH6 98.06/98.18/98.31c fly, bought for 1.5 in 10k
• ERH6 98.06/98.18cs, bought for 2.5 in 10k
• ERH6 98.1875 call, sold for 2 in 8k
• ERU6 98.50c, bought for 3.25 in 17.5k total
• SFIZ5 96.30/96.15/96.05 broken put fly paper paid 6 on 8K
• SFIG6 96.55/96.65/96.75 call fly paper paid 1.5 on 7.5K
• SFIH6 96.45/96.55/96.65/96.75c condor vs 96.25p, bought the condor for 0.25 in 2k
• SFIJ6 96.25/96.15 put spread 6K given at 1
• 0NU6 96.80/97.10cs vs 0NU6 96.30/96.00ps, bought the cs for -0.25 and flat in 7.5k

European yields rose Wednesday. with Gilts underperforming.

• Core EGBs and Gilts traded flat in the European morning, with some downward bias as Services PMIs were revised up from flash in the final for the UK, France and Germany (with Italy and Spain coming in above-expected) and anticipation grew of a nearer-term resolution to the US federal government shutdown.
• Yields rose through the afternoon led by US Treasuries, following stronger than expected US data (ISM Services, ADP private payrolls).
• In other data, the ECB's  latest forward-looking wage tracker was revised up marginally, while German September factory orders were a little stronger than expected.
• On the day both the German and UK curves bear steepened, with Gilts underperforming ahead of Thursday's BOE decision announcement.
• Periphery/semi-core EGB spreads widened slightly.
• The BOE is Thursday's market focus. MNI's preview is here - we characterise our view as 50/50 (when it comes to a cut or a hold), which is comfortably more dovish than current market pricing.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.7bps at 2.004%, 5-Yr is up 1.5bps at 2.27%, 10-Yr is up 1.9bps at 2.673%, and 30-Yr is up 2.2bps at 3.259%.
• UK: The 2-Yr yield is up 2bps at 3.804%, 5-Yr is up 3.1bps at 3.93%, 10-Yr is up 3.8bps at 4.463%, and 30-Yr is up 4.5bps at 5.249%.
• Italian BTP spread up 0.5bps at 75.1bps / French OAT up 0.3bps at 78.5bps  

• Despite the impressive surge higher for US yields on Wednesday, the USD index is holding at unchanged levels on the day, as a recovery for major equity indices today offsets the most recent greenback enthusiasm. Despite this, the DXY did make fresh 5-month highs, with a firmer-than-expected ISM services PMI supportive.
• Most of the G10 currency action has been centred around the Yen once more, with USDJPY posting an impressive 140 pip range on Wednesday. Initial risk off during SPAC hours and a moderately hawkish set of BOJ minutes prompted USDJPY to extend its pullback to 152.96, however, the subsequent recovery has been very notable.
• The pair’s intraday bounce picked up pace in late European trade, printing a new daily high through the London close. A break above yesterday's 154.48 would mark a full reversal of the JPY strength tripped by Katayama's warnings on FX movements on Tuesday - and again shows that USDJPY is a key beneficiary in a higher US yields environment.
• Today's price action affirms the view that pullbacks are technically corrective in nature, and a break of 154.39/48 supports a rally toward 154.80, the Feb 12th high.
• The more stable risk sentiment has allowed AUD and NZD to outperform, rising around 0.3% against the greenback, although these advances are yet to erode the prior declines this week.
• USDCAD remains a touch higher on the day above 1.41, looking to extend its winning streak to five sessions. Importantly, the pair has held an important resistance for now, the top of the bull channel drawn from the Jul 23 low.
• Higher equities boosted EM FX significantly, with the likes of MXN, ZAR and BRL shrugging off the moves for US yields. USDMXN has now reversed over 1% from intra-day highs, helping the pair edge back below 18.60 in late trade.
• The Bank of England headlines the economic calendar on Thursday, and is potentially set to be a close call decision between a hold and a 25bp cut.