EUROPEAN INFLATION: September PPI Sees Broad Upticks In Non-Energy Categories

EGB periphery and semi-core spreads fell sharply Tuesday amid a broad bond rally.

• Rather than any specific triggers, instead the move appeared to be the result of a confluence of factors including softer crude oil prices and a bounce in French OATs following the recent selloff.
• While French (and wider Eurozone) fiscal issues remain at the forefront, budget proposals presented Tuesday from French Presidential frontrunner Le Pen included a "golden rule" to "restore a budget surplus before 2028".
• In data, both French and Spanish August IP was weaker than expected, while German factory orders were skewed lower by volatile large-scale orders.
• German and UK yields mostly fell on the day in a flattening move, with weakness in the short end of the German curve a standout exception (large Schatz supply may have weighed).
• Periphery/semi-core spreads tightened 7-8bp to 10Y Bunds, with OATs among the outperformers.
• Wednesday's European calendar includes German industrial production data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 4.7bps at 3.112%, 5-Yr is unchanged at 3.25%, 10-Yr is down 1.5bps at 3.478%, and 30-Yr is down 2.1bps at 3.845%.
• UK: The 2-Yr yield is down 3.1bps at 4.817%, 5-Yr is down 3.1bps at 4.923%, 10-Yr is down 4.3bps at 5.375%, and 30-Yr is down 4.2bps at 5.903%.
• Italian BTP spread down 8.3bps at 105bps / French OAT down 7.8bps at 129.4bps  

• US Data/Speaker Calendar (prior, estimate). All times ET
• 10/07 0700 MBA Mtg Applications (-6.0%, --)
• 10/07 1100 NY Fed 1-Yr Inflation Expectations (3.58%, 3.64%)
• 10/07 1130 US Tsy $75B 17W bill auction
• 10/07 1300 US Tsy $39B 10Y Note auction re-open (91282CRF0)
• 10/07 1400 FOMC Meeting Minutes for September
• 10/07 1500 Consumer Credit ($18.062B, $15.0B)
• Source: Bloomberg Finance L.P. / MNI

• RES 4: 1.3599 High Aug 28
• RES 3: 1.3568 High Sep 9 
• RES 2: 1.3398 50-day EMA
• RES 1: 1.3311/1.3327 High Sep 30 / 20-day EMA
• PRICE: 1.3279 @ 16:02 BST Oct 06
• SUP 1: 1.3181 Low Oct 01
• SUP 2: 1.3140 Low Jun 24 and a key M/T support
• SUP 3: 1.3096 Low Nov 25 ‘25
• SUP 4: 1.2984 50.0% retracement of the Jan 13 ‘25 - Jan 27 bull leg  

The trend structure in GBPUSD remains bearish, despite the bounce in prices on Tuesday. The fresh cycle low last Thursday confirmed a flag formation - a bearish continuation signal that reinforces current trend conditions - on the daily chart. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend. Scope is seen for an extension towards 1.3140, the Jun 24 low and the next key support. Resistance at the 20-day EMA is at 1.3327.