UK DATA: Upward Revision To Oct Services PMI, But Fall In Employment Still Noted
Nov-05 09:36
Momentum in UK services activity remains positive, though October’s 52.3 final read remains below August’s 54.2. While stronger new orders supported the aggregate index, another reduction in employment numbers and easing output charge inflation will be noted by the BOE.
Key notes from the UK services PMI release:
- “Survey respondents cited a gradual turnaround in new work and sales opportunities, despite elevated business uncertainty and delayed decision-making among clients”
- “Anecdotal evidence suggested that a rebound in order books and successful new product launches had helped to boost business activity in October.”…“Stronger order books appeared to reflect rising domestic demand, with service providers noting increased marketing spending and greater sales enquiries. In contrast, new work from abroad decreased for the second month running”
- “October data pointed to only a slight reduction in employment numbers across the service economy” … “Where a reduction in headcount was reported, this mainly reflected efforts to offset higher payroll costs through the non-replacement of voluntary leavers.”
- “Input cost inflation remained historically strong , but moderated for the second month running to its lowest since November 2024. Higher salary payments were commonly reported”
- “ Average prices charged by service providers meanwhile increased at the slowest pace since June,”
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GERMAN T-BILL AUCTION RESULTS: 6/11-Month Bubills
Oct-06 09:34
| Type | 6-month Bubill | 11-month Bubill |
| Maturity | Apr 15, 2026 | Sep 16, 2026 |
| Allotted | E2.445bln | E1.859bln |
| Previous | E2.463bln | E1.375bln |
| Total sold | E3bln | E1.5bln |
| Target | E3bln | E1.5bln |
| Avg yield | 1.937% | 1.944% |
| Previous | 1.935% | 1.908% |
| Bid-to-cover | 1.45x | 2.91x |
| Previous | 1.66x | 3.81x |
| Bid-to-offer | 1.18x | 3.61x |
| Previous | 1.36x | 3.49x |
| Previous date | Sep 01, 2025 | Sep 08, 2025 |
GILTS: Bear Steepening On Global Cues
Oct-06 09:34
Gilts trade lower as steepening impetus from Japan (in the wake of the LDP Party naming a new leader & PM) and heightened political risk in France (as PM Lecornu steps down) weigh.
- Futures break Thursday’s low, basing at 90.48 before a recovery to 90.60.
- Bears remain in technical control at this stage, particularly with UK fiscal risks lingering.
- Initial support and resistance in futures still located at 90.26 & 91.28, respectively.
- Yields 1.5-5.0bp higher, curve steeper.
- 10s still comfortably within their recent 4.60-4.80% range, last 4.73%. Broader benchmark yields fail to test recent highs.
- 2s10s and 5s30s stick within their respective multi-week ranges, trading ~7bp and ~11bp below their cycle closing highs. Steepening trends intact.
- BoE-dated OIS still shows ~5bp of easing through year-end and is not discounting the next 25bp cut until the end of the April MPC.
- We continue to believe that markets underprice the odds of a Q4 rate cut.
- Comments from BoE Governor Bailey are due today.
- They will be closely scrutinised (even though he spoke as recently as Friday), particularly after Deputy Governors Ramsden & Breeden failed to push back against the idea of rate cuts last week.
- We have previously suggested that Bailey and those two Deputies would probably have to join dovish dissenters Dhingra & Taylor if we were to see a cut in Q4.
- Also note that the BoE will sell GBP775mln of short bucket gilts from its APF (3- to 7-Year) this afternoon.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Nov-25 | 3.963 | -0.5 |
Dec-25 | 3.923 | -4.5 |
Feb-26 | 3.818 | -14.9 |
Mar-26 | 3.788 | -17.9 |
Apr-26 | 3.707 | -26.0 |
Jun-26 | 3.683 | -28.4 |
Jul-26 | 3.634 | -33.3 |
Sep-26 | 3.623 | -34.4 |
OPTIONS: Larger FX Option Pipeline
Oct-06 09:34
- EUR/USD: Oct07 $1.1650(E1.8bln), $1.1750(E1.2bln), $1.1820(E2.3bln); Oct08 $1.1700(E1.0bln), $1.1770-80(E1.2bln), $1.1800(E1.2bln)
- USD/JPY: Oct08 Y146.50($1.2bln), Y147.00($1.5bln)
