By Lorcan Roche Kelly
An auction of Japanese 10-year debt drew the lowest bid-to-cover ratio of any since 2016, leading to a climb in yields across the curve. The sell-off spilled into Treasuries and European sovereign debt, with the U.S. 10-year yield rising by eight basis points. The sudden collapse came after the Bank of Japan’s decision to reduce bond purchases in October. It also comes in the wake of a record month for corporate debt issuance globally with companies selling more than $300 billion for the first time ever.
Barr, Giuliani, Pompeo
There were rapid developments in the House impeachment inquiry yesterday, with President Donald Trump’s personal lawyer, Rudy Giuliani, his Secretary of State Michael Pompeo and Attorney General William Barr all drawn into the widening net. Giuliani was subpoenaed for records of his dealing with Ukraine, while Pompeo and Barr’s roles are being examined by U.S. Attorney John Durham, the prosecutor leading the investigation. Trump, meanwhile, is pushing to unmask the whistle-blower behind the allegations. It may be Joe Biden’s electoral chances that are being hit harder than Trump’s by the investigation.
Euro-area inflation came in at 0.9% for September, slower than analyst expectations. Core inflation, excluding food and fuel prices, rose to 1%, higher than the headline rate for the first time since 2016. There was also disappointing news in the region’s manufacturing PMI data at 45.7 for the month — the lowest reading since the depths of the sovereign crisis. There are fears that the drop in manufacturing could turn out to be more of a structural event than a cyclical one.
Overnight, the MSCI Asia Pacific Index rose 0.2% while Japan’s Topix Index closed 1% higher. Stock markets in China and Hong Kong were closed for the start of a week-long holiday. In Europe, the Stoxx 600 Index was 0.3% lower at 5:45 a.m. Eastern Time, as equities reversed gains following weak economic data. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 1.737% and gold continued its recent run of losses.
July GDP numbers for Canada are published at 8:30 a.m. In the U.S., Markit manufacturing PMI is at 9:45 a.m., with ISM manufacturing at 10:00 a.m. August construction spending is also released at 10:00 a.m. American autosales are published by manufacturers today. Chicago Fed President Charles Evans, Fed Vice Chairman Richard Clarida and Fed Governor Michelle Bowman are all scheduled to speak later.