These were the yields and basis point movements of some of the most watched 10 year bonds by the close in Europe:

Spain: 5.77% (+8bp)
Italy: 4.99% (+7bp)
France: 2.28% (+0bp)
Ireland: 5.03% (-5bp)
Japan: 0.80% (-2bp)
Germany: 1.57% (-5bp)
UK: 1.80% (-5bp)
US: 1.77% (0bp)

So-called "core" European country bonds generally outperformed today, as periphery debt gave back approximately half of yesterday´s gains.

That following a somewhat "mixed" Spanish treasury debt auction this morning, although the re-opening of the market for this country´s 10 year bonds is worth highlighting.

Irish bonds today performed more like "core" bonds again, despite GDP data showing flat growth in the second quarter, instead of the 0.7% advance that had been foreseen by the consensus. Some economists -such as those at Citi- are warning that Ireland needs to revive growth quickly or risk debt unsustainability.

Acting as a backdrop, China´s manufacturing sector PMI for the month of September has come in at 47.8 overnight, after a reading of 47.6 in August, for its longest streak below the 50 point threshold -which indicates economic contraction - in eight years. As well, Japan's exports fell 5.8% year-on-year in August, for a third straight decline, on weakness in demand from the EU and China.

Meantime, and in the US this afternoon, the Treasury has sold $13bn in inflation protected 10 year debt. The sale's bid-to-cover ratio was 2.36, the lowest level since April 2009. Why? The record low negative yield of -0.75% surely has a lot to do with that.

Of interest, remarks by Dallas Fed President Richard Fisher yesterday evening to the effect that the current central bank program is not "QE-infinity." His peers at the Boston and Richmond Federal Reserves however have today voiced their support for Bernanke´s third round of quantitative easing.

The Federal Reserve Bank of Philadelphia´s manufacturing index for the month of September has printed at -1.9 points, slightly ahead of the reading of -4.5 expected and last month´s -7.1. Significantly, perhaps, the new orders sub-index rose to 1 from -5.5, its highest in four months.

Lastly, Gilts did relatively well today despite the release of -on the whole- slightly better than expected economic data, thanks to a stronger than expected reading for industrial order books during the month of September.

AB

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