Bonds: BoE pays premium at latest reverse auction

These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 1.55% (+1bp)

UK: 0.54% (-2bp)
Germany: -0.10% (-1bp)
France: 0.14% (+0bp)
Italy: 1.12% (+2bp)
Spain: 0.94% (+0bp)
Portugal: 3.01% (-2bp)
Greece: 8.05% (+1bp)
Japan: -0.08% (-2bp)

Longer-dated Gilts outperformed moderately as the Bank of England opted to pay a premium at its latest reverse auction for debt due in more than 15 years.

The Old Lady on Threadneedle Street obtained a coverage ratio of 1.54 on Tuesday, down from the 2.67 achieved at a similar operation a week before.

One analyst attributed the low ratio, in part, to pension funds' reluctance to part with the longest dated Gilts and a dearth of new supply over the Summer.

Yields on the benchmark 30-year Gilt skidded five basis points lower to close at 1.266%.

Also worth noting, the minutes of the US central bank's discount rate meeting on 25 July revealed that eight out of 12 regional Fed banks asked for a 25 basis point increase in the discount rate, up from six on 13 June.

Economic data on either side of the Pond was somewhat mixed, with the latest preliminary euro area composite IHS Markit PMI at 53.3 (previous: 53.2) inching past the consensus forecast for a reading of 53.1, pointing to a degree of resilience in the bloc's economy after Brexit, according to economists.

A similar survey referencing the US on the other hand surprised to the downside, falling from a nine-month high of 52.9 in July to 52.1 in August.

“The August drop in the PMI is a disappointment but less worrying when looked at in the context of July’s better than expected reading. Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter, and should help drive stronger GDP growth," said Chris Williamson, Chief Business Economist at IHS Markit.

In the emerging markets space, 10-year government debt issued by Ankara jumped, sending yields down by 15 basis points to 4.36%.

Earlier in the session, Turkish rate-setters had lowered the central bank's overnight lending rate from 8.75% to 8.50%, as expected.

On a more sombre note, after the close of trading in London Standard&Poor's lowered its outlook on Mexico's long-term sovereign debt from 'stable' to 'negative'.

Acting as a backdrop, there was some 'market-chatter' to be seen highlighting the distortions being wreaked on Japan's stockmarket by its central bank's decision to purchase stock ETFs.