Bonds: DBRS reaffirms Portugal, Fitch cuts outlook on Italy

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

US: 1.74% (-2bp)

UK: 1.09% (+1bp)
Germany: 0.01% (0bp)
France: 0.29% (+1bp)
Italy: 1.37% (+1bp)
Spain: 1.12% (+1bp)
Japan: -0.05% (+1bp)
Portugal: 3.19% (-2bp)
Greece: 8.44% (+0bp)

Prices on longer-term Gilts were slightly lower at the tail-end of the week, underperforming similarly-dated US and German debt by a small margin.

To take note of, German 10-year bunds posted their first weekly advance in October following what markets took as hints from European Central Bank chief Mario Draghi that quantitative easing in the Eurozone would be extended next year.

"The European Central Bank’s enormous stimulus has strengthened eurozone financial markets’ resiliency, but it has also made them dependent on ongoing stimulus to maintain stability. Weaning markets off easy monetary policy will be a delicate exercise for the ECB and is a topic we think will gain prominence next year – and one that reinforces our long-term caution about investing in the eurozone," Andrew Bosomworth, PIMCO Managing Director and Portfolio Manager, said in a research report sent to clients.

Significantly, Canadian ratings agency DBRS reaffirmed its BBB (low) rating on Portugal´s long-term sovereign debt.

For the moment, that insures that the ECB will be able to continue buying debt issued by Lisbon as DBRS is the only remaining agency which still rates debt from the country as investment grade.

Fitch Ratings on the other hand lowered the outlook on Italy´s long-term debt rating from 'stable' to 'negative'.

On the other side of the world, yields on 10-year Chinese bonds slipped by as much as two basis points to 2.635% ´- a record low.

In her first EU summit as prime minister in Brussels, Prime Minister May said: "I recognise the scale of the challenge ahead. I am sure there will be difficult moments - it will require some give and take.

"But I firmly believe that if we approach this in a constructive spirit, as I am, then we can deliver a smooth departure and build a powerful new relationship that works both for the UK and for the countries of the EU, looking for opportunities, not problems."

She said until Britain formally leaves the EU, she expected the nation to continue to have a say in the bloc’s decisions.

In other UK events, data from the Office for National Statistics showed Britain’s public finances had a bigger-than-expected deficit in September of £10bn, up 14.5% from the deficit in the same month a year ago. Economists had expected a deficit of £8.5bn.

The data was published ahead of Chancellor Philip Hammond’s Autumn Statement next month.

Speaking to reporters on Friday afternoon, the president of the Federal Reserve Bank of San Francisco, John Williams, reportedly said "this year would be good" for a rate rise.

He did not disagree with recent remarks from Fed chair Janet Yellen that allowing the economy to run a little hot might help undo some of the damage from the past financial crisis.

Nevertheless, allowing the rate of unemployment from 5% to 4% might force too quick a shift on rates by the Fed at some point down the road, with potentially troublesome consequences for the economy, he added.

In 2017, he reportedly said it would make sense for the central bank to tighten rates a few more times.

As of the close of trading in New York, Fed funds futures were still pricing in a 69.5% probability of a 25 basis point rate hike in the States come the 14 December US Federal Reserve policy meeting.