Bonds: Gilts outperform slightly

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

US: 1.67% (-1bp)

UK: 0.87% (+1bp)
Germany: 0.04% (+3bp)
France: 0.33% (+3bp)
Italy: 1.28% (+3bp)
Spain: 1.08% (+0bp)
Portugal: 3.19% (+3bp)
Greece: 8.36% (+7bp)
Japan: -0.002% (+1bp)

Gilts slipped a tad but outperformed most of their developed world peers as traders waited on a speech from a key US rate-setter at the Federal Reserve Governor, Lael Brainard, scheduled for after the close of trading in London.

In the event, Brainard told her audience in Chicago that the risks to the economy of "significant unexpected weakness" in demand were likely higher than those from greater than expected strength.

"In today's new normal, the costs to the economy of greater-than-expected strength in demand are likely to be lower than the costs of significant unexpected weakness. In the case of unexpected strength, we have well-tried and tested tools and ample policy space in which to react," she told The Chicago Council.

Just a few hours before the president of the Atlanta Fed, Dennis Lockhart, had said that data released over the past few weeks, "warrant...serious discussion of a policy rate increase”.

However, when pressed for further indications as to the possible timing of the Fed's next hike he refused to be drawn, reportedly answering: "Financial markets seem to be very sensitive to remarks of Fed speakers at the moment.”

The Bank of England's reverse auction of Gilts maturing in between three and seven years' time was well bid, drawing a cover ratio of 3.16 versus the 2.82 it garnered the last time around.

To take note of, the issuance calendar was very heavy on Monday, with the US Treasury having sold $76bn in three and six-year bills and a combined $44bn in three and 10-year sales.

By way of reference, in remarks to Bloomberg TV on 9 September HSBC's Stephen Major reiterated his forecast - made at the start of the year - for the yield on the benchmark 10-year Gilt to see 2016 out from the 1.0% level.

"A fair value for Gilts is closer to 1.0% than to half a percent", he said.

In his opinion, Brexit was the reason why yields on the 10-year US Treasury had overshot HSBC's target to the downside, falling towards 1.3% at one point.