Bonds: Russian debt extends gains

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

US: 1.60% (+3bp)

UK: 0.727% (+6bp)
Germany: -0.04% (+2bp)
France: 0.19% (+1bp)
Spain: 1.03% (+3bp)
Italy: 1.17% (-0bp)
Portugal: 3.04% (+0bp)
Greece: 8.10% (0bp)
Japan: -0.03% (+2bp)

Longer-term Gilts underperformed the rest of the market by a wide margin, amid the release of a somewhat weaker than expected US jobs report for the month of August and a sharp improvement in a closely watched gauge of activity in the construction sector.

IHS Markit´s UK construction sector PMI powered higher from a reading of 45.9 in July - an 85-month low - to 49.2 in August.

“Despite another month of reduced output, the latest figures can be viewed as welcome news overall after a challenging summer for the construction sector. The move towards stabilisation chimes with the more upbeat UK manufacturing PMI data for August, and provides hope that the near-term fallout from Brexit uncertainty will prove less severe than feared,” said Tim Moore, senior economist at IHS Markit.

Stateside, the August employment report left economists dividend on the outlook for a September rate hike.

To take note of, the yield on the benchmark two-year US Treasury note ended the day flat at 0.7858% after the report revealed that the unemployment rate held steady at 4.9%, instead of dipping to 4.8% as economists had forecast, amid a tick lower in the length of the average workweek.

Nevertheless, in a speech delievered later in the day Richmond Fed president Jeffrey Lacker, a non-voter on the FOMC until 2018, reiterated that he was in favour of tightening policy sooner rather than later and that the US central bank´s last policy meeting in July would have been a "good time" to do so.

Further afield, the yield on Russian bonds maturing in February 2027 continued to drop, slipping by eight basis points to 8.15% after the central bank´s gauge of inflation expectations retreated to its lowest level since October 2014.

The yield on that ruble-denominated Russian debt issue had thus fallen by 48 basis points since 22 July, according to Bloomberg data, the most from among its 25 peers tracked by the same data provider.

Spanish bonds were going the other way, finishing the week lower as investors too profits after a two-month rally, due to the risks of continuing political gridlock in the Mediterranean country, which may be headed for its third presidential elections in just over one year.