Bonds: Strong US data weighs on Gilts

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

US: 2.24% (+2bp)

UK: 1.39% (+1bp)
Germany: 0.27% (-2bp)
France: 0.74% (+0bp)
Italy: 2.10% (+7bp)
Spain: 1.60% (+6bp)
Portugal: 3.74% (+7bp)
Greece: 7.38% (-1bp)
Japan: 0.01% (-2bp)

Yields on longer-dated Gilts ended the day moderately higher, tracking gains on the other side of the Pond following a barrage of stronger- than-expected economic data in the States and on the heels of a surprisingly strong reading for UK retail sales.

Especially noteworthy was a surprise 19,000 person drop in the number of Americans filing for unemployment benefits from the previous week to 235,000 (consensus: 257,000) - the least in 43 years.

In parallel, the Bureau of Labor Statistics said that the consumer price index increased 0.4% month-on-month in October after rising 0.3% in September, which was in-line with analysts´ expectations.

Over the 12 months to October, the index was ahead by 1.6%, its highest year-on-year reading since October 2014.

In parallel, the Commerce Department said that housing starts rose more than expected in October, surging 25.5% from the revised September figure to a seasonally-adjusted rate of 1.32m. This was a nine-year high and surpassed expectations for an increase to 1.15m.

The Federal Reserve bank of Philaldelphia´s manufacturing sector index dipped from a reading of 9.7 for October to 7.6 in November (consensus: 8.0).

However, the gauges most closely-tracked by market watchers, those referring to new orders and prices paid by companies were more solid robust.

Acting as a backdrop, in tesimony before the joint economic committee on Capitol Hill, Federal Reserve chief Janet Yellen said that at its last meeting the FOMC had judged that an interest rate increase might be needed "relatively soon".

Neil Wilson, market analyst at ETX Capital, said “the fact is a December rate hike has already been priced in – markets think there is a roughly 90% chance the Fed will increase the target federal funds rate. It now looks almost impossible for the Fed not to raise rates next month – it’s painted itself in a corner and has to respond with a hike or all hell will break loose in the markets.

“Today’s jobless numbers – showing unemployment at a four-decade low – only strengthens the case for the Fed to act. Rising bond yields since Donald Trump’s win further add to the argument for the central bank to raise rates. Longer term, Trumpflation may not be all it’s cracked up to be as a savings glut exists globally.

Back in the UK, retail sales volumes surged by 1.9% month-on-month in October, far outpacing the 0.5% rise expected by economists.