Bonds: US services PMI pushes traders to price-in further Fed rate cuts
These were the movements in some of the most closely-followed 10-year sovereign debt yields:
US: 1.53% (-7bp)
UK: 0.7% (-3bp)
Germany: -0.59% (-4bp)
France: -0.29% (-4bp)
Spain: 0.13% (-4bp)
Italy: 0.83% (-7bp)
Portugal: 0.15% (-4bp)
Greece: 1.35% (-1bp)
Japan: -0.20% (-3bp)
Longer-term sovereign debt around the world added to the previous session's gains as a weaker than expected reading on US services sector activity was met with an initial move lower in stockmarkets, which in turn spurred demand for safe havens.
In parallel, the yield on the benchmark two-year US Treasury note fell back by seven basis points, as traders moved to fully price-in a 25 basis point cut in short-term official interest rates by the end of the year.
The target range for the Fed funds rate was then at 1.75-2.0%.
Earlier, the Institute for Supply Management had reported a drop in its non-manufacturing Purchasing Managers' Index from a reading of 56.2 in August to 52.6 for September (consensus: 55.0).
Commenting on the ISM report, Barclays Research's Michael Millar told clients: "Although August's decline is coming off of a surprisingly strong August reading, it will likely fuel concerns that weakness in the more trade-exposed manufacturing sector (which accounts for 10-12% of overall GDP) is spilling into the broader economy."
It followed similarly weak readings in the euro area and the UK, although Samuel Tombs at Pantheon Macroeconomics was more upbeat than some of his peers regarding the latter.
"Markit’s services survey, however, has been far too downbeat over the last year," he said.
"We see no reason why the PMI, or other business surveys, suddenly would be on the money now, having misled for the last year. Accordingly, we continue to expect GDP to rise by 0.3% on a quarter-on-quarter basis in Q3 and for the MPC to hold back from cutting interest rates, provided that a no-deal Brexit is avoided."