[MARKET ANALYSIS] Fixed income muted as focus turns to the US Treasury primary dealer questionnaire

Fixed income benchmarks are a touch lower to start the final trading session of the week. USTs essentially flat, and look set to end with weekly gains despite a hotter CPI and PPI print this week, as Fed Chair Warsh fails to provide little guidance. As such, money markets pared back their bets of an October hike (now 14% vs 26% earlier). Focus will be on the US Treasury primary dealer questionnaire, expected at 17:00BST/12:00EDT, ahead of the QRA on November 4th. Some analysts expect the Treasury to cut both 20-year and 30-year auction sizes by USD 3bln each, and to be replaced by T-bills. To add, there has also been speculation that the 20-year could be cut altogether. Gilts and Bunds trade in tandem, posting losses of around 15 ticks. Focus for Gilts this morning, and heading into the Budget, is on any clues to how Chancellor Healey chooses to balance spending with income. The latest being focused on the banking sector, with Bloomberg reporting that UK Chancellor Healey will raise taxes on banks. The report follows a Guardian source stating that the proposal includes a 3% increase to the bank surcharge.