By Michael Every of Rabobank

Noble and Ignoble Prizes

Yesterday saw widespread Russian missile attacks on Ukrainian cities. Some suggest this tit-for-tat for the Kerch bridge is to instil fear; others, that it is aimed at taking down Ukraine's power supplies ahead of winter. If the latter, Europe could potentially see a flood of refugees looking for (expensive) heat and shelter: yesterday already saw Ukraine halt power exports to Europe. For Russia such actions would make its 'prize' in Ukraine more of a poisoned chalice, but Chechnya and Syria are two examples of the same kind of action. Meanwhile, Europe and the US are now to send air defense aid to Ukraine, so military escalation continues. Grain prices were up significantly yesterday, as markets realised the celebrated Black Sea supply deal may not hold, as we feared.

In the financial economy we saw particular volatility in Gilts. The BOE stepped in again but stepped away from hopes they were going to be doing a yield-friendly QE vs. more traditional Bagehot action. 10-year Gilt yields spiked 24bp, and that was 9bp lower than the peak sell-off, with 5-year Gilts up 19bp, and 2-year Gilts up 22bp. The next UK OBR public finances report will now be released on 31 October. Get your Halloween cliché headlines written now.