eurozone debt yields slide on growth fears
Eurozone government bond yields yesterday hit all-time record lows as debt prices surged after a poor set of US data triggered fresh concerns about a slowdown in global economic growth.
Durable goods orders in the US unexpectedly dropped 2.8 per cent in March – the market had been expecting a 0.3 per cent increase – to make it the biggest decline since September 2002.
The US report added to gathering gloom about growth in the eurozone area and sent the yield on the 10-year benchmark Bund to a historic low of 3.406 per cent before recovering to 3.415 per cent, down 3.3 basis points. The yield on the two-year Schatz was 2.3bp lower at 2.285 per cent.
Yields have been flirting with the lows in recent weeks and the bullish tone in the eurozone bond market was evident throughout the day.
The German GfK survey for May fell to 4.9 from 5.1 in April, indicating that consumer sentiment would worsen in May. The French statistics office reported that business confidence fell to 97 in April from 101 in March.
US Treasury prices also rallied, sending yields sharply lower.
The durable goods report, which pointed to a potential slowdown in manufacturing activity, reignited the debate about whether the US, the world’s biggest economy, was entering a soft patch, leading the US Federal Reserve to pause its steady pace of interest rate hikes.
The weak data raised the possibility that today’s first quarter gross domestic product numbers could come in below the consensus 3.5 per cent annualised rate.
However, analysts pointed out that the durable goods data are often volatile month-on-month.
US government bond yields on both the two-year and the 10-year Treasury notes were down more than 7 basis points (bp) on the day, before weak demand in the latest auction of new two-year notes ended the rally and sent yields higher.
The two-year note traded at 3.64 per cent and the 10-year yield stood at 4.24 per cent in late New York trade.
Gilt prices in the UK followed other government bond markets higher. The two-year gilt was yielding 4.535 per cent, down 2.1bp while the 10-year gilt yield fell 2.2bp to 4.550 per cent.
The yield on the benchmark Japanese 10-year government bond rose by 0.5bp to 1.265 per cent as investors adjusted their positions ahead of the Golden Week holiday period, which starts tomorrow.
The slight rise in the yield came in spite of a moderate fall in Japanese equity prices as traders reacted to earnings results.
Durable goods orders in the US unexpectedly dropped 2.8 per cent in March – the market had been expecting a 0.3 per cent increase – to make it the biggest decline since September 2002.
The US report added to gathering gloom about growth in the eurozone area and sent the yield on the 10-year benchmark Bund to a historic low of 3.406 per cent before recovering to 3.415 per cent, down 3.3 basis points. The yield on the two-year Schatz was 2.3bp lower at 2.285 per cent.
Yields have been flirting with the lows in recent weeks and the bullish tone in the eurozone bond market was evident throughout the day.
The German GfK survey for May fell to 4.9 from 5.1 in April, indicating that consumer sentiment would worsen in May. The French statistics office reported that business confidence fell to 97 in April from 101 in March.
US Treasury prices also rallied, sending yields sharply lower.
The durable goods report, which pointed to a potential slowdown in manufacturing activity, reignited the debate about whether the US, the world’s biggest economy, was entering a soft patch, leading the US Federal Reserve to pause its steady pace of interest rate hikes.
The weak data raised the possibility that today’s first quarter gross domestic product numbers could come in below the consensus 3.5 per cent annualised rate.
However, analysts pointed out that the durable goods data are often volatile month-on-month.
US government bond yields on both the two-year and the 10-year Treasury notes were down more than 7 basis points (bp) on the day, before weak demand in the latest auction of new two-year notes ended the rally and sent yields higher.
The two-year note traded at 3.64 per cent and the 10-year yield stood at 4.24 per cent in late New York trade.
Gilt prices in the UK followed other government bond markets higher. The two-year gilt was yielding 4.535 per cent, down 2.1bp while the 10-year gilt yield fell 2.2bp to 4.550 per cent.
The yield on the benchmark Japanese 10-year government bond rose by 0.5bp to 1.265 per cent as investors adjusted their positions ahead of the Golden Week holiday period, which starts tomorrow.
The slight rise in the yield came in spite of a moderate fall in Japanese equity prices as traders reacted to earnings results.
April 28, 2005
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