Treasuries slip as equities bounce
Rising equity markets and the forthcoming sale of new short-dated paper were enough to move US Treasury yields higher and prices lower in an otherwise quiet trading session on Monday.
The US Treasury is set to sell $24bn of new two-year notes on Wednesday, which may have prompted some selling in the market by trading accounts.
The two-year Treasury yield rose 4 basis points to 3.65 per cent. Meanwhile, the yield on the 10-year Treasury, which fell below 4.24 per cent – as US equities opened higher – bounced back to about 4.26 per cent by afternoon trade in New York. The moves reduced the difference betwen the short and the long end of the yield curve to less than 62bp, from 66bp at the end of last week.
Eurozone government bond yields sank and prices rose on further weakening of business confidence in Germany. The Ifo Institute said its business climate index fell to 93.3 in April from 94.0 in March, the third consecutive monthly decline.
But prices dropped earlier highs, leaving the yield on the 10-year Bund 1.7bp lower at 3.449 per cent and the yield on the two-year Schatz 1bp higher at 2.313 per cent.
The market, however, is bracing for more disappointment, with six German economic institutes and the government expected later this week to revise down annual growth forecasts.
There was little domestic news to give direction to UK gilt prices, where yields followed their continental counterparts lower. The 10-year gilt yield fell 1.7bp to 4.576 per cent, while the two-year bond was yielding 4.569 per cent, down 0.6bp.
In Japan, investors scooped up government bonds, pushing the yields on the benchmark Japanese government 10-year bond by 2.5bp to near a 14-month low.
They were prompted in part by the chance to earn interest from bond coupons during next week’s Golden Week public holiday, during which bond and equity markets in Japan close close.
But investors were also prompted by a more depressing thought: the global flight to bonds as they become more pessimistic about both Japanese and global economic prospects.
The US Treasury is set to sell $24bn of new two-year notes on Wednesday, which may have prompted some selling in the market by trading accounts.
The two-year Treasury yield rose 4 basis points to 3.65 per cent. Meanwhile, the yield on the 10-year Treasury, which fell below 4.24 per cent – as US equities opened higher – bounced back to about 4.26 per cent by afternoon trade in New York. The moves reduced the difference betwen the short and the long end of the yield curve to less than 62bp, from 66bp at the end of last week.
Eurozone government bond yields sank and prices rose on further weakening of business confidence in Germany. The Ifo Institute said its business climate index fell to 93.3 in April from 94.0 in March, the third consecutive monthly decline.
But prices dropped earlier highs, leaving the yield on the 10-year Bund 1.7bp lower at 3.449 per cent and the yield on the two-year Schatz 1bp higher at 2.313 per cent.
The market, however, is bracing for more disappointment, with six German economic institutes and the government expected later this week to revise down annual growth forecasts.
There was little domestic news to give direction to UK gilt prices, where yields followed their continental counterparts lower. The 10-year gilt yield fell 1.7bp to 4.576 per cent, while the two-year bond was yielding 4.569 per cent, down 0.6bp.
In Japan, investors scooped up government bonds, pushing the yields on the benchmark Japanese government 10-year bond by 2.5bp to near a 14-month low.
They were prompted in part by the chance to earn interest from bond coupons during next week’s Golden Week public holiday, during which bond and equity markets in Japan close close.
But investors were also prompted by a more depressing thought: the global flight to bonds as they become more pessimistic about both Japanese and global economic prospects.
April 26, 2005
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