Bonds round-up: Bonds unnerved by inflation fears
Inflation fears reared their heads and kept bond prices subdued.
US Treasuries eased slightly as data released today showed the US Consumer Price Index (CPI) up 0.8% during November due to rising energy costs. Analysts had expected a rise of 0.6%.
Core prices, which strip out volatile food and energy prices, grew at its fastest pace in 10 months, which experts think will make the Fed more cautious about cutting interest rates any further.
Inflation undermines the returns on fixed-income securities and prices declined to compensate, with the yield on the 10-year Treasury note rising 2 basis points to 4.22%.
(Article continues below)Advertisement
In Europe, bond prices were little changed, despite the German annual inflation rate rising to 3.3% in November, its highest level in 12 years, from 2.7% in October. Euro zone inflation, meanwhile, quickened to 3.1% in November from 2.6% the preceding month.
Regardless of the unwelcome inflation trends, bond prices held up, helped by the realisation that the concerted efforts of central banks to encourage interbank lending is having little success, with lending rates remaining stubbornly high.
The yield on the 10-year bund was unchanged at 4.28% while the 10-year gilt's yield rose 1 basis point to 4.77%.
