Bonds round-up: Bonds drift lower on rates status quo
With the Bank of England confirming UK base rates would be left unchanged gilt prices fell back, with the yield on the 10-year gilt improving 2 basis pointed to 4.41%.
The move to hold rates steady was widely expected, although some optimists were suggesting that yesterday's disappointing trading update from retailer Marks & Spencer might prompt a rate cut.
US Treasuries were also moderately lower ahead of a speech by Federal Reserve chairman Ben Bernanke today, in which he will give his view of the current state of the US economy.
The yield on the 10-year Treasury note rose 1 basis point to 3.84% while the yield on the 2-year Treasury benchmark rose 1 basis point to 2.73%, keeping the gap between the two yields close to its widest margin in thee years. Shorter dated bonds are more sensitive to interest rate changes, so a widening of the spread indicates a strong likelihood of an imminent rate cut.
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Prices fell back following moderately good economic news.
First time jobless claims in the week ending 5 January unexpectedly declined to 322,000, while the number of people on the dole dropped from a two-year high.
US wholesale inventories rose 0.6%, slightly more than expected, in November, after showing no change in October. Sales rose 2.2% in October.
In Europe government bonds also drifted lower as the European Central Bank conformed to expectations and kept interest rates unchanged. The yield on the 10-year bund rose 1 basis point to 4.09%.
