Bonds round-up: Equity market crash boosts bonds
With the US market closed today. European and British government bonds take centre stage, posting strong gains.
European bonds took heart from European Central Bank council member Guy Quaden's expressed view that eurozone inflation will decelerate in the second half of 2008. The ECB has been reluctant to countenance an interest rate cut until it is confident that iuflation is under control.
The yield on the benchmark 2-year bund tumbled 13 basis points to 3.34%, while the 10-year bund's yield fell 6 basis points to 3.91%..
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Gilts advanced strongly, as investors baled out of equities in a hurry.
The yield on the benchmark 10-year gilt fell 7 points to 4.37%, despite the prospect of £25bn of private sector bonds being issued as part of the Northern Rock rescue. Such a large bond issue might ordinarily be expected to siphon off demand for government debt but all such concerns were lost in the stampede to switch from equities to gilts.
