Bonds round-up: Massive falls in UK & European bonds
Government bonds are out in the cold as equity markets continue their rally.
Losses were particularly severe in the UK and Europe. In Europe, two-year government notes recorded their biggest daily fall since the early nineties, pushing the yield on the 2-year benchmark bund up 24 basis points to 3.48%. Yields move inversely to prices.
The gap between the yield on 2-year bonds and 10-year bonds narrowed for the first time in two weeks. The yield on the 10-year bund rose 12 basis points to 4.01%.
Demand for government debt was further dampened by a report showing business confidence on the rise in Germany.
In the UK, the yield on the benchmark 10-year gilt rose 11 points to 4.54% evidence of further turmoil in the UK housing market.
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UK mortgage approvals fell to an all-time low in December as potential buyers found it harder to obtain credit, while many were put off by increased borrowing costs.
The British Bankers' Association said 42,088 loans were granted for house purchases last month, down from 43,944 in November.
The US housing market is looking similarly troubled. Sales of existing homes in the US were the lowest on record in 2007.
The National Association of Realtors (NAR) reported that existing home sales fell 2.2% in December to an annualised rate of 4.89m, compared to analysts' expectations of 4.95m. For the whole of 2007, sales were down 12.8% from 2006 levels to 5.65m units.
US treasuries fared better than their European counterparts, and even traded higher at one point. The yield on the benchmark 10-year treasury note climbed 3 basis points to 3.63%.
