Bonds round-up: Recessionary fears lift European bonds
Renewed recessionary fears prompted investors to switch from equities to government bonds in Europe today, but US treasuries are lower on fears that the Fed will not, after all, cut interest rates this week.
US treasuries head lower despite poorer than expected sales of new homes in the US in December. Sales of single-family homes in December fell 4.7% to an annualised 604,000, from a downwardly revised 634,000 in November. Observers had been expecting December sales to be at around the 640,000 level on an annualised basis.
Sales of new homes in 2007 slipped by a record 26.4% to 774,000, surpassing the previous largest year-on-year fall of 23.1%, recorded in 1980.
The yield on the benchmark 10-year treasury note rose 3 basis points to 3.59%.
In Europe, government debt was back in favour, helped by a reduction in the growth of M3 money supply in the euro-zone. The measurement of money supply is used as an indicator or inflation trends, and so a deceleration in the growth rate would be a positive sign for inflation and might give the European Central Bank (ECB) scope to slip through an interest rate cut.
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M3 money supply rose 11.5% year-on-year in December, compared with a 12.3% annual gain in November.
However, gains were trimmed after Bank of France governor Christian Noyer reiterated that the ECB's prime directive is to control inflation.
The yield on the 10-year benchmark bund fell 3 basis points to 3.95%.
In the UK, gilts also made headway, and the yield on the benchmark 10-year gilt fell 4 basis points to 4.49%.
