Bonds round-up: Banks optimism hits bonds
Investors shunned government debt today as equity markets rebounded strongly.
US treasuries gave ground on the back of stronger than expected US manufacturing data. The Institute for Supply Management's factory index rose to 48.6 in March from 48.3 in February, when it had been expected to decline.
The appeal of government bonds was also diminished by a growing feeling that the worst of the crisis in the financial markets may now be over. Although banks such as UBS and Lehman continue to announce hefty mark-downs, the fact that they have been able to raise new capital to shore up their balance sheets has been interpreted as a positive indicator in equity markets.
European government bonds also fell back, as yet another European Central Banker made comments that underlined the bank's determination to shackle inflation. Lorenzo Bini Smaghi was reported in the Italian press as saying that "it's not for nothing that we are insisting the inflation target remains less than 2%".
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In the UK, gilt prices followed the global trend.
The UK Purchasing Managers Index offered little comfort for bond holders, remaining unchanged in March when market observers had expected a small fall.
The yield on the benchmark 10-year treasury note rose 15 basis points to 3.56%, while the yield on the UK counterpart climbed 11 basis points to 4.46%. The yield on the 10-year bund rose 9 ticks to 3.99%.
