Bonds round-up: Cautiously firmer ahead of rate cut decision
Government bond prices moved cautiously higher in expectation of the announcement of a quarter point cut in US interest rates today.
US treasuries firmed despite better than expected GDP figures. US Gross Domestic Product grew just 0.15% in the first quarter of 2008, confirming suspicions that the US economy is beginning to seize up.
On an annualised basis, the growth rate was unchanged from the previous quarter at 0.6% and better than feared by economists, who had predicted annualised growth of just 0.2%.
Growth was hampered by weak consumer spending, which rose at an annualised rate of 1%, down from 2.3% in the fourth quarter of 2007.
The GDP figures are likely to be taken into account by the Federal Reserves Open Market Committee (FOMC) in its interest rate deliberations.
A reduction in interest rates is regarded as adding to inflationary pressure but the GDP figures provided some leeway for another rate cut as the core deflator for personal consumer spending, which excludes food and energy costs, saw its annual rate ease to 2.2% from 2.5% in the final quarter of 2007.
The yield on the 10-year treasury note eased 1 tick to 3.81%.
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European government bonds were little changed. The 10-year bund's yield dipped one basis point to 4.12%, but at the shorter end of the market prices eased a little.
An index of executive and consumer sentiment in the euro zone fell for the eleventh month in succession, to 97.1 from 99.6, hitting its lowest level in 30 months.
Yet more bad news on the UK housing front lent support to gilts, which edged higher.
House prices fell on an annual basis for the first time in 12 years in April as prospective buyers found it increasingly difficult to finance property purchases.
The average price of a home dropped 1% to £178,555 on the same time last year, something that hasn't happened since March 1996, said Nationwide, the UK's largest building society.
April saw a 1.1% decline in prices, according to Britain's fourth-biggest mortgage lender, twice the figure analysts were looking for. Values, which have now fallen for the last six months, sank 0.7% in March.
The yield on the 10-year gilt fell one basis point to 4.68%.
