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Bonds round-up: Banking gloom spurs bonds demand

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Date: Friday 15 Feb 2008

LONDON (ShareCast) - A decline in US consumer confidence boosted demand for US treasuries.

The Reuters/University of Michigan preliminary index of consumer sentiment fell to its lowest level since February 1992, declining to 69.6 in February from 78.4 in January.

US Treasuries edged higher, with the yield on the benchmark 10-year treasury note sliding one basis point to 3.80%.

On the other side of the Atlantic, government bonds were in demand as investors baled out of equities.

Worries about yet more write-downs by global banks sparked the flight to the safety of government debt.

UBS hit its fellow banks by suggesting there are plenty more skeletons in the write-downs closet. UBS analyst Philip Finch estimated that hits of a further $120bn for CDOs, $50bn for structured investment vehicles, $18bn for commercial mortgage-backed securities and $15bn for leveraged buyouts are yet to be announced by banks that have already declared sub-prime related losses of $150bn.

The yield on the benchmark 10-year gilt fell 3 basis points to 4.61% while the return on its counterpart among bunds fell 4 basis points to 3.96%.