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Bonds round-up: Insipid US GDP growth hits treasuries

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Date: Thursday 28 Feb 2008

LONDON (ShareCast) - US treasuries powered higher today on the back of bleak US economic data.

The US economy grew at an annual rate of 0.6% in the fourth quarter, compared with an annual growth rate in Q3 of 4.9%. Meanwhile, first-time jobless claims jumped 19,000 to 373,000 in the week to 23 February.

With the US equity market falling out of bed with a bump, demand for government debt was strong, pushing the yield on the benchmark 10-year treasury note down 10 basis points to 3.74%.

European government bonds were also wanted and, again, economic indicators helped to drive demand.

French consumer confidence, as measured by the index of sentiment, declined to -35, its lowest level since 1987, when records began.

The situation was less bleak for the German labour market, where the adjusted unemployment rate eased to 8% in February from 8.1% in January.

With the euro hitting new highs, concerns were raised that the currency’s strength would constrain the region’s economic growth.

The yield on the benchmark 10-year bund fell 6 basis points to 4.03%.

UK gilts surrendered earlier gains to close the session little changed after Tim Besley and John Gieve, both members of the Monetary Policy Committee, gave an interview in which they reiterated the need to keep a tight rein on inflation.