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Bonds round-up: US housing fears boost bonds

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Date: Tuesday 04 Mar 2008

LONDON (ShareCast) - Comments by Federal Reserve chairman Ben Bernanke that US banks must do more to forestall foreclosures on struggling mortgage holders roused the bond markets today on both sides of the Atlantic.

US treasuries advanced as Bernanke conceded that the US housing crisis is likely to continue for some time. The yield on the benchmark 10-year treasury note fell 2 basis points to 3.53%.

Over the border, the Bank of Canada cut its key lending rate by half a point and indicated that it would make further cuts to stave off a slump in exports to the US.

In Europe, government bonds moved up as investors neglected equities. Rises were constrained by data which showed factory gate prices in the euro zone rose 4.9% in the year to January, a figure which is sure to increase the European Central Bank’s resolve to keep interest rates high in its fight against inflation.

The yield on the benchmark 10-year bund fell 6 basis points to 3.8%.

In the UK, gilts followed their European counterparts higher, with the yield on the benchmark 10-year gilt falling 4 basis points to 4.41%.