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Bonds round-up: Bonds retreat on economic data

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Date: Thursday 27 Mar 2008

LONDON (ShareCast) - Government bonds fell back today on both sides of the Atlantic, with economic data generally proving detrimental to the appeal of buying government debt.

In the US, treasuries retreated following the release of personal spending and first-time jobless data.

US personal spending grew by 2.3% in the last quarter, higher than the original estimate of 1.9%. US first-time jobless claims fell 366,000 in the week to 22 March from 375,000 the preceding week.

The yield on the benchmark 10-year treasury note rose 4 basis points to 3.50% ahead of today’s auction of $18bn of 5-year notes.

In the UK, gilts fell back following an unexpected rise in the Confederation of British Industry’s retail sales indicator, which climbed to +1% in March from -3 in February.

Meanwhile, revised figures from the Office for National Statistics released today revealed a big increase in UK business investment in the fourth quarter of last year.

Business investment increased by 1.8% in the last three months of 2007 for a 5.3% annual improvement, according to the statistics office.

Original estimates were for a 0.5% decline and 1.7% increase year on year, but experts are unsure whether tomorrow’s fourth quarter GDP figures will be revised higher as a result.

There was even relatively good news on the housing front, where the number of mortgage approvals granted by Britain’s high street banks grew last month, though the figure was still way down on the level seen in February of last year.

The British Bankers’ Association (BBA) said the number of mortgages approved by its members for house purchases rose to 43,870 in February from January’s level of 43,732. However, on a year-on-year comparison approvals were down by a third.

The yield on the 10-year gilt rose 4 basis points to 4.48%.

In Europe, long dated bonds were subdued by imminent new issues expected from Italy and Belgium in the next few days. The yield on the 10-year bund rose 3 basis points to 3.9%.