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Bonds round-up: Bonds slide as US data gives hope

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Date: Thursday 24 Apr 2008

LONDON (ShareCast) - Gilts fell back on a combination of profit taking after yesterday's Bank of England minutes and mixed UK retail sales data today.

UK retail sales tumbled at their fastest rate since the start of 2007 last month, although sales in the first three months of the year have not been as high in almost two years.

That three-month picture encouraged more selling after yesterday's minutes from the latest Bank of England interest rate meeting. That showed two of the MPC are worried sufficiently about inflation to recommend no change in rates last time. Ten-year gilts rose 10 basis points to 4.77%.

European government bonds also declined as European Central Bank President Jean-Claude Trichet said current interest rates would help to keeping inflation in check, raising suspicions that interest rates may not come down much more. Ten-year bund yields rose by 4 basis points to 4.17%.

US Treasuries also dropped on initial jobless claims data and durable-goods orders. Two-year Treasury yields rose 15 basis points to 2.38%, while 10-year Treasury yields added 10 basis points to 3.83%.

US dole claimants decreased to 342,000 in the week that ended April 19, from 375,000 a week earlier while durable goods orders except for transportation items increased 1.5% in March after a decline of 2.1% in February. The news outweighed another slump in new home sales, which fell by 8.5% in March.