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Bonds round-up: Treasuries climb as rate rise fears recede

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Date: Wednesday 11 Jun 2008

LONDON (ShareCast) - US treasuries are enjoying their first good session of the week after comments by European Central Bank (ECB) executive board member Juergen Stark quelled global rate rise fears.

Stark indicated that were the ECB to raise rates at its next meeting it would not necessarily be a harbinger of further rate rises. “We are not talking about a series of rate increases,'' Stark said.

The ECB’s president, Jean-Claude Trichet, had previously indicated that a quarter point rate rise would be on the agenda at the next meeting of ECB policy-makers, as the central bank seeks to keep a lid on inflation.

The yield on the benchmark 10-year Treasury note fell 6 basis points to 4.05%.

In Europe, government bonds tended firmer at the shorter end but ten-year bunds were little changed.

French consumer prices acted ass a drag on demand. The French inflation rate quickened to 3.7% in May from 3.4% in April.

Nevertheless, the yield on the benchmark two-year bund fell 8 ticks to 4.58%. Yield move inversely to prices.

In the UK, gilts crawled higher as the jobless total grew again.

An extra 38,000 lost their jobs in the three months to April as the economic downturn continued to bite, with 1.64m Britons now out of work.

There was also a 9,000 increase in the number claiming unemployment benefit during May to 819,300, said the Office for National Statistics, the fourth consecutive monthly rise.

The increase was at least a couple of thousand more than analysts had predicted and came as the unemployment rate rose 0.1% during the quarter to 5.3%.

The yield on the 10-year gilt eased one tick to 5.11%.

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