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Bonds round-up: Treasuries nervous ahead of Fed decision

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Date: Wednesday 25 Jun 2008

LONDON (ShareCast) - Concerns that the Federal Reserve will signal a change in emphasis to the fight against inflation when it makes its monthly interest rate announcement today has sent US treasuries into retreat.

The Fed is widely expected to leave rates unchanged today, bringing to an end a run of seven reductions in as many months.

The yield on the benchmark 10-year Treasury note rose 7 basis points to 4.15% as investors baled out of government debt.

Better than expected US durable goods data had little effect on sentiment. Orders for US durable goods were flat in May, holding at a seasonally adjusted $213.64bn, beating expectations for another decline.

The Commerce Department said durables, which are manufactured goods designed to last at least three years, showed no change last month after a revised 1% drop in April and a 0.2% decline in March.

In Europe, government bonds were also in retreat, though losses were minor compared to their US counterparts after prices rallied in the afternoon. The yield on the 10-year bund rose two ticks to 4.62%.

Gilts were out of step with US and European government bonds, edging higher after the CBI’s monthly trade survey indicated 39% of retailers polled registered a year-on-year fall in sales, versus 30% who recorded a rise.

The yield on the 10-year gilt eased one basis point to 5.13%.

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