Bonds: Some economists still expect hike in Bank Rate in Q4
The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 2.40% (+0bp)
UK: 2.40% (-3bp)
Germany: 1.00% (-1bp)
France: 1.39% (-2bp)
Spain: 2.43% (-3bp)
Italy: 2.60% (-4bp)
Japan: 0.50% (+0bp)
Portugal: 3.41% (-8p)
Greece: 5.87% (-3bp)
Sovereign bonds rallied led by gains in the Eurozone's periphery after analysts weighed in with positive comments.
In particular, Portuguese bonds tacked on further gains after Fitch Ratings issued a report saying that a ruling by the country's constitutional court which allows for cuts in public workers' pay this year and next will help Lisbon reach its targets for public spending.
Gilts were also wanted after consumer price (CPI) data for August came in well below forecasts, at a 1.6% year-on-year rate of change versus 1.9% for July (consensus: 1.8%). Leading prices lower was a sharp correction in non-energy industrial good (NEIG) inflation, as well as for that of food, alcohol and tobacco prices.
The figures helped to reaffirm Barclays Research in its view that UK consumer prices will likely stay below the Bank of England's (BoE) 2% target until the end of 2015. Despite that the bank's economists continue to expect that the BoE will carry out its first rate hike in the fourth quarter of this year.
Stateside data showing that housing starts rocketed by 15.7% on the month in July to reach a seasonally adjusted annual rate of 1.09m units, snapping two straight months of losses, kept Treasuries from sharing in Tuesday's gains.
Analysts had been expecting an annualised rate of 970,000.
In parallel, the Bureau of Labor Statistics announced that consumer prices advanced at a 0.1% month-on-month (2% year-on-year) clip in July.
AB