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Bonds round-up: Mortgage firm bail-out fears unsettle bonds

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Date: Friday 11 Jul 2008

LONDON (ShareCast) - Concern that the US government may have to bail out mortgage guarantors Freddie Mac and Fannie Mae sent Treasury bonds lower.

Shares of the two mortgage firms plummeted for a second day running on talk that rising mortgage defaults could send both to the edge of collapse and even damage the rating of the US government if it had to organise a rescue.

Two-year treasury yield rose by 6 basis points to 2.46% while ten-year benchmarks added 4 points to 3.85%.

Hopes that European bonds would benefit as investors sought safe havens away from the US were dashed as wholesale prices in Germany rose at the fastest for 26 years in June. Prices charged rose by 8.9% from a year earlier and by 0.9%.

Ten year bund yields rose by nearly 2 basis points to 4.42% while two-year bunds rose slightly to 4.4%.

In the UK, gilts also fell back with ten year yields rising over two basis points to 4.89% and short yields up a tad to 4.88%.

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