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Date: Tuesday 22 Jul 2008

LONDON (ShareCast) - A call from Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, for the US central bank to increase interest rates “sooner rather than later” provoked a sell-off of US treasuries.

The yield on the benchmark 10-year Treasury note rose 5 basis points after Plosser’s comments; Plosser voted against central bank rate cuts in April and May and is a noted hawk on interest rates.

In contrast, gilts were in demand after Chancellor of the Exchequer Alistair Darling conceded the problems emanating from the global credit crunch had been more profound than expected.

Gilt prices rose for the first time in five days on hopes that the Chancellor’s comments signalled a nod and a wink to the Bank of England that a rate cut would be beneficial to the UK economy.

The yield on the 10-year gilt dived 6 ticks to fall just below 5%.

In mainland Europe, bond prices were little changed. The yield on the 10-year bund rose one basis point to 4.64%.

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