Bonds: Yields slip back in a light day for economic data
Gilt yields fell back slightly, mimicking a similar move in US rates despite better than expected economic data out in the States and hawkish rhetoric from Monetary Policy Committee member Ian McCafferty.
The yield on the benchmark ten-year Gilt retreated two basis points to 2.01%, while that on US Treasury notes of a similar maturity declined by the same amount to 2.30%.
In an exclusive interview with Market News International, McCafferty said the MPC's "clear cut" decision not to hike Bank Rate at its July meeting was taken when there was maximum uncertainty over Greece.
The rate-setter, a well-known hawk on the MPC, placed weight on the strength seen in total UK earnings while emphasising the central bank should not fear an appreciation in sterling in reaction to a rate hike.
UK retail sales volumes dipped by 0.2% month-on-month in June, but analysts dismissed the drop’s significance, indicating that it was likely just a temporary quirk in the data.
Undue strength in the currency was also thought to be one of the chief factors staying the hand of the US Federal Reserve.
On the data front, initial weekly US unemployment claims surprised with a hefty 26,000 person drop to reach 255,000 for the week ending 18 July – the least since November 1973.
However, economists at Barclays explained how they “only took a partial signal from the drop in initial claims, given the large weekly change in the seasonal adjustment factor and the seasonal retooling of auto plants.”
German Bunds were also largely unchanged, with their yield standing at 0.74% by the closing bell.
The story was much the same out in the periphery, with yields on Italian and Spanish debt closing at 1.90% and 1.95%, respectively.
The only other noteworthy piece of data was the European Commission’s gauge for consumer confidence in the Eurozone, which slipped to a reading of -7.1 for June (consensus: -5.8) after a reading of -5.6 for the month before.
Further afield, some observers took note of the drop in 10-year Indian government debt to 7.8%, a two-week low, as oil prices continued to retreat. As of 18:32 front month Brent crude futures were down by 1.7% to hit $55.19 per barrel on the ICE.