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Bonds round-up: Inflation worries hit bonds

Date: Friday 18 Dec 2009

Bonds round-up: Inflation worries hit bonds

US Treasury bonds are falling on the back of worries that commodity price rises will fuel inflation.

Talk that Iranian forces have invaded Iraq and surrounded an oil well has pushed up the oil price.

Ten-year US Treasury bond yields are two basis points higher at 3.5% and two-year yields have increased slightly less to 0.77%.

UK gilt prices are moving ahead with two-year yields nearly seven basis points lower at 1.12%. Ten-year yields are eight basis points lower at 3.77%.

There was mixed economic news. UK borrowing hit £20.3bn in November, the biggest deficit for any month since records began in 1993. However, that was lower than the expected figure of £23bn. The Public Sector Net Borrowing Requirement stands at a record £106.4bn for the first eight months of the fiscal year 2009/10, up from £49.3bn this time in 2008.

Consumer confidence and business investment both declined. Mortgage lending fell by 10% in November but that seasonal decline was expected. UK car output rose for the first time in fourteen months.

German bund prices are lower at the short-end but medium and long-term prices are rising. Two-year yields are less than one basis point higher at 1.15%, but ten year yields are one basis point lower at 3.13%.

German business sentiment rose to 94.7 in December, beating expectations of 94.5.

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