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Bonds round-up: Quiet day all round

Date: Thursday 07 Jan 2010

Gilts had a quiet day as the Bank of England did what virutally all economists had predicted and kept interest rates on hold and its quantitative easing target at £200bn.

Ten-year benchmark yields eased a shade to 4.05% as economists debated whether next month may see a shift in policy to accompany quarterly inflation and growth estimates from the Bank.

The Bank did say it would sell more than £300bn of corporate bonds to help liquidity in the secondary market, but economists this was not a clear signal that QE was coming to an end.

Inflation is more of a concern in the US, where the gap between index-linked and standard treasury bonds reached its widest for nearly 18 months on concern that strong US economic data could see a marked tightening in the Fed’s monetary policy.

Yields on benchmark 10-year treasuries fell even so, to 3.8% down by nearly 2 basis points, though the more sensitive short note yield rose a touch to 1%.

Tomorrow, non-farm payroll figures are expected. Figures from payrolls processing firm ADP on Wednesday showed private-sector employment fell by 84,000 in December, the smallest decline in jobs since March 2008, but bigger than expected.

Initial jobless applications today climbed to 434,000 in the week ended 2 January, from a 16-month low of 433,000 the prior week,

In Europe, investors pushed yields on 10-year benchmark bunds down a little to 3.37%, even though the latest Eurozone confidence survey was stronger than forecast.

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