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Bonds round-up: Jobs figures push bond prices higher

Date: Friday 08 Jan 2010

News that another 85,000 jobs were lost in December led to rises in US Treasury bond prices.

Today’s number means that payrolls fell by 4.2m in 2009 and have slumped by 7.3m since the recession began.

The unemployment rate, which had been expected to rise to 10.1%, stuck at 10%. There was some good news because November’s jobs decline of 11,000 was revised to a gain of 4,000, the first increase in almost two years.

Two-year Treasury bond yields are six basis points lower at 0.96%, but ten-year yields have fallen by less than one basis point to 3.82%.

Worries about inflation pushed short-term gilts higher, although medium-term gilts fell in price. The longest-dated gilts - 15 years to 30 years - rose in price.

Factory gate prices rose more sharply than expected in December, raising the prospect that inflation may rise faster in 2010 than the Bank of England had been expecting.

The UK Producer Prices index rose 0.5% in December, and was 3.5% higher than one year earlier - a 3.1% year on year increase was predicted.

Manufacturers appear to be reacting to higher input prices of their own by pushing up the prices of their own goods. Annual input price inflation rose to 6.9%, the biggest increase since November 2008.

Two-year gilt yields fell one basis point to 1.27%, while ten-year yields were one basis point higher at 4.07%.

German bunds had a mixed day with shorter dated bunds rising in price and medium-dated bunds falling. Two-year yields fell two basis points to 1.24%, while ten-year yields were one basis point higher at 3.38%.

The unemployment rate in the eurozone hit the 10% mark for the first time since the introduction of the single currency over a decade ago. The figure is expected to be significantly higher during 2010.

EU statistics office Eurostat said 15.7 million people were unemployed in the 16-country zone in November compared with 9.9% in the previous month.

Among the Member States, the lowest unemployment rates were recorded in the Netherlands (3.9%) and Austria (5.5%), and the highest rates in Latvia (22.3%) and Spain (19.4%).

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