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Bonds round-up: US Treasuries rise on Chinese move

Date: Friday 12 Feb 2010

Bonds round-up: US Treasuries rise on Chinese move

US Treasury bond prices are rising on the back of the news that the Chinese authorities are trying to rein back growth.

The Chinese are lifting the reserve requirements for banks by half a percentage point. This is the second time this year the central bank raised banks' reserve requirements following a half-point increase in January to cool down the economy.

The move means that major Chinese banks will now be required to keep 16.5% of deposits as reserves.

Two-year US bond yields are five basis points lower at 0.82% and ten-year yields are four basis points lower at 3.68%.

In contrast, UK gilts prices are falling. Two-year yields are four basis points higher at 1.17% and ten-year yields are more than eleven basis points ahead at 4.04%.

Homebuyers rushed to beat January’s increase in the UK stamp duty threshold, causing a surge in mortgages at the end of 2009. The Council of Mortgage Lenders (CML) says there were 62,000 home loans in December, up 23% from the month before and a 90% year-on-year.

The eurozone expanded by just 0.1% in the fourth quarter of 2009 as struggling economies such as Greece held back growth in the 16-member currency zone.

The 27 member European Union, which includes countries that have their own currencies such as the UK, also registered growth of 0.1%. Both the eurozone and EU emerged from recession in the third quarter of 2009, registering growth of 0.4% and 0.3% respectively.

The German economy failed to grow in the fourth quarter of 2009 following two consecutive quarters of growth. Germany’s gross domestic product was unchanged quarter-on-quarter, preliminary data from the Federal Statistics Office showed.

Greece, which has dominated the headlines lately as it seeks to resolve its debt situation, saw its economy contract by 0.8% in the fourth quarter, compared with 0.5% in the third quarter. Other countries still in recession include, Spain, Latvia and Romania.

German bunds are rising in price with two-year yields nearly seven basis points lower at 0.98%. Ten-year yields are nearly five basis points lower at 3.19%.

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