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Bonds round-up: Steady after US inflation figures

Date: Friday 19 Feb 2010

Bonds round-up: Steady after US inflation figures

US Treasury bond prices were barely changed even though US inflation figures were better than expected.

The news should ease fears of a rise in interest rates but it was offset by the Federal Reserve raising the discount rate at which it lends money to banks by 25 basis points to 0.75% last night.

The Consumer Price Index rose by 0.2% in January, which was lower than the 0.3% expected.

US bond prices have fallen slightly. Two-year yields rose nearly one basis point to 0.93%, while ten-year yields increased by a similar amount to 3.81%.

January snow knocked UK retail sales. Retail sales fell by 1.8% between December and January, according to the Office for National Statistics (ONS), more than three times as much than economists’ forecasts. Sales rose 0.9% year-on-year, but that was still less than the 1.1% rise analysts had been expecting.

December sales were revised to show a 0.2% decline from November and a 2.4% annual increase. The ONS originally said retail sales rose 0.3% from the previous month.

This has hit gilt prices. Two-year yields are on-half of a basis point higher at 1.15%, while ten-year yields are six basis points higher at 4.16%.

German bunds are also falling. Two-year yields are one basis point higher at 1.08%, while ten-year yields are nearly three basis points higher at 3.28%.

Markit's euro zone Flash Services Purchasing Managers' Index fell to 52.0 in February, from 52.5 in the previous month.

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