Investors ignore suggestions of US rate cuts

In mid-day trading on Tuesday, 2-year Treasury bonds had gone up to a yield of 3.70 percent, a rise of 2.7 basis points, and 10-year US bonds had gained 2.7 basis points to yield 4.119 percent. 30-year bonds had risen 3.2 basis points to a yield of 4.408 percent.

Investors chose to ignore figures showing a drop in retail sales and weaker producer price inflation which would traditionally indicate a slowing of the economy and possible low interest rates that would spur higher bond prices.

In the eurozone, prices fell and yields rose as data showed that in April Italy saw its largest rise in industrial output in eight years. This helped cut speculation that the European Central Bank might lower interest rates. Also, inflation slowed its growth in France and Spain in May. The 10-year Bund gained 0.9 basis points to yield 3.199 percent.

In the UK, investors engaged in a sell-off after the governor of the Bank of England warned of inflation risks as consumer price inflation rate data released Tuesday remained steady at 1.9 percent for the third month in a row after analysts had predicted that the figure would fall.

In Japan, the price of government bonds fell early in the day due to the dollar’s rise in relation to the yen, but that decline induced investors to buy, pushing prices higher again. At the end of it, 10-year government bonds remained unchanged at a yield of 1.235 percent.

Discuss this in the Finance Markets forums

Story link: Investors ignore suggestions of US rate cuts