Bond markets mixed on interest rate news

Government bond markets around the world were mixed, with yields up some places, down in others, and some simply standing pat.

In the United States, the 2-year Treasury bond was about even at a yield of 4.052 percent, while the 10-year bond gained 2.2 basis points to yield 4.338 percent late in the trading day in New York. The 10-year bond had reached a 3-month high yield of 4.348 percent earlier in the day.

The Treasury Department was expected to announce that it would issue new 30-year bonds. Existing 30-year bonds were yielding 4.552 percent, their highest level since May.

In the eurozone, the 10-year Bund gained 3 basis points to yield 3.33 percent, a two-week high. Signs of inflationary pressure eliminated any lingering possibility that the European Central Bank will cut interest rates when it meets later in the week.

Last week, some analysts held out hope that rates would be cut in consideration of the eurozone’s faltering economy and especially in light of expectations that UK interest rates will be cut when the Bank of England meets, also later this week.

Gilt prices in the UK initially fell, but rallied back to around Monday’s levels amid new security warnings in London.

Meanwhile in Japan, the 10-year government bond gained 2 basis points to yield 1.365 percent despite growing concerns of a political crisis over the prime minister’s plan to privatize the post office and his threat to call elections if the upper house of parliament does not vote to approve the plan on Friday.

Also a factor in bond prices was debate over the belief of the governor of Japan’s central bank that inflation will return by the end of this year or early next year.

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