Bond yields up

New data on inflation and business confidence out of Germany sent government bond yields in the Eurozone higher on Tuesday. Energy prices on the rise and strong business activity sent inflation in Germany up by 0.5 percent in April, which was considered to be an indication that inflation in the rest of the region might also be up. Higher inflation is expected to spur the European Central Bank to raise interest rates to 2.5 percent soon. Additionally, the IFO business confidence index in Germany was up to 105.9, from 105.4 last month. The index had been expected to decline to 104.8.

In late afternoon trade, the ten-year Bund had added 6.3 basis points to a yield of 3.989 percent, while the two-year Schatz was yielding 3.371 percent, a gain of 6.2 basis points.

Yields on US Treasury bonds were also up on the day after the Conference Board reported consumer confidence in the United States at its highest level in four years in April, with its consumer confidence index at 109.6 in April, up from 107.2 in March. April’s index level had been expected to decline. In addition, existing home sales in the US were up 0.3 percent tin March against in expected drop.

At late morning in New York, ten-year Treasury bonds were yielding 5.079 percent, in increase of 9.4 basis points. Two-year bonds were up 6.9 basis points to a yield of 4.954 percent.

In the UK, a new sale of index-linked bonds drew orders of only 1.32 times the available amount, much less than expected. Yields on the ten-year gilt were at 4.633 percent, a gain of 4.6 basis points.

Yields were also higher on longer-dated Japanese government bonds on demand for a new auction of 20-year paper that was less than expected. Yields on thirty-year bonds added 3.5 basis points to 2.485 percent, while ten-year yields were at 1.905 percent, up 2 basis points.

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