Finance Markets

May 5, 2006

US Treasury bond yields down

Filed under: Bonds, Economy

Yields were down and prices up on US Treasury bonds on Friday on new data that helped calm fears that interest rate rises would go on longer than has been generally expected. It was revealed that only 138,000 new jobs were created in the United States in April, far below the 200,000 which had been expected. In addition, the March figure of 211,000 new jobs created was revised downward to 200,000. However, there was still some concern over interest rates from the news that average hourly earnings were up 0.5 percent in April, to an annualized rate of growth of 3.8 percent, the highest level since August 2001.

On this news, yields on two-year Treasury bonds dropped 3.8 basis points to 4.941 percent. Yields on ten-year issues were at 5.121 percent, a decline of 4 basis points.

In the UK and Eurozone, yields were held steady or rose although the news from the US helped minimize the gains as housing figures from the UK. Comments from the president of the European Central Bank created the expectation that interest rates in both regions will rise soon despite the fact that both the ECB and the Bank of England voted on Thursday to hold interest rates at current levels for the time being.

Two-year gilts in the UK were up 1 basis point to 4.737 percent on Friday, while ten-year gilt yields held steady at 4.716 percent. In the Eurozone, meanwhile, the two-year Schatz added 3.5 basis points to 3.394 percent and the ten-year Bund was flat at 4.017 percent.

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