Government bond yields up in Europe, Japan

Yields on US Treasury bonds were down on Tuesday as investors ignored healthy consumer sentiment and waited for the US Federal Reserve to make its decision on interest rates later this week. The gain in bond prices was strong enough to withstand dealer attempts to lower the price of two-year notes ahead of an auction of $22 billion in new issues scheduled for late in the day Tuesday. A sale of 5-year bonds was scheduled for Wednesday.

In late-morning trade in New York, two-year bonds had lost 2.1 basis points to 5.236 percent, while yields on ten-year bonds had dropped 3.3 basis points to 5.208 percent.

Eurozone bond yields were up as worries continued about the potential for the European Central Bank to raise interest rates again soon as comments by ECB officials tended to support that possibility. In addition, the Ifo index of German confidence was at 106.8 in June, the highest the index has been in 15 years, when it had been expected to fall from its revised May reading of 105.7.

Yields on the two-year Schatz were up by 3.3 percent in late afternoon trade, to 3.594 percent. The ten-year Bund gained 0.4 basis points to a yield of 4.090 percent.

Prices on UK gilts were up in late trade. The two-year gilt dropped 1.3 basis points to 4.834 percent, while the ten-year gilt was down by 0.1 basis point to yield 4.733 percent.

Amid increasing rumors that the governor of the Bank of Japan could resign, ten-year Japanese government bonds added 1 basis point to yield 1.910 percent.

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