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Bond yields up in London, eurozone


by Elaine Frei
February 22, 2006

Following the release Wednesday of the minutes from the most recent meeting of the monetary policy committee of the Bank of England, which revealed that only one committee member voted to cut interest rates, gilt yields rose and prices fell as traders lost hope that rates will decline any time in the near term. Speculation before release of the minutes had been that at least two members had voted in favor of cutting rates.

Still, some analysts believe that interest rate cuts may still come later in the year, possibly beginning in May, if the economy does not live up to the Bank’s hopes and pressures leading to inflation begin to ease.

In late morning trade on Wednesday, two-year gilt were yielding 4.260 percent, a gain of 3.5 basis points, while ten-year gilts gained 0.2 basis points to a yield of 4.129 percent.

Prices were down and yields up in the eurozone as well on the news that the French business climate was better than expected and investors took little notice of the release Tuesday of the minutes from the most recent meeting of the US Federal Reserve. Yields on the two-year Schatz were up 3 basis points to 2.938 percent and the ten-year Bund gained 2.9 basis points to a yield of 3.458 percent.

Yields were down, however, on the two-year Japanese government bonds, even while holding steady on the Asian nation’s five-year and ten-year bonds. Yields on the two-year bond were down 1 basis point to 0.390 percent, while yields on the five-year stood at 0.975 percent and the ten-year bond was yielding 1.520 percent.



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