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Thursday 20th of November 2008
May 17, 2006

Bond yields rise in US, Europe


by Elaine Frei

Inflation news sent yields on government bonds higher in the US and the Eurozone on Wednesday, while interest rate speculation did the same to yields in the UK.

In the US, the release of new consumer inflation data that was up more than expected both overall and in core categories made investors suspect that the Federal Reserve will be more likely to raise interest rates further despite earlier indications that a pause in the current series of rate hikes was in the cards.

At late morning in New York, two-year Treasury bonds were up 5.5 basis points to yield 5.005 percent. Ten-year issues had added 7 basis points to a yield of 5.173 percent.

In the Eurozone, higher core consumer price inflation data was up in April as well. These new figures, in addition to a bond auction in Germany that was not especially successful combined to send bond yields up. The two-year Schatz added 7 basis points to yield 3.313 percent. Yields on the ten-year Bund were up to 4.002 percent.

UK gilt yields were affected by the revelation that one member of the Bank of England’s monetary policy committee had voted for a quarter-point hike in interest rates, while another voted for a cut and the rest voted to keep rates as they are. Some analysts took that vote to mean that interest rates in the UK could go up sooner than has been generally believed.

The 2-year gilt added 2.3 basis points to yield 4.756 percent, while ten-year gilts were yielding 4.636 percent, a gain of 2 basis points.

Meanwhile in Japan, ten-year government bond yields dropped by 4.5 basis points to 1.910 percent.

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