Government bond yields up on interst rate concerns

Prices were down on government bonds in the Eurozone on Monday on continuing fears that the European Central Bank will continue to raise interest rates beyond the end of the year. The fears were exacerbated by comments from ECB officials, and some analysts believe that rates could go beyond 4 percent next year. Late in the trading day, the two-year Schatz had added 3.6 basis points to a yield of 3.696 percent, while the ten-year Bund was yielding 3.829 percent, a gain of 5.4 basis points.

In the UK, gilts followed Eurozone yields upward after inflation and growth there were both revised up, setting up the possibility that the Bank of England will also raise interest rates again before the year is out. The two-year gilt added 5.7 basis points to 5.027 percent, while the ten-year gilt was 8.2 basis points higher to 4.658 percent.

Data showing that foreigners are buying fewer US Treasury bonds, along with anticipation of Tuesday’s meeting of the Federal Reserve, sent yields up on Treasury bonds as well. Two-year bonds were yielding 4.91 percent, a gain of 3.8 basis points, while ten-year issues also added 3.8 basis points to 4.83 percent.

Japanese markets were closed for a holiday.