Bonds: US yields plateux as Obama slams Republic debt plans

Yields and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:

US: 2.00% (no change)

UK: 2.19% (-1bp)

Germany: 1.63% (-1bp)

France: 2.26% (no change)

Spain: 5.18% (-5bp)

Italy: 4.37% (-2bp)

[NOTE: there are 100bp to a percentage point]

US bond yields remained flat at 2% on Tuesday after President Barack Obama delivered a speech warning that people would lose their jobs if deep budget cuts proposed by Republicans were allowed to take effect on March 1st. He warned that the $85bn (£55bn) of earmarked cuts was a harmful, "meat-cleaver approach" to tackling deficit reduction.

In the UK, bond yields contracted by a single basis point to 2.19% as the Bank of England appointed Andrew Bailey as Deputy Governor of the Bank and Chief Executive Officer of the Prudential Regulation Authority, the replacement for the Financial Services Authority.

In Europe's largest economy, Germany, bond yields fell by a single basis point to 1.63% as the influential ZEW Survey showed a higher-than-expected economic sentiment indicating increasing levels of confidence in the country. The index recorded a reading of 48.2 in February, up from the previous month's reading of 31.5 and surpassing expectations of a 35 reading.

Meanwhile in France, yields plateaued at 2.26% as President Francois Hollande was quoted by Associated Press magazine as saying that France would grow by less than previously expected this year. "Everyone knows that for 2013, we will not reach our target, which was 0.8%," the magazine cited him as saying.

The country which saw the greatest reduction in bond yields was Spain, where the rate on 10-year bonds slid five basis points to 5.18%. This happened as the Treasury issued €23.9bn of medium and long term debt in 2013 and the government's economy ministry reported that the trade deficit had narrowed 33.6% to €30.8bn in 2012. Exports fell 3.8% to €222.6bn.

As the Italian parliamentary elections edge closer this weekend, bond yields contracted by two basis points to 4.37%. Analysts, economists and political pundits were all weighing in on the likely impact of the vote which many have described as a significant "risk event". The country faces challenges over the coming years as it attempts to pay off a £2tn public sector debt.

MF