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:

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

Recommended

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Why investors should be “cautiously bullish” for 2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

Here’s why you really should own at least some bitcoin
Bitcoin

Here’s why you really should own at least some bitcoin

While bitcoin is having a quiet year – at least in relative terms – its potential to become the default cash system for the internet is undiminished, …
16 Sep 2020
Will a second wave of Covid lead to another stockmarket crash?
Stockmarkets

Will a second wave of Covid lead to another stockmarket crash?

Can we expect to see another lockdown like in March, and what will that mean for your money? John Stepek explains.
18 Sep 2020
James Ferguson: How bad data is driving fear of a second wave of Covid-19
UK Economy

James Ferguson: How bad data is driving fear of a second wave of Covid-19

Merryn and John talk to MoneyWeek regular James Ferguson about the rise in infections in coronavirus and what the data is really telling us.
17 Sep 2020