European govt bonds remain lower on strong US jobs data, ahead of ECB decision

European govt bonds remain lower on strong US jobs data, ahead of ECB decision

	Published : Tue, 10 Apr 2007 16:56 By : Agencies Print this Story

LONDON (Thomson Financial) - European government bonds remained lower after Friday's stronger-than-expected employment data out of the US and on jitters ahead of Thursday's interest rate decision by the European Central Bank.

After the four-day Easter break, euro zone bonds were catching up with last week's decline in US Treasuries after data released on Friday showed the US economy created 180,000 jobs in March. The reading was well above the 130,000 expected and put paid to talk of the US Federal Reserve cutting interest rates any time soon.

'There has been a bit of digesting (in the European bond market) of Friday's strong US payrolls data, which is keeping Fed rate cut talk off the agenda for the time being,' said CIBC analyst Audrey Childe-Freeman.

Tomorrow evening will see the release of the minutes to the rate-setting meeting of the Federal Open Market Committee on March 21, where market players will be looking for further clues on the interest rate outlook.

Meanwhile, bond market participants were also nervous ahead of the European Central Bank's interest rate decision due Thursday.

Rates are fully expected to be left on hold at 3.75 pct, though a further rate hike to 4.0 pct is expected in the coming months, probably in June but with a risk of an early hike in May. Attention will therefore centre on ECB president Jean-Claude Trichet's accompanying press conference for any hints on the timing of the central bank's next move.

'No one is expecting the ECB to move on Thursday, but there is nervousness ahead of the meeting as the market is aware that it is not a question of if but when the ECB raises rates again,' Childe-Freeman said.

In the UK, gilts were also lower, but continued to outperform the wider market after the Bank of England's decision to leave interest rates unchanged at 5.25 pct last week.

Market players are likely to remain cautious, however, with the BoE expected to raise rates next month.

The data calendar for the UK is thin this week, though some attention will be paid to the British Retail Consortium's latest retail sales monitor tomorrow, as well as housing market data from the Royal Institution of Chartered Surveyors on Thursday. If these come in on the strong side, this will cement the market's belief that interest rates are set to rise again.

At Yield Change on

1630 BST pct previous close

June euribor future (Liffe) N/A N/A

GERMANY

June bund future (Eurex) 114.36 dn 0.30

4.00 pct Apr 2016 govt bond 99.07 4.12 dn 0.24

FRANCE

3.25 pct April 2016 govt bond 93.29 4.16 dn 0.24

June gilt future N/A N/A

4.00 pct Sep 2016 govt bond 92.46 5.02 dn 0.15

June short sterling future N/A N/A

September short sterling future N/A N/A

jessica.mortimer@thomson.com

jkm/slm

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.

AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited