European government bonds come off lows after ECB statement |
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Published
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Thu, 10 May 2007 17:07
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LONDON (Thomson Financial) - European government bonds came off their morning lows after the European Central Bank left rates unchanged and after some mixed US data.The ECB kept its repo rate at 3.75 pct, as widely expected, and signalled a hike in June by using the key phrase 'strong vigilance', but refused to reveal much about its expectations for rates later in the year.'All in all, the ECB has not provided any clear guidance for the rate outlook beyond June,' said Holger Schmieding at Bank of America.The ECB said that previous rate increases are starting to have the desired impact in slowing money supply growth and mortgage credit, even though they remain at high levels.'As ECB rate increases work with a lag, this can be seen as an argument to wait and see in the near future,' said Schmieding.Among short-dated maturities the tone remains clearly negative, however, in the run-up to the June rate hike and as European economic data continues to be persistently strong, whereas longer-dated maturities have been outperforming on views that rate hikes will soon come to an end.US data also helped support bonds in the afternoon, with a wider-than-expected US trade deficit offset only somewhat by a fall in the weekly jobless claims.This suggests the US labour market remains tight although the weaker trade figures could weigh on Q1 GDP growth numbers, analysts said.In the UK, gilts were also mostly lower after the Bank of England increased its key interest rate to 5.50 pct. Its statement referred to robust growth, limited spare capacity and an easier pricing climate for firms.As the rate hike was widely expected, the market will now look to the inflation report to be published next week for more direction on future interest rate moves.'Our expectation is that the shape of the inflation projections will be consistent with rates rising again over the next few months,' said Philip Shaw at Investec, who does not rule out a back-to-back hike next month.At Yield Change on1645 BST pct previous closeJune euribor future (Liffe) 95.85 dn 0.01Sept euribor future (Liffe) 95.72 dn 0.01GERMANYJune bund future (Eurex) 113.64 dn 0.063.75 pct Jan 2017 govt bond 96.34 4.21 dn 0.07FRANCE3.75 pct Apr 2017 govt bond 95.96 4.26 dn 0.03ITALY4.00 pct Feb 2017 govt bond 97.06 4.42 dn 0.06UKJune gilt future 106.72 dn 0.114.00 pct Sept 2016 govt bond 91.93 5.09 dn 0.10June short sterling future 94.18 up 0.01September short sterling future 94.07 up 0.01carlo.piovano@thomson.comcp/cp/slmCOPYRIGHT
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