European govt bonds boosted by equity market weakness, ahead of US data |
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Published
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Fri, 11 May 2007 09:41
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LONDON (Thomson Financial) - European government bonds were firmly higher as weakness in equity markets saw investors seeking the safety of bonds ahead of some US data later today.US and European equity markets stumbled on some soft chain store sales data, leaving markets sensitive to the US retail sales data due in the afternoon.Retail sales are seen rising 0.3 pct in April after rising 0.7 pct in the prior month, while sales excluding autos are seen rising 0.4 pct in the month, after having risen 0.8 pct.Any disappointments will make investors question the currently record-high valuations on stocks, particularly in the US.'Watch for still more (equity investors) to rush for the exit from the stock market and rush to flee into buying bonds,' said Michael Cartine at Thomson's IFR Markets.Also key today will be US PPI, which is seen rising 0.7 pct in April after rising 1.0 pct in March.Adding support to bonds were also comments by former Federal Reserve chairman Alan Greenspan who said he still sees about a one in three chance of a recession in the US this year. Although he is no longer a rate-setter, Greenspan's opinion seems to remain highly regarded by the market, as the last time he pronounced this opinion about a recession stocks dropped heavily and bonds rallied.Bonds are also leaning to the upside after the ECB yesterday signalled a rate hike in June, as expected, but also sounded less certain that rates would have to go up further after that.'Yesterday's meeting was one of the first occasions on which (president) Trichet has emphasised that he sees an impact from recent rate hikes,' said Orlando Green at Calyon.'After June's well-flagged 25 point hike we think the central bank will become truly data-dependent,' he said.Elsewhere, gilts were also higher, as a lack of domestic data today leaves the market to follow global sentiment.The Bank of England yesterday raised interest rates, as widely expected, with many analysts expecting it to raise them once again, possibly as early as next month.At Yield Change on0920 BST pct previous closeJune euribor future (Liffe) 95.86 unchangedSept euribor future (Liffe) 95.74 up 0.01GERMANYJune bund future (Eurex) 114.06 up 0.453.75 pct Jan 2017 govt bond 96.69 4.17 up 0.37FRANCE3.75 pct Apr 2017 govt bond 96.31 4.21 up 0.33ITALY4.00 pct Feb 2017 govt bond 97.46 4.37 up 0.42UKJune gilt future 107.18 up 0.504.00 pct Sept 2016 govt bond 92.32 5.04 up 0.45June short sterling future 94.19 up 0.01September short sterling future 94.10 up 0.03carlo.piovano@thomson.comcp/cp/ejpCOPYRIGHT
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European govt bonds higher on equity market falls, awaiting key US CPI data 