European govt bonds remain lower as equity markets gain

European govt bonds remain lower as equity markets gain

	Published : Mon, 13 Aug 2007 16:41 By : Agencies Print this Story

LONDON (Thomson Financial) - European government bonds were under pressure as equities rebounded, though trade remained jittery and volatile amid ongoing fears of a global credit crunch.

Share prices have rallied today, reversing some of the very steep losses seen towards the end of last week and helped by moves by the European Central Bank and the Federal Reserve to inject liquidity into the banking system.

'It's been a better day for equities. This has provided a good opportunity to take profit on the bond market, which has been driven by intra-day moves in equity markets,' said Audrey Childe-Freeman at CIBC.

The declines are likely to be short-lived, however, in a market that remains very concerned about the current turmoil in credit markets and about the level of risk that should be taken on, she said.

'This is a tricky and volatile environment and this is likely to continue for a few weeks before we see any signs of stabilisation,' she said.

Meanwhile, stronger-than-expected US retail sales data this afternoon also helped push bonds lower, though they had limited impact.

Headline retail sales increased by 0.3 pct month-on-month in July, and by a healthier 0.6 pct excluding gasoline and autos.

The news is encouraging, but the outlook remains relatively bleak given the trouble in the housing and credit markets at the moment, analysts said.

'Given that consumers also face rising unemployment, a chronic downturn in the housing market and now falling stock markets as well, we expect any improvement to be very limited and possibly short-lived,' said Paul Ashworth at Capital Economics.

Also due this week out of the US are key figures on inflation and the housing market, which will be closely monitored.

Over in the UK meanwhile, gilts were also lower, tracking their European counterparts.

This morning's UK PPI data were mixed, with output prices rising but input prices unexpectedly down. This week is a key week for UK data, with inflation figures tomorrow, followed by labour market data on Wednesday and retail sales on Thursday.

At Yield Change on

1617 BST pct previous close

Sept euribor future (Liffe) 95.635 dn 0.025

Dec euribor future (Liffe) 95.600 dn 0.025

GERMANY

Sept bund future (Eurex) 112.55 dn 0.16

3.75 pct Jul 2017 govt bond 99.02 4.37 dn 0.13

FRANCE

3.75 pct Apr 2017 govt bond 94.53 4.45 dn 0.25

ITALY

4.00 pct Feb 2017 govt bond 95.60 4.63 dn 0.07

Sept gilt future 105.61 up 0.03

4.00 pct Sept 2016 govt bond 91.20 5.23 dn 0.07

Sept short sterling future 93.80 dn 0.07

Dec short sterling future 93.87 dn 0.03

jessica.mortimer@thomson.com

jkm/slm

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