European government bonds remain softer after US data

European government bonds remain softer after US data

	Published : Thu, 17 May 2007 16:14 By : Agencies Print this Story

LONDON (Thomson Financial) - European government bonds remained weaker after some robust US data, although trading activity was limited by a public holiday across Europe.

US weekly jobless claims fell for the fifth week in a row and came in lower than expected at 293,000 against market expectations for a 310,000 reading. The four-week average fell to 305,000, the lowest level since April 2006. This suggests the labour market has been tightening and that fears of weaker consumer spending may be overdone.

'Claims would appear to be signalling an acceleration in the economy and a pick-up in employment growth, which suggests that payroll gains in May were very solid,' said John Ryding at Bear Stearns.

Although US Treasuries fell on the data, dragging on European bonds as well, investors remain wary over the strength of the US economy after first quarter GDP and recent inflation data both came in slightly below expectations this week.

Eyes will now turn to the Philadelphia Fed survey of manufacturing activity, which later today is expected to show a jump to 4.0 in May from 0.2 in April, according to economists.

Overall, European bond markets have this week been in a bearish mood after GDP and inflation data came in just above expectations.

'The momentum remains negative and the technical picture supports further weakness near term,' said BNP Paribas strategists.

'It is still premature to expect a lasting rebound in European bonds as economic data remain robust, stock markets solid and the technical pattern weak,' they said.

Meanwhile, gilts were also slightly lower, tracking the wider market due to a lack of domestic data. In the UK, investors are firmly expecting interest rates to rise at least once more this year, keeping pressure on short-term bonds.

At Yield Change on

1550 BST pct previous close

June euribor future (Liffe) 95.84 unchanged

Sept euribor future (Liffe) 95.66 unchanged

GERMANY

June bund future (Eurex) 112.88 dn 0.09

3.75 pct Jan 2017 govt bond 95.64 4.31 dn 0.07

FRANCE

3.75 pct Apr 2017 govt bond 95.21 4.35 dn 0.04

ITALY

4.00 pct Feb 2017 govt bond 96.35 4.52 dn 0.09

June gilt future 106.32 dn 0.19

4.00 pct Sept 2016 govt bond 91.59 5.14 dn 0.17

June short sterling future 94.18 dn 0.01

September short sterling future 94.03 dn 0.03

carlo.piovano@thomson.com

cp//cmr

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