Wednesday May 7, 03:56 PM
Bonds round-up: Bonds easier ahead of rate decisions
LONDON (ShareCast) - Gilts are in retreat ahead of tomorrow's interest rate announcement by the Bank of England as traders bet that the Bank will wait until next month to feed through its next rate cut. Not even the release a gloomy consumer
confidence survey could lift gilt prices. Consumers are less confident than at any time since the Nationwide began collecting data in May 2004, figures from the building society showed today. Worries about the state of the economy caused the biggest ever monthly drop in the sentiment index, down to 70 in April from 77 the month before, 22% lower than a year ago. Disappointing UK manufacturing data also failed to attract buyers of government debt. Manufacturing output in the UK fell at its fastest pace in six months during March, surprising analysts who had expected no change from February's read. Figures from the Office for National Statistics revealed that production dropped 0.5% during the month, the largest decline since September last year. The retreat, which included a drop off in car production, follows a couple of good months, with output having improved by 0.4% in both January and February. The yield on the 10-year gilt rose 4 basis points to 4.72%. European government bonds were similarly weak ahead of tomorrow's interest rate announcement from the European Central Bank. The bank (NASDAQ: TBHS - news) has consistently refused calls to cut rates as it continues its fight against inflation and it would be a major shock if it cut rates tomorrow. Bunds fell as the German government sold €4.09bn of 3.5% five-year notes. The offer was 1.7 times subscribed. The yield on the 10-year bund rose 5 ticks to 4.18%. US treasuries are little changed ahead of today's $15bn auction of 10-year notes. The benchmark treasury note's yield rose one basis point to 3.93%.
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