Friday May 9, 11:01 AM
European govt bonds higher as risk appetite falters on equity markets
LONDON (Thomson Financial) - European government bonds were higher, benefiting from safe haven flows as risk appetite faltered on equity markets.
With European equity markets tracking overnight losses in Asia, market players have sought
the relative safety of fixed income assets instead.
'The stock sell off has continued.... It has been enough to push bond markets higher again,' said John Ratcliffe, an analyst at Thomson IFR Markets.
And with little in the way of data due on Friday, bond markets will mostly be driven by the ebb and flow of risk appetite on financial markets.
'The fundamental data are unlikely to provide lasting stimulus for today's trading,' said John Davies, fixed income strategist at WestLB.
'Accordingly, bond trading should be driven by technicals and events on the equity and commodity markets,' said Davies.
In the UK, gilts were higher as markets continued to price in a high probability that the Bank of England will deliver an interest rate cut next month.
Though the BoE's Monetary Policy Committee kept interest rates on hold at 5.00 percent on Thursday, in line with expectations, this did not dent the market view that the BoE will need to cut rates next month instead in the face of deteriorating UK economic indicators.
'Underlying conditions in the British economy remain weak,' said an analyst at BNP Paribas (Paris: FR0000131104 - news) .
'The rate cut has been postponed due to inflation concerns, but with
the economy weakening sharply the MPC (A050540.KQ - news) will cut rates in June regardless of inflation,' said the analyst.
A dismal showing on Friday in the Ministry of Justice's home repossession figures in the first quarter has added to the recent run of poor UK data.
Court orders for repossession were up an annual 17 percent in the first three months of the year, and up 9 percent on the fourth quarter of 2007 due to the tighter credit conditions.
At Yield Change on
0942 GMT pct previous close
June euribor future (Liffe) 95.25 dn 0.02
Sept euribor future (Liffe) 95.44 up 0.01
GERMANY
June bund future (Eurex) 114.93 up 0.40
4.00 pct Jan 2018 govt bond 99.82 4.18 up 0.34
FRANCE
4.25 pct Oct 2017 govt bond 98.19 4.22 up 0.28
ITALY
4.50 pct Feb 2018 govt bond 100.44 4.49 up 0.20
UK
June gilt future 109.14 up 0.33
5.00 pct March 2018 govt bond 103.33 4.57 up 0.32
June short sterling future 94.47 unchanged
Sept short sterling future 94.74 unchanged
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