Bonds

LONDON (ShareCast) - Comments from Russia's central bank that it may switch some reserves to International Monetary Fund (IMF) bonds at the expense of US government debt sent treasuries lower.

The IMF announced plans to issue bonds to issue bonds to its 185 member nations earlier this year. Plans are being finalised to issue the bonds after several countries including Brazil and China expressed interest in buying them.

Alexei Ulyukayev, first deputy chairman of Russia's central bank, repeated comments made last month by finance minister Aleksei Kudrin that the government is holding discussions about investing up to $10bn in IMF bonds.

Treasuries had already been on the back foot as the government prepared to sell $19bn worth of notes. The sale of US government debt comes as the US embarks on a spending programme designed to stimulate the economy, helping it to recover from the credit crisis.

The yield on a 10-year note rose by six basis points to 3.89%, the highest level since November.

Here, gilts were sharply lower as stocks advanced and the brighter economic outlook sapped demand for the safety of government debt.

Industrial production rose for the first time in 14 months in April, while an increase in activity at car plants helped manufacturing output improve for the second month in a row.

The yield on the 10-year gilt was up seven basis points at 3.92%.

Mainland European government bonds were also out of favour as stocks advanced.

The yield on Germany's 10-year bund climbed three basis points to 3.67%.