Bonds

Tuesday April 29, 04:47 PM
European govt bonds track Treasuries higher after weak U.S. data

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LONDON (Thomson Financial) - European government bonds were tracking their U.S. counterparts higher after weak data from the world's largest economy sparked safe haven flows.

Risk appetite waned to the benefit of fixed income

assets after further evidence of the deep malaise on U.S. housing markets was revealed, with the S&P/Case-Shiller home price index for 20 cities dropping sharply by 12.7 percent in February from a year earlier.

'This was not particularly good news for anyone hoping that the Federal Reserve's 'inflate away the housing problem plan' was working,' said James Vola, an analyst at Thomson IFR Markets.

'The index's weakness has brought a flight-to-quality bid to Treasuries,' said Vola.

Bonds' gains were consolidated further following the release of a weak consumer confidence survey.

The New York-based Conference Board said its Consumer Confidence Index fell for the fourth month running in April to 62.3, from an upwardly revised 65.9 in March, amid ongoing fears about the effects of inflation and a slowing economy.

'The financial markets may have decided that the glass is half full but consumers remain unbelievably downbeat,' said Paul Ashworth, U.S. economist at Global Insight.

Looking ahead, the annual CPI (NYSE: CPY - news) inflation figures from the euro zone on Wednesday are expected to ease slightly to 3.4 percent in April from 3.6 percent the previous month. However this still remains firmly above the European Central Bank's target of around 2 percent.

Attention will then turn to the U.S. advance figure for GDP in the first quarter, and to the Federal Open Market Committee's interest rate decision.

In the UK, gilts were tracking the rest of the bonds market higher, with support also coming from Tuesday's raft of weak data from the housing and retail markets.

Official mortgage approvals numbers dropped to a record low of 64,000 in March from 72,000 in February, adding to the bleak housing market outlook following Hometrack's weak house price survey for April on Monday.

There was also a dismal survey on retail sales from the Confederation of British Industry, and weak lending figures from the Building Societies Association.

Nationwide's latest house price survey on Wednesday is expected to paint yet another bleak picture of the housing market with a 0.6 percent monthly drop in April, taking the annual rate down to a fall of 0.2 percent.

At Yield Change on

1520 GMT pct previous close

June euribor future (Liffe) 95.21 up 0.04

Sept euribor future (Liffe) 95.40 up 0.07

GERMANY

June bund future (Eurex) 114.04 up 0.51

4.00 pct Jan 2018 govt bond 98.91 4.14 up 0.50

FRANCE

4.25 pct Oct 2017 govt bond 97.22 4.35 up 0.40

ITALY

4.50 pct Feb 2018 govt bond 99.64 4.59 up 0.48

June gilt future 108.23 up 0.37