LONDON (AFX) - The benchmark Bund futures index remained near a two-week low after stronger than expected US durable goods data added to the raft of bond-negative news over the week.
Excluding a 3 pct drop in transportation goods orders, December orders for durable goods rose 2.1 pct, the highest in three months.
"Putting aside the erratic this was a fairly strong report and the strong rebound in the new orders index of the ISM manufacturing survey suggests there is more to come," said Paul Ashworth, senior economist at Capital Economics.
European government bonds were already down for the third day running after a solid survey into German business confidence eased concerns that the euro zone's largest economy was struggling in the face of high oil prices and the appreciating currency.
German issues also came under pressure earlier after a surprise rise in German consumer sentiment, with the GfK's German consumer climate index up to 3.1 points in January from 2.6 points in December.
Both the GfK and the Ifo surveys point to a rise in German consumer spending in the months ahead and help offset some of the concerns raised by the currency and oil prices.
The ECB has kept its key refi rate unchanged at 2 pct since June 2003 in an attempt to bolster anaemic economic growth in the euro zone.
European issues have enjoyed solid gains in the last few months as the surging currency, in particular, accentuated concerns it may bring anaemic euro-zone economic growth to a standstill by making exports more expensive.
A strong currency also acts as a powerful anti-inflationary device.
These forces operate in tandem to reduce the market's expectations of any imminent rate hike from the European Central Bank.
Over in the UK, gilts were lower despite a disappointing manufacturing survey
The Confederation of British Industry, the UK's largest business lobby group, reported in its quarterly industrial trend survey that its business optimism balance fell from -10 pct in October to -22 pct in January, its lowest level since the second quarter of 2003.
But weighing on gilts were a warning from a Bank of England rate setter that inflationary pressures are rising also weighed on gilt prices and a suggestion from the Nationwide, the UK's largest building society, that the house prices are likely to steady over the coming months.
BoE rate setter, Stephen Nickell warned in a paper that the factors which have kept inflation in the UK subdued are starting to end.
He projects a pick-up in CPI inflation towards the 2.0 pct target level.
And in its monthly house price survey, the Nationwide said house prices in January rose by 0.4 pct from the previous month, compared with the 0.2 pct decline recorded in December.
"The latest housing and GDP data probably will calm some worries that the economy is very weak, while Nickell's speech aims to defuse the argument that the recent fairly low CPI inflation rates are a sign that upside inflation risks going forward are also low," said Michael Saunders, Citigroup economist.
"We do not expect the MPC to move rates either way at the February meeting, but still expect that the next move in rates will eventually be up," he added.
At Yield Change on
1608 GMT pct previous close
March euribor future (Liffe) 97.840 up 0.005
GERMANY
March bund future (Eurex) 119.51 dn 0.25
4.25 pct Jan 2014 govt bond 104.44 3.55 dn 0.35
FRANCE
4.00 pct April 2014 govt bond 103.36 3.58 dn 0.26
UK
March gilt future 110.71 dn 0.31
5.00 pct Sept 2014 govt bond 102.83 4.63 dn 0.27
March short sterling future 95.12 dn 0.01
ITALY
4.25 pct Oct 2013 govt bond 104.73 3.71 dn 0.24
SPAIN
4.75 pct Jul 2014 govt bond 109.63 3.54 dn 0.27
NETHERLANDS
3.75 pct Jul 2014 govt bond 101.41 3.57 dn 0.27
BELGIUM
4.25 pct Sept 2014 govt bond 105.30 3.59 dn 0.26
GREECE
4.50 pct May 2014 govt bond 106.29 3.69 dn 0.24
pp/ec
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
Excluding a 3 pct drop in transportation goods orders, December orders for durable goods rose 2.1 pct, the highest in three months.
"Putting aside the erratic this was a fairly strong report and the strong rebound in the new orders index of the ISM manufacturing survey suggests there is more to come," said Paul Ashworth, senior economist at Capital Economics.
European government bonds were already down for the third day running after a solid survey into German business confidence eased concerns that the euro zone's largest economy was struggling in the face of high oil prices and the appreciating currency.
German issues also came under pressure earlier after a surprise rise in German consumer sentiment, with the GfK's German consumer climate index up to 3.1 points in January from 2.6 points in December.
Both the GfK and the Ifo surveys point to a rise in German consumer spending in the months ahead and help offset some of the concerns raised by the currency and oil prices.
The ECB has kept its key refi rate unchanged at 2 pct since June 2003 in an attempt to bolster anaemic economic growth in the euro zone.
European issues have enjoyed solid gains in the last few months as the surging currency, in particular, accentuated concerns it may bring anaemic euro-zone economic growth to a standstill by making exports more expensive.
A strong currency also acts as a powerful anti-inflationary device.
These forces operate in tandem to reduce the market's expectations of any imminent rate hike from the European Central Bank.
Over in the UK, gilts were lower despite a disappointing manufacturing survey
The Confederation of British Industry, the UK's largest business lobby group, reported in its quarterly industrial trend survey that its business optimism balance fell from -10 pct in October to -22 pct in January, its lowest level since the second quarter of 2003.
But weighing on gilts were a warning from a Bank of England rate setter that inflationary pressures are rising also weighed on gilt prices and a suggestion from the Nationwide, the UK's largest building society, that the house prices are likely to steady over the coming months.
BoE rate setter, Stephen Nickell warned in a paper that the factors which have kept inflation in the UK subdued are starting to end.
He projects a pick-up in CPI inflation towards the 2.0 pct target level.
And in its monthly house price survey, the Nationwide said house prices in January rose by 0.4 pct from the previous month, compared with the 0.2 pct decline recorded in December.
"The latest housing and GDP data probably will calm some worries that the economy is very weak, while Nickell's speech aims to defuse the argument that the recent fairly low CPI inflation rates are a sign that upside inflation risks going forward are also low," said Michael Saunders, Citigroup economist.
"We do not expect the MPC to move rates either way at the February meeting, but still expect that the next move in rates will eventually be up," he added.
At Yield Change on
1608 GMT pct previous close
March euribor future (Liffe) 97.840 up 0.005
GERMANY
March bund future (Eurex) 119.51 dn 0.25
4.25 pct Jan 2014 govt bond 104.44 3.55 dn 0.35
FRANCE
4.00 pct April 2014 govt bond 103.36 3.58 dn 0.26
UK
March gilt future 110.71 dn 0.31
5.00 pct Sept 2014 govt bond 102.83 4.63 dn 0.27
March short sterling future 95.12 dn 0.01
ITALY
4.25 pct Oct 2013 govt bond 104.73 3.71 dn 0.24
SPAIN
4.75 pct Jul 2014 govt bond 109.63 3.54 dn 0.27
NETHERLANDS
3.75 pct Jul 2014 govt bond 101.41 3.57 dn 0.27
BELGIUM
4.25 pct Sept 2014 govt bond 105.30 3.59 dn 0.26
GREECE
4.50 pct May 2014 govt bond 106.29 3.69 dn 0.24
pp/ec
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
© 2005 AFX News
