Bonds: Spanish yields slide on disappointing economic data



LONDON (ShareCast) - The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:

US: 1.96% (-1bp)
UK: 2.07% (-3bp)
Germany: 1.69% (-1bp)
France: 2.26% (-2bp)
Spain: 5.16% (-8bp)
Italy: 4.17% (-4bp)

[NOTE: there are 100bp to a percentage point]

US bond yields fell one basis point to 1.96%. This came as the International Council of Shopping Centres and Goldman Sachs Retail Chain Store Sales Index released figures showing a decline of 1.0% week-on-week in the week ending January 26th. The figures represented the fourth consecutive week of falls on the index. However on a year-on-year basis, the reading rose by 2.0%.

US data further showed that house prices rose in November (Xetra: A0Z24E - news) for a 10th consecutive month. The Case-Shiller Home Price Index, which tracks monthly changes in the value of residential property in 20 metropolitan regions across the US, showed prices edged 0.6% higher over the month on a seasonally adjusted basis. The data came in below October's 0.7% rise and consensus forecasts of a 0.7% uptick.

In the UK, 10-year bond yields slid by three basis points to 2.07%. Bank of England policy maker David Miles told the Independent newspaper that he expected growth would pick up in the UK this year. "I'm a bit more optimistic that growth is going to pick up," he told the newspaper. However he said that weak demand could weigh on productivity: "The danger of remaining in a situation where growth and demand are very anaemic and weak is that you actually reduce the productive capacity of the economy," he was reported saying.

Meanwhile, books opened on Britain's sale of a 2044 conventional gilt with initial price guidance set to give a yield of 9.25-to-9.75 basis points above that of the 2042 gilt. The syndication is currently the last one scheduled for a conventional gilt in the 2012/2013 financial year, with a further sale of an index-linked gilt planned for the second half of February.

In Germany, yields dropped by one basis point to 1.69%. This occured as the German Import Price Index reading fell 0.5% in December after remaining unchanged in November, according to the Deutsche Bundesbank. Year-on-year, the German Import Price Index rose 0.3% down from the 1.1% increase previously and below projections of 0.9%.

Meanwhile, Nuremberg-based market research group GfK predicted that German consumer confidence would rebound in February, boosted by higher income expectations and stable labour market conditions. The group forecasted that the index would edge up to 5.8 in February compared to the 5.7 reading in January.

In France, yields dropped two basis points to 2.26%. The French consumer confidence index published by the National Institute of Statistics and Economic Studies showed a confidence reading of 86, unchanged from one month ago. Data from the NISE also showed that in January, French households' opinion about the past general economic situation in France was almost stable recording a reading of one point. French household opinion about the future general economic situation slightly decreased in December by two points.

Meanwhile, an interview with France's employment minister Michel Sapin on a radio station caused some controversy when the politician was quoted describing the country as "totally bankrupt". The minister was quoted saying: "There is a state, but it is a totally bankrupt state". The strong views are likely to call into question Prime Minster Francois Hollande's tax policies which have seen some well-known personalities leave the country.

In Spain, yields plunged by eight basis points to 5.16%. Statistics from Spain's National Statistics Institute showed that calendar-adjusted retail sales in December fell 10.7% from the same period a year earlier, after falling by 7.8% in November, 9.7% in October and by 11% in September. The statistics came just days after Spain's central bank estimated that Spanish gross domestic product fell 0.6% in the fourth quarter from the third.

Italy's bond yield dropped by four basis points to 4.17%. The country sold €8.5bn of six-month bonds with a bid-to-cover ratio of 1.646 compared to a previous bid-to-cover of 1.57.