Bonds: Eurozone industrial production weighs on periphery bonds

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

US: 1.84% (-3bp)
UK: 2.03% (-6bp)
Germany: 1.54% (-4bp)
France: 2.13% (-3bp)
Spain: 5.05% (+16bp)
Italy: 4.21% (+7bp)

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

US bond yields fell slightly as the country geared up for the official start of the corporate earnings season. All eyes were on JP Morgan Chase (Other OTC: JFTTL - news) , Goldman Sachs (NYSE: GS-PB - news) and Bank of America (Other OTC: BACYL - news) to gain an indication of how the market will move over the coming days.

Federal Reserve Chairman Ben Bernanke's scheduled evening speech on monetary policy at the University of Michigan may also prove a bond yield influencer, although any ripples won't be felt until tomorrow.

In the UK, bond yields fell sharply on the same day that the interim Financial Policy Committee published a draft policy statement explaining that the planned powers for the FPC to give directions setting extra capital requirements for the purposes of financial stability. The government is planning two powers - a countercyclical buffer and sectoral capital requirements. The OECD's composite leading for the UK pointed to firmer growth in November (Xetra: A0Z24E - news) .

Bond yields dropped in Germany after the publication of export figures for the month of November and a renewed 'haven' bid. Export levels, a traditional driver of growth in Germany, were down to €94.1bn ($125bn) in the month of November from €98.4bn in October.

Nevertheless, the latest results from Eurostat revealed that Germany's industrial production was up 0.1% in November month-on-month. Meanwhile, the OECD's composite leading indicators (CLIs) for the country showed signs of stabilising growth, albeit with a contraction of 1.02% year-on-year in the CLI for the month of November.

Elsewhere, yields fell fractionally in France as Eurostat figures revealed a 0.5% rise in production for the month of November compared to in the previous month. Like Germany, France also saw a stabilising of growth in in its composite leading indicators although alongside a contraction of 0.68% year-on-year in November.

Spanish bonds saw the greatest increase in their yields, with a jump of 16 basis points as the Treasury announced plans to issue up to €10bn of debt this week. Also weighing on markets were the very poor industrial production figures released by Eurostat on Monday morning. They showed the Eurozone's industrial output contracting at a 3.9% pace in November, the worst tally since November 2009. Leading the contraction were the drops in Spanish and Italian industrial output.

Other figures on the other hand revealed that Spanish banks' net ECB borrowing stood at €313.1bn in December down from €340.8bn in November.

Italian bond yields edged up by seven basis points as Italian government debt for November was published at €2.02tn, a record high.

MF