Thursday, 23 June 2005

Conundrum continues

The conundrum continues, with interest rates falling all over the world yesterday.

Treasury yields go back below 4 per cent
Yields on 10-year US Treasuries dropped below 4 per cent again on Wednesday as talk of interest rate cuts in Europe pushed up demand for US government debt. "At 4 per cent we are a high-yield market compared to some others," said John Roberts, head of Treasury trading at Barclays Capital...

In late trade in New York, 10-year Treasuries were trading at yields of 3.944 per cent, down 10.3 basis points. Two- and 30-year bond yields were also lower, at 3.604 per cent and 4.250 per cent, respectively... The yield on the two-year gilt was down 12.2bp to 4.142 per cent, and the 10-year gilt yield lost 9.3bp to 4.249 per cent. The two-year Schatz was yielding 2.005 per cent, down 2.6bp, while the 10-year Bund yield fell 6.6bp to 3.140 per cent... The yield on the benchmark Japanese government 10-year bond fell 2.5bp to 1.265 per cent...

But the recent economic news flow hasn't been that bad actually.

On Tuesday, Germany's ZEW institute's monthly index rose to 19.5 in June from 13.9 the month before.

On Wednesday, the European Union reported a 1.1 percent rise in exports for April even as its deficit widened to 9.7 billion euros. On the same day, the European Union also reported a 2.1 percent rise in industrial new orders for April, while the euro-zone reported a 1.5 percent rise, both reversing falls in previous months.

And today, Japan reported a double dose of good news. Its tertiary sector index of service industry activity rose 1.8 percent in April while the government's business survey index (BSI) for big companies for April-June rose to 0.9 from 0.6 in the previous quarter with companies showing even more confidence for subsequent quarters.

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