These were the yields and basis point movements of some of the most watched 10 year bonds just before the close in Europe and in the United States:

Spain: 5.69% (-1bp)
Italy: 5.08% (-10bp)
France: 2.17% (-8bp)
Germany: 1.54% (+0bp)
UK: 1.74% (+0bp)
USA: 1.69% (+4bp)

Periphery bonds rose modestly today, ahead of the German Constitutional Court's (GCC) decision, tomorrow morning, on the legality of the European Stability Mechanism (ESM).

That despite Spain's Prime Minister, Mariano Rajoy, saying that while he would accept deficit targets he would not allow the specific distribution of state spending to be questioned by Brussels.

Possibly helping to steady nerves somewhat, the Netherlands sold 10 year debt today at an average yield of 1.85%, the lowest rate in at least 5 years; this ahead of tomorrow's elections.

Somewhat more surprisingly perhaps, US Treasuries have shown themselves impervious to a warning from ratings agency Moody's -this afternoon- reminding investors that it could downgrade its rating should Congress fail to bring the country's 'red-ink' under control.

In a similar vein, Goldman Sachs's David Kostin yesterday said a deal to head-off automatic tax increases and spending cuts at the start of next year may be "messy" and could hurt stocks, Bloomberg reports.

Solid US Treasury auction results



Betting on further easing from the Fed are we? Speculation in this regard is definitely out there in the markets, although some commentary has observers expecting something along the lines of "some" easing or a "middle-of-the-road" approach by the central bank at this Thursday's policy get-together.

Lastly, and possible lending some credence to the above, the US Treasury has this evening auctioned $32bn in three year debt at a yield of 0.337%, the lowest in a year. Furthermore, the bid-to-cover ratio has come in at 3.94, the highest since 1986 no less. Indirect bidder participation came in at 36.89%, comfortably above the 30.6% average derived from the last auctions.



AB

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