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

US: 1.81% (-3bp)
UK: 2.02% (-3bp)
Germany: 1.51% (-5bp)
France: 2.12% (-3bp)
Spain: 5.01% (-2bp)
Italy: 4.18% (-1bp)

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

US bond yields contracted slightly as concerns over the debt ceiling resurfaced and manufacturing in the New York region contracted for the sixth consecutive month. The US treasury said it could hit the debt ceiling by mid-February. US business inventories rose 0.3% and in his planned address to the University of Michigan late yesterday evening Federal Reserve chairman Ben Bernanke justified the country's aggressive monetary policy.

In the UK, yields slid by two basis points on the same day the Centre for Economics and Business Research warned Britain could be stripped of its AAA credit rating as national debt continues to rise. Consumer prices rose 2.7% from a year earlier, according to the Office of National Statistics.

Germany saw the greatest change in its bond yields, slipping down by five basis points to 1.51% following the publication of disappointing growth figures. GDP growth was lower than expected for 2012, rising by 0.7% compared to the consensus forecast of 0.8% and considerably lower than the 3 per cent growth experienced in 2011. As well, said preliminary data shows that fourth quarter output may have contracted by approximately 0.5 percentage points.

In France, yields fell three basis points as the country's labour minister said the pace of increasing unemployment would slow in 2013 and reasserted that France would maintain its 0.8% growth target.

On the periphery, Spanish yields dropped two basis points after €5.758bn was picked up in 12 and 18 month bills. The treasury surpassed the top-end of its €4.5-5.5bn target. Fitch also announced that it expects Spain will not ask for aid in the Eurozone.

In Italy, the marginal contraction of 1 basis point reflected that prices were recovering some of what they lost yesterday.

MF

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