The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 1.91% (6bp)
UK: 2.06% (4bp)
Germany: 1.64% (6bp)
France: 2.22% (5bp)
Spain: 5.12% (11bp)
Italy: 4.07% (-8bp)
[NOTE: there are 100bp to a percentage point]
Government bond yields in most of Europe's key countries jumped markedly on Friday following the publication of a wave of economic data, key public appointments ni the US administration and comments from influential decision-makers.
In the US, 10-year bond yields jumped by six basis points to 1.91%, representing the largest bond yield deviation the country has seen over the past seven days. The rise came on a day when US President Barack Obama announced a raft of new appointments to his administration, taking the unusual step of choosing two former prosecutors as top financial regulators. Mary Jo White, who was the first female attorney in Manhattan and has a "tough-as-nails" reputation, was named as the new head of the country's Securities and Exchange Commission and Richard Cordray was named as the director of the Consumer Financial Protection Bureau. Both appointments led some commentators to predict there would be tougher policies on Wall Street over the coming months.
In the UK, worrying growth figures released by the Office of National Statistics showed that the nation's economy had contracted three times as much as was expected in the fourth quarter of 2012 to -0.3%. This compared to a rise of 0.9% in the third quarter of 2012 and an expected decline of 0.1%. The disappointing figures fuelled speculation over a potential triple dip recession. Responding to the dismal figures, UK Chancellor George Osborne was quoted by the BBC as saying he would not change the government's austerity strategy. "We can run away from our problems or we can confront them and we are going to confront them," he was cited as saying.
Meanwhile, Europe's fastest growing economy, Germany, posted a six basis point increase in its 10-year bond yields to 1.64%. This happened on the same day that the Ifo Business Climate Index for German industry and trade rose for the third time in succession. The survey recorded a 104.2 reading for the month of January 2013, up from the expected 100.5 expected and above the previous month's reading of 102.4. Symptomatic of increasing confidence in Germany, financial services firm JP Morgan upgraded its forecast for German growth.
French bond yields were up five basis points to 2.22% as Christine Lagarde, Managing Director of the International Monetary Fund, expressed her views about the likelihood of France achieving its deficit target as "extraordinarily ambitious". In an interview with France 2 television at the World Economic Forum, Lagarde was quoted saying: "That [the French bid to bring its public deficit down to 3% of output] seems to us to be an extraordinarily ambitious target." The comments came on the same day that France's Finance Minister Pierre Moscovici was quoted giving his response to the earlier week EU-IMF agreement to keep Greece afloat inside the euro zone. "[It is] a turning point for the euro zone because it helps to recreate stability and confidence. Greece's fate will no longer be a daily issue."
In Spain, bond yields soared by 11 basis points to 5.12%, the biggest rise seen all week, as the country's National Institute of Statistics' Producer Price Index figures were released for the month of November showing a decrease to 2.7% compared to 2.8% in November. Some commentators blamed this partially on milder hikes in energy prices, specifically a decline in petroleum refinement prices. Meanwhile, Spain's economy minister Luis de Guindos said that the country did not need a bailout in an interview with Reuters.
Italy was the only country included in ShareCast's round-up of bonds which saw a drop in its yields. 10-year bond yields slid four basis points to 4.07% on Friday as Prime Minister Mario Monti warned that a stronger euro could hurt exports but brushed off talk of a foreign exchange
war between major currency blocs, according to Reuters. The Italian leader was quoted saying: "As far as the risk that an excessively strong euro could harm exports of European countries, there is certainly a risk to a certain extent."