Yields and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 2.04% (3bp)
UK: 1.96% (no change)
Germany: 1.47% (-1bp)
France: 2.10% (-1bp)
Spain: 4.77% (5bp)
Italy: 4.67% (7bp)
[NOTE: there are 100bp to a percentage point]
Peripheral countries in the Eurozone saw their bond yields climb on Wednesday, while core European countries posted contractions following encouraging economic data and signs of stability.
US bond yields climbed by three basis points to 2.04% as the price index for US imports rose 1.1% in February - the largest monthly advance seen since August 2012. This followed the previous month, when import prices rose 0.6%, according to the Bureau of Labor Statistics. The February and January rises were both driven by higher fuel prices.
Meanwhile, data issued by the US Commerce Department showed that in February retail and food services sales were worth $421.4 bn, representing an increase of 1.1% from the previous month and an increase of 4.6% from February 2012. Excluding autos, retail and food services, sales in February 2013 were $342.9bn, up 1.0% from January and up 3.9% from February 2012.
In the UK, bond yields were flat at 1.96% as the Debt Management Office sold £1.5bn of 3.75% 2052 gilts with a bid-to-cover ratio of 1.64% and an average yield of 3.434%.
The market also had time to digest comments made by Andrew Bailey, Deputy Governor of Prudential Regulation at the Bank of England, during a Treasury Select Committee meeting on Wednesday. Reuters news agency said Bailey indicated that some of Britain's banks needed more capital but that the government had not been asked to put cash into the Royal Bank of Scotland or Lloyds. "I have not asked the government to put capital into RBS or Lloyds," the news agency cited him as saying.
Meanwhile, in Germany, bond yields contracted by a single basis point to 1.47% on a day devoid of major economic or monetary policy announcements. The most significant development to have a potential effect on the yield came in the form of comments made by Finance Minister Wolfgang Schaeuble during a conference in Berlin.
The German finance leader expressed a different opinion to Juergen Fitschen, Deutsche Bank AG co-Chief Executive Officer, after Fitschen was reported as questioning whether European draft rules that could limit bonuses would hamper banks' ability to compete in some markets. Schaeuble was cited by Bloomberg as saying: "The next crisis of this magnitude won't just cost us our market economy system but our western democracy as well... Those who know that must take the debate a bit more seriously than to say it's tough to find employees in emerging markets."
The news agency further reported that Schaeuble said that while Fitschen's statement was correct "in part" the bonus rules must be implemented to make the finance industry more stable with stricter capital requirements.
In France, bond yields slid by a single basis point to 2.10% as data published by the National Institute of statistics and Economic Studies (INSEE), showed that in the fourth quarter of 2012, payroll employment in principal market sectors decreased by 0.3% quarter-on-quarter. This represented a reduction of 44,600 jobs. It followed a similar proportional reduction in the preceding quarter.
In February, France's Consumer Price index increased by 0.3%, after a decline of 0.5% in January. Year-on-year, it slowed down, increasing by 1.0% in February after +1.2% in January and +1.3% in December 2012. The largest upward pressures on the change in the CPI of February came from seasonally upturns in service prices and, in addition, from new increases in petroleum product prices.
In Spain, bond yields expanded by five basis points to 4.77% after Euronews reported Prime Minister Mario Rajoy had pledged 3.5bn euros over the next four years to help ease unemployment in the indebted country. Almost 50% of the working age population aged under 25 are thought to be struggling to find work in the country.
In Italy, bond yields rose by seven basis points to 4.67% as the country grappled with uncertainty more than a fortnight after inconclusive election results were announced.
Fabio Fois, an analyst at Barclays' Economic Research, said that Italy was "walking through political instability". In a research paper issued on Wednesday, Fois said: "Two weeks after the inconclusive elections, political instability persists in Italy. Neither of the main coalitions seems able to secure the support necessary to control the Parliament."
He pointed out that minority governments had not been that successful in the past in Italy, with all of them being short-lived at about 12 months on average. He predicted that new elections could be called by President Napolitano's successor in late June/early July.