Yields and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:

US: 2.01% (1bp)
UK: 2.18% (-2bp)
Germany: 1.63% (-1bp)
France: 2.26% (no change)
Spain: 5.17% (-2bp)
Italy: 4.34% (-5bp)

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

European bond yields contracted for a second day running as signs of stability continued throughout the 17-nation bloc.

The US was the only country analysed in ShareCast's bonds report which recorded a rise in its 10-year bonds to 2.01%. This came as a wave of economic data was published by national statistics bodies.

The February 2013 Empire State Manufacturing Survey - often viewed as a barometre of manufacturing in the western part of the US - indicated that conditions for New York manufacturers improved for the first time since the summer of the last year. The general business conditions index rose into positive territory, advancing 18 points to 10.0. Industrial production contracted by 0.1% month-on-month in January. This was against expectations of 0.2% growth.

UK bond yields slid by two basis points to 2.18% as data from the Office of National Statistics showed the volume of retail sales fell by 0.6% in January against economists' expectations of a 0.5% rise. This followed a revised 0.3% drop in December and reflected tough trading conditions for shops and stores in the two key trading months of the year.

The Eurozone's largest economy, Germany, saw yields slip by a single basis point after European Central Bank Governing Council member Jens Weidmann was reported by Bloomberg as saying that Ireland's plan to rescue a failed bank could be in breach of government-funding regulations. Weidmann, who heads Germany's Bundesbank, said an appreciating euro alone would not trigger a cut in interest rates and the currency's gains were justified by the economic outlook. Meanwhile, German Finance Minister Wolfgang Schaeuble was cited warning a German radio station of the dangers of countries intervening in the foreign exchange markets. "We do not want state intervention in exchange rates. We want exchange rates that are determined by the markets," he told Inforadio.

French bond yields were unchanged at 2.26% after French President Francois Hollande was paraphrased by Indian online publication Business Standard as saying that the crisis in the Eurozone was over. The French premier is in India promoting business relations and the news publication cited him saying: "We have introduced [a] mechanism for stability, created banking union of members of the European Union and all necessary steps are initiated to maintain solidarity." He added: "Both India and France can work together to face various global and local challenges together. Both will have to open their markets. France has not opened just a window but full door for Indian companies who can tap both the European and African markets".

Meanwhile in the Eurozone's fourth largest economy, Spain, yields slid by two basis points to 5.17%. The country's Treasury said on Friday that it would sell three bonds next week. The first of the bonds is expected to mature on March 31st 2015 with a coupon of 2.75%. The second bond will mature on October 31st 2019 and offers a 4.30% coupon while the final bond matures on January 31st 2023 with a 5.40% coupon. The National Statistics Institute in Madrid also published data showing that Spain's core inflation rate accelerated in January as austerity measures sustained price increases while pushing the economy deeper into recession. Core inflation - which excludes energy and fresh food prices - accelerated to 2.2% in January.

In Italy, yields dropped by five basis points to 4.34% marking a return to equilibrium since fraught election campaigns saw spikes in yields last week. Data released by the Bank of Italy may have contributed to the contraction, with the institution showing the current account surplus increased in December due to goods trade. The current account balance showed a surplus of €2.36bn compared to a €488m surplus in the same period last year. But while the visible trade surplus surged to €3.76bn from €1.73bn in the prior year, income fell to €17m from €208m . The shortfall in current transfer also widened to €950m from €586m last year.

MF

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