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

US: 1.99% (3bp)
UK: 2.15% (5bp)
Germany: 1.61% (5bp)
France: 2.25% (3bp)
Spain: 5.05% (-16bp)
Italy: 4.43% (4bp)

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

Bond yields contracted in Spain while the US and remainder of the core European countries covered in ShareCast's daily bonds analysis climbed following disappointing economic data.

In the US, bond yields rose by three basis points to 1.99% as the Chicago Federal National Activity Index (CFNAI) posted a slightly negative reading of -0.32 for the month of January. The CFNAI is a monthly index which is designed to gauge overall economic activity and related inflationary pressure. It is a weighted average of 85 existing monthly indicators of national economic activity and seen as a complement to the GDP growth figures. A negative reading indicates that growth is slightly below trend.

Meanwhile in the UK, bond yields climbed five basis points to 2.15% as markets reacted to news issued on Friday that credit ratings agency Moody's had taken the step of downgrading the UK's rating. The agency downgraded its assessment of the outlook for the UK economy from AAA to AA1. It was the first time in more than 30 years that the country had its credit rating lowered.

On the Continent, the Finance Ministers of France and Germany issued a joint statement urging Cyprus to agree on a rescue deal by the end of March. "Discussions must begin soon to meet the objective of reaching an agreement before the end of March," French Finance Minister Pierre Moscovici and German Finance Minister Wolfgang Schaeuble said in the joint statement. "We urge the troika and Cypriot authorities to make progress on finalizing the memorandum of understanding".

German bond yields rose by five basis points to 1.61% after the country sold €1.94bn of 12-month T-bills with a bid-to-cover ratio of 2.2. This was slightly more than the €1.8bn sold in the country's previous T-bill auction.

French bond yields rose by three basis points to 2.25%. The happened on the same day that Bloomberg reported that Jens Weidmann, European Central Bank Governing Council member, had delivered a speech in Paris encouraging the French government to step up its efforts to fix its public finances so as to fulfil its leadership role in restoring confidence in the region. "Only together can France and Germany solve the current crisis," Weidmann was cited by the news agency as saying."Stabilizing the monetary union requires both countries to be economically and politically strong."

In Spain, bond yields slid 16 basis points to 5.05%, representing one of the largest daily falls in recent weeks. Spanish producer prices rose 1.1% month on month in January, representing a rise from the slight 0.1% contraction recorded in the month of December.

In Italy, bond yields fluctuated significantly in the hours following the closing of voting in the country's elections. Shortly after 14:00 London time when the voting closed, yields on Italy's 10-year bonds had contracted sharply by 24 basis points to 4.30%. Soon after the voting closed, exit polls were released which appeared to indicate that a centre-left coalition could be able to form a government. However, by 17:00 the yields had picked up to 4.43%, up four basis points after updated news reports indicated that projections from an early vote count showed former Premier Silvio Berlusconi's centre-right slightly ahead in the Senate.

In recent weeks, analysts have weighed in on the highly important elections which have been viewed as a crucial element as well as a significant "risk event" in determining whether Italy can implement much-needed reforms to reduce its deficit.

Elsewhere in Europe, the result of the Cypriot election was viewed as generally positive across the Continent. Centre-right leader Nicos Anastasades won the presidential elections with 57.5% of the vote. His appointment comes at a critical time for the country which has been precariously close to bankruptcy in recent months.

MF

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