Yields and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 1.86% (-1bp)
UK: 1.99% (-11bp)
Germany: 1.47% (-10bp)
France: 2.18% (-6bp)
Spain: 5.34% (19bp)
Italy: 4.87% (40bp)
[NOTE: there are 100bp to a percentage point]
Bond yields swung wildly on Tuesday as the Eurozone reacted to the result of Italy's inconclusive general election which closed to voting on Monday.
On the other side of the Atlantic, US yields saw the least movement, contracting by one basis points to 1.86% as the Federal Reserve Bank of Richmond published its latest data indicating that manufacturing activity in the central Atlantic region had rebounded in February after declining in January. The seasonally adjusted composite index of manufacturing activity gained 18 points settling at six from January's reading of-12.
Encouraging data from the Standard & Poor's/Case-Shiller Home Price Index showed that US home prices ended 2012 with solid gains. In December's report, all three headline composites and 19 out of the 20 cities monitored, gained over their levels of a year ago.
In the UK, bond yields slid by 11 basis points to 1.99% as policymakers weighed in on how best to improve the nation's economy. Paul Tucker, Bank of England Deputy Governor, told Members of Parliament at the Treasury Committee that negative interest rates should be considered as one of several ideas he raised. "This would be an extraordinary thing to do and it needs to be thought through carefully," he said.
Meanwhile, the Confederation of British Industry published its latest quarterly Distributive Trades Survey, covering the first two weeks of February. The data showed that UK retailers saw sales volumes continue to strengthen compared to one year ago in the first half of February although the pace of growth slowed once again. Some 37% of retailers saw an increase in their volume of sales in the year to February and 29% reported a reduction.
Bond yields slid 10 basis points to 1.47% in the Eurozone's largest economy, Germany, as the market had time to react to comments made by European Central Bank board member Joerg Asmussen on Monday evening. Speaking at a German savings event, Asmussen was reported as saying: "Early indicators ... point to a swift recovery (in Germany) and I would expect that we will see a return to positive quarterly growth already in the first quarter of the year".
In France, bond yields contracted by six basis points to 2.18% as French Finance Minister Pierre Moscovici told Reuters that he was committed to doing everything to reduce the public deficit to 3.0% of GDP by the end of 2014.
Elsewhere, in Spain, bond yields rose by 19 basis points to 5.34% as Foreign Minister Jose Manuel Garcia-Margallo expressed views about the impact of Italy's deadlocked election result and how it could impact the rest of the Eurozone. Speaking to journalists while at a conference in Madrid, the minister warned that there was a feeling of "extreme concern" over possible movements in bond spreads as a reaction to the results.
In Italy, bond yields jumped a staggering 40 basis points to 4.87% one day after the country's inconclusive general elections resulted in political gridlock. The precarious position has prompted fears of that a political stalemate could or a weak government could adversely affect the rest of the Eurozone. European Union Economic Chief Olli Rehn weighed in on the subject on Tuesday telling reporters that it would be important to have a properly functioning government soon in Italy to show the country was moving forwards.