The following were the yield and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 2.65% (+2bp)
UK: 2.75% (-1bp)
Germany: 1.83% (+1bp)
France: 2.37% (+1bp)
Spain: 4.34% (+6bp)
Italy: 4.34% (+10bp)
Japan: 0.70% (+2bp)
Portugal: 6.99% (-7bp)
Greece: 9.67% (+2bp)
Government bond markets were generally poorly behaved on Thursday at the longer end of the maturity spectrum, following significantly better than expected unemployment numbers in the US. Initial US weekly unemployment claims fell unexpectedly in the seven days ending on September 14th, by 5,000 to reach 310,000 (Consensus: 325,000).
That came as the US Congress continues to debate on whether or how to raise the federal government´s debt ceiling. Against that backdrop, US President Obama reiterated his stance that he will not negotiate over the debt ceiling.
Also worth pointing out, the President of the Federal Reserve bank of Richmond, Jeffrey Lacker, has reportedly said that it will be harder for the US central bank to communicate credibly in the future. He also believes the tapering of quantitative easing should start in October.
His opposite number at the Minneapolis Fed, Narayana Kocherlakota, however, today remarked that the central bank must use all tools, no matter how unconventional, to boost employment.
An afternoon auction of $29bn of 7-year bonds was well received, with the indirect participatipn rate coming in a tad higher than the last time around, at 42.0%. The bid-to-cover ratio also nudged higher, to 2.46 times the instruments on offer, versus 2.43 on the last occasion they were sold.
European Central Bank Governing council members also made some statements which are of interest today. Yves Mersch said Eurozone economic growth remains weak, with only the first green shoots of recovery apparent and unemployment unacceptably high.
Worth pointing out as well, Spanish Prime Minister Mariano Rajoy said in a Bloomberg interview that the country may deepen its labor reform after taking advice from the OECD. In other news, it has been revealed that more than half of UK company shares
are owned by foreign investors.
UK gross domestic product (GDP) increased by 0.7% on the quarter in the first three months of the year and by another 1.3% on the year. The latter was revised down by 0.2 percentage points from the previous estimate. Household final consumption expenditure increased by 0.3% between the first and second quarters of 2013 - the seventh consecutive quarter on quarter increase. That marked a downwards revision of one tenth of a percentage point when compared with the preliminary reading.
Thursday's balance of payments release showed that the current account deficit in the first quarter was the largest on record - after being revised up to £21.8bn, or 5.5% of GDP, the largest since data began in 1955. Economists highlighted how that shows the UK's external position has become more unbalanced, not less. There appears to have been an unusually large surge in profits paid overseas and drop in receipts by domestic owners of overseas firms in Q1, both of which were reversed in Q2, economists at Barclays Research explained.