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

US: 1.84% (+8bp)
UK: 1.97% (+14bp)
Germany: 1.43% (+11bp)
France: 2.07% (+7bp)
Spain: 5.04% (-24bp)
Italy: 4.29% (-22bp)

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


US Treasuries dropped on Wednesday as risk appetite increased after politicians in Washington voted in favour of a deal to avert the automatic spending cuts and tax increases known as the fiscal cliff.

President Barack Obama praised a last minute deal to avoid the fiscal cliff, which could have plunged the economy back into recession. Obama was speaking at a press conference shortly after the House of Representatives passed a Senate-backed bill to stop massive tax rises and spending cuts, by 257 votes to 167. A day before it had cleared the Senate by a majority of 89 votes to 8.

10-year bond yields Stateside surged by eight basis points (bp) to 1.84% today as the demand for 'safer' assets diminished. Borrowing rates rose by nine bp earlier in the day, the strongest daily gain since October 17th 2012.

Market strategist Ishaq Siddiqi from ETX Capital said: "2013 has kicked off with a bang with bulls in full control of price-action - the risk rally sees all your traditional investments in vogue [stocks EUROSTOXX making 16-month high, euro, commodities, peripheral bond yields, banks, miners et al] while core government bonds and US Treasuries take a beating."

UK gilt yields also jumped today, with the 10-year rate up 14bp at 1.97%. The borrowing rate on the benchmark note was up 15bp earlier, the steepest advance since September 14th 2012.

The sell-off in 'safe-haven' government bonds (such as those in the US, UK and Germany) was also spurred by forecast-beating manufacturing data in Britain and America today. As such, 10-year bond yields in Spain and Italy sank by 24bp and 22bp, respectively, as investors built positions in riskier assets.

BC

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