These were the yields and movements on some of the most watched 10 year bonds by the close in Europe:

Italy: 4.90% (-2bp)
Spain: 5.13% (+8bp)
France: 2.90% (-1bp)
Germany: 1.76% (-4bp)
UK: 2.17% (+8bp)
US: 2.07% (+4bp)

The "big picture" in debt markets through Tuesday was conducive to risk. A closely watched survey of German investor confidence from the ZEW Centre for Economic Research gave a reading of 22.3, the fourth increase in a row and significantly ahead of market forecasts.

In the US, retail sales rose 1.1% in February compared to January, the biggest gain in five months; the figures follow an upwardly revised 0.6% gain between December and January.

These two pieces of data explain the climbs in the yields of US bonds; investors believe there are more profitable places to put their money.

The fragility of the recovery though is demonstrated by Spain.

For several months it managed to keep its yield below the level of Italy's but of late the news flow has gone against Madrid.

Yesterday at a meeting of Eurozone finance ministers in Brussels, Spain came under severe pressure to reduce its budget deficit target for 2012 from 5.8% to 5.3% of GDP. Members of the single currency area are under treaty obligations to borrow no more than 3% of their economic output, a target which has been given added gravity by the chaos of recent months.

Europe, and the international bond market, is by no means out of the woods yet.

BS

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