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

US: 1.97% (-1bp)
UK: 2.12% (1bp)
Germany: 1.63% (-1bp)
France: 2.27% (-2bp)
Spain: 5.44% (-2bp)
Italy: 4.57% (-4bp)

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

In the US, bond yields contracted by a single basis point to 1.97% on Thursday as data from the Labor Department showed that US unemployment aid applications had declined. In the week ending February 2nd, the advance figure for seasonally adjusted initial claims was 366,000, representing a 5,000 decrease compared to in the previous week's revised figure of 371,000. The four-week moving average was 350,500, representing a decrease of 2,250 from the previous week's revised average of 352,750.

On the other side of the Atlantic, UK bond yields rose by one basis point to 1.63% as all eyes turned to Mark Carney, the future governor of the bank of England, who faced a mandatory grilling before the House of Commons' Treasury Select Committee.

In the live televised hearing, which lasted more than an hour, the Canadian national - currently the governor of the Bank of Canada - said he had not ruled out changes to the way that the Bank of England ran its monetary policy and said that the current policy of inflation targeting had been successful.

Meanwhile, the Bank of England maintained its interest rates at 0.5% and left its quantitative easing programme at £375bn as expected. The Office of National Statistics published data on industrial and manufacturing output, showing that the former rose 1.1% in December while the latter climbed 1.6%. Both growth rates exceeded those seen in the previous month.

In Europe's largest economy, Germany, bond yields fell by one basis point to 1.63%. This occurred on the same day that the Economics Ministry published figures reporting that industrial output for December stood at 0.3%, slightly more than the 0.2% that had been forecast. Meanwhile, Elke Koenig, the head of Germany's financial watchdog, BaFin, told Reuters news agency that the boards of Germany's big lenders had underestimated the potential for manipulating inter-bank lending rates for too long: "In the past, the bank considered the LIBOR and Euribor rate submissions as a process with little risk, which in retrospect was inappropriate," Koenig was cited by the news agency as saying.

Bond yields slid two basis points to 2.27% in France as Foreign Trade Minister Nicole Bricq reported that the country's trade deficit had fallen by 9% in 2012 to €67bn. In 2011, the French trade deficit had hit a record of €74bn. Agence France-Presse cited Bricq saying: "It is the first encouraging signal which should allow us to regain confidence". He added: "These figures, the first net improvement since 2009, are explained by the growth of French exports and stable imports."

In Spain, yields fell by two basis points to 5.44% as industrial output figures from the National Statistics Institute in Madrid showed that industrial output had fallen for a 16th consecutive month. Output at factories, refineries and mines adjusted for the number of working days fell 6.9% from a year earlier after declining 7% in November.

Italian bond yields slid by four basis points to 4.57% as incumbent Premier Mario Monti expressed hope that European Union countries could conclude negotiations on the bloc's next seven-year budget.

Deutsche Presse Agentur cited the leader saying: "Growth and equality are, more than ever, two crucial ingredients for Europe's progress. We will fight for both these things to be realised and hope that there can be an accord."

Meanwhile, European Central Bank President Mario Draghi made a reference to the Italian central bank's handling of crisis-hit Monte dei Paschi di Siena (MSP) during a packed press conference. The ECB chief iterated the International Monetary Fund's tance publicised earlier in the week concluding that the Bank of Italy had taken timely and appropriate action to address the problems at MSP.

MF

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