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

US: 2.05% (3bp)
UK: 1.97% (no change)
Germany: 1.47% (-1bp)
France: 2.09% (-1bp)
Spain: 4.85% (8bp)
Italy: 4.65% (-2bp)

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

US bond yields climbed by three basis points to 2.05% as the Producer Price Index for seasonally adjusted finished goods increased 0.7% in February, according to data published by the US Bureau of Labor statistics. Prices for finished goods rose 0.2% in January and contracted 0.3% in December. On an adjusted basis, the finished goods index expanded 1.7% for the 12 months ended February 2013 marking the largest 12-month rise since October 2012.

Meanwhile, the nation saw an overall contraction in the number of people registering for initial unemployment claims. In the week ending March 9th, the advance figure for seasonally-adjusted claims was 332,000, representing a decrease of 10,000 from the previous week's revised figure of 342,000. The four-week moving average was also down at 346,750, slightly less than the previous week's revised average of 349,500.

In the UK, bond yields were flat at 1.97% as house price purchase lending recorded its highest January total since 2008. Data published by the Council of Mortgage Lenders showed a seasonal dip in lending masked by the strongest January since 2008. In spite of a seasonal monthly fall, house price purchase lending rose by 11% compared to January 2011. Remortgage lending was, however, still 23% lower than at the start of 2012.

In Germany, bond yields contracted by a single basis point to 1.47% as the Kiel Institute for the World Economy predicted that German economic growth would expand by 0.6% this year and by 1.5% next year. The institute predicted that the number of people in employment would grow to 41.8m from 41.6m and public debt as a percentage of GDP was expected to contract to 80.0 from 81.9 in 2012.

A statement issued by the Intitute stated:"Looking forward, we expect the German economy to gradually gain momentum during the remainder of the forecasting period as enterprise investment spending will more and more recover from its currently depressed level."

In France, bond yields fell by one basis point to 2.09% as Fitch Ratings reported that French banks' significant and increasing amount of customer deposits and growing proportion of long-term debt were providing a solid foundation for their funding. The agency said banks had also reduced their reliance on short-term and volatile funding sources.

In Spain, bond yields climbed by eight basis points to 4.85% as the country announced that it had sold a total of €803 of bonds. This comprised €134m of 6.0% 2029 bonds with a bid-to-cover ratio of 4.1 and an average yield of 5.224%, €304m of 4.9% 2040 bonds with a bid-to-cover ratio of 2.4 and an average yield of 5.434% and €365m of 4.7% 2041 bonds with a bid-to-cover ratio of 2.1 with an average yield of 5.432%.

Antonio Garcia Pascual, a member of the Economic Research team at Barclays, commented on the likelihood of Spain amending its regional growth targets. At present, the Spanish government has the same 2013 deficit target of 0.7% of gross domestic product for all regions. However, Pascual pointed out that regions such as Catalonia and Murcia, have signalled that they will not be able to meet this target. "It is expected that as the European Commission relaxes the overall target for Spain, the central government could also relax the regional targets," Pascual said.

In Italy, bond yields slid by two basis points to 4.65% as Reuters news agency reported that incumbent Prime Minister Mario Monti said he would ask the European Union for flexibility on deficits at the EU summit. The news agency cited him as saying: "Reasonable margins for flexibility have been introduced and we will ask to be able to avail ourselves of these margins."

MF

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