Yields and basis point (bp) movements of some of the most-watched 10-year bonds this afternoon:
US: 1.90% (3bp)
UK: 1.95% (6bp)
Germany: 1.45% (4bp)
France: 2.13% (3bp)
Spain: 5.05% (-5bp)
Italy: 4.76% (-14bp)
[NOTE: there are 100bp to a percentage point]
US bond yields climbed by three basis points to 1.90% on Tuesday after the Institute for Supply Management published its non-manufacturing report on business. The report, which reflects activity across the whole of the US, showed that economic activity in the non-manufacturing sector grew in February for the 38th consecutive month. The NMI registered 56% in February, 0.8 percentage points higher than the 55.2% registered in January indicating continued growth at a slightly faster rate in the non-manufacturing sector. The business activity index received a reading of 56.9 and the new orders index recorded a reading of 58.2.
Markets were also reacting to the news that one of the US' key benchmark indices, the Dow Jones share index had exceeded its previous highest rate. Early on in US trading, the index had reached 14,268.
In the UK, bond yields jumped six basis points to 1.95% as data from the British Retail Consortium showed that UK retail sales values were up 2.7% on a like-for-like basis from February 2012, when they were down 0.3% on the preceding year. On a total basis, sales were up 4.4% against a 2.3% rise in February 2012.
As further evidence of growth in business, data collected between the 12th and 26th February by Markit showed the fastest rise in activity for five months underpinned by solid expansion of new business. Business confidence also hit a nine-month high and the sharpest rise in input costs for 14 months was recorded.
In Germany, bond yields rose by four basis points to 1.45% as data from Markit showed slower growth of service sector output and new work seen in February. The final Germany services business activity index was recorded at 54.7 in February, down from 55.7 in January. Employment in the service sector increased marginally during February. However, across the German private sector as a whole, employment was unchanged over the month with job creation in services offset by lower manufacturing staffing levels.
In France, yields rose three basis points to 2.13% as INSEE, the national statistics institute in France, unveiled a report about businesses and entrepreneurs. It showed that 50% of companies created in 2006 were still active in 2011. "The crisis has affected this generation of companies whose survival depends on the designer profiles and business and means used for the project," the report said. Data from Markit further showed sharp drop in business activity at French service providers during February. The Final Markit France Services Activity Index was recorded at 43.7, compared to 43.6 in January, representing a two month high. The seasonally adjusted final Markit France Services Business Activity Index, which is based on a single question asking respondents to report on the actual change in business activity at their companies compared with one month ago, posted 43.7 in February.
In Spain, bond yields fell by five basis points to 5.05% as the European Commission was reported saying that Spain's reform delays were adding to banking hurdles. An article published by Bloomberg reported that Spain was "backsliding on economic reforms, fueling risks for its banking system in the midst of an overhaul that faces 'significnt challenges'" citing the European Commission. Meanwhile, data from Markit showed a decline in activity accelerating for the first time in five months. The Spanish service sector moved deeper into contraction in February, according to the data, ending a recent run in which rate of decline in activity and new business had been slowing. Companies lowered their charges at a rapid rate again in a bid to secure new orders. Meanwhile, the rate of job cuts accelerated for the second month running and was substantial.
In Italy, bond yields contracted by 14 basis points to 4.76% marking a return towards more usual Italian bond yields seen over the past four weeks. Data published by Markit showed that February saw a steep and slightly accelerated decline in output and new work. PMI data continued to show Italy's service sector contracting t a substantial rate in February. The survey recorded a marked and slightly quicker decrease in business activity than was seen in January, corresponding with further weakness in new work in the sector. The data also showed that employment levels also fell, albeit to a slightly lesser extent than the survey recorded one month before.