German Bonds Mixed, UK Higher Following EU Rejecting Stimulus Calls

(CEP News) - German bonds are mixed and UK bonds higher on Tuesday following comments from European Finance Ministers rejecting calls for further stimulus action.

Citing comments from European Finance Ministers, the Financial Times reports that EU nations have reject calls for more fiscal stimulus despite urgings from Obama to do more.

The Financial Times also reported that Barclays is examining UK Treasury’s asset insurance program as a means of unloading toxic assets in the region.

European Central Bank Governing Council Member Lorenzo Bini Smaghi said the central bank is prepared to cut rates to zero if deflation risks were threatening economy, but warned that this was not the case for now.

Axel Weber of the Bundesbank said German price growth will turn negative for “some months”, but warned not to confuse this with deflation.

In terms of data, the German January trade surplus rose to €8.5 billion from €6.9 billion in December. Economists had expected increase to €9.5 billion.

French government deficit declined to €8.1 billion in January, from €6.6 billion deficit 12 months prior.

At 7:46 a.m. EDT,

In Germany, returns on two-year German bonds are down 0.6 bps to 1.26%, with five-year yields up 3.1 bps to 2.15%, 10-year yields up 2.2 bps to 2.96% and 30-year yields up 1.9 bps to 3.70%. The Euribor September 09 contract is up 4.0 ticks to 98.46.

Yields on UK two-year bonds are down 1.9 bps to 1.33%, with five-year yields down 1.7 bps to 2.17%, 10-year yields down 0.9 bps to 3.12% and 30-year yields down 1.5 bps to 4.02%. The Short Sterling September 09 contract is up 2.0 ticks to 98.16.

By Erik Kevin Franco, efranco@economicnews.ca

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Posted in Categories: Economy, Eurozone, Releases, UK.