Confidence in economy imporves bond yields in Japan

In Japan on Tuesday, confidence in the economy grew on the release of strong retail sales data. The 10-year government bond was up 2 basis points to a yield of 1.2 percent.

Another factor in the rise in yields was an investor reaction to speculation that the Bank of Japan could end its zero interest rate policy.

In the eurozone, longer-dated bonds responded to rumors that Dutch pension reform could be delayed, which would reduce demand for long-dated bonds. Additionally, demand was disappointing for a new issue o bonds in Italy.

The 2-year Schatz gained 4.5 basis points to yield 2.053 percent. The 10-year Bund was up 5.4 basis points to yield of 3.171 percent, while the 10-year Bund rose by 5.7 basis points to yield 3.686 percent.

In the UK, the 2-year gilt gained 5.3 basis points to yield 4.140 percent, and the 10-year gilt was up 5.2 basis points to a yield of 4.229 percent. Meanwhile, by late morning in New York on Tuesday prices on US Treasury bonds had fallen and yields had risen.

Several factors contributed to the falling prices. These included retreating oil prices, a consumer confidence index that was up more than had been expected, and anticipation of Wednesday’s sale of $20 billion in new 2-year bonds.

Traditionally, dealers try to push bond prices lower before a sale of new paper in order to get extra yields out of the new bonds. Two-year Treasury bonds saw yields rise 5.1 basis points to 3.639 percent, while 10-year bonds were up 5.7 basis points to a yield of 3.966 percent after hitting a 7-week low on Monday.

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