US bond prices down on Greenspan report

Prices were down and yields up on US Treasury bonds on Wednesday after Federal Reserve chairman Alan Greenspan painted a rosy picture of the US economy in Congressional testimony.

The 2-year bond gained 4.2 basis points to yield 3.902 percent, while the 10-year bond was up 4.5 basis points to 4.228 percent and the 30-year issue rose by 3.6 basis points to 4.461 percent.

Mr. Greenspan’s comments had the same effect on bond prices in the UK and the eurozone. In the UK, 2-year gilts gained 3 basis points to 4.136 percent, while the 10-year gilt rose 1.7 basis points to yield 4.341 percent. Minutes of the most recent Bank of England monetary policy committee meeting, released Wednesday, showed that four out of nine committee members voted to cut interest rates.

This news seemed less important to investors than did the remarks hinting at further tightening in the US from Mr. Greenspan in Washington.

In the eurozone, Germany increased the size of a 30-year bond issue as the German Finance Agency sold almost €5 billion of the bonds in an auction that was oversubscribed by 1.5 times.

The 2-year Schatz was up 2.3 basis points to 2.239 percent, the 10-year Bund gained 2.5 basis points to yield 3.296 percent, while the 30-year bund advanced by 2.7 basis points to 3.811 percent.

In Japan, bond prices were slightly higher on speculation of another US interest rate hike. The 10-year government bond lost 0.5 basis points to a yield of 1.265 percent.

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