European and UK Fixed Income Markets Rangebound Following Overnight Data

Market Updates | Written by CEP News | Aug 11 08 12:01 GMT |

(CEP News) - Fixed income futures overseas are mixed on Monday, but are maintaining their ranges following the release of several pieces of data overnight. Germany's 10-year Bund future is up three ticks to 113.61 and trading between 113.48-113.68 through the releases of German wholesale price indexes, French production and Italian CPI figures. The 10-year yield is down 0.8 bps to 4.253%, with its U.S. counterpart up 0.4 bps to 3.931%. Germany's wholesale price inflation continued to rise in July. The index jumped 9.9% year-over-year in the month, up from both the 9.0% gain expected and the 8.9% increase seen in June. July's annualized jump was the largest recorded since November 1981, when the index had risen 10.0%. In monthly terms, wholesale prices rose 1.4% following June's 0.9% increase. Economists, however, had expected a deceleration in the growth rate to 0.5% in July. Keeping with German fixed income, the five-year Bobl is down ten ticks to 108.20 and the corresponding yield is up 1.3 bps to 4.088%. The two-year Schatz is up 5.5 ticks to 103.245, with the German two-year yield up two bps to 4.075%. The U.S. two-year yield is down 1.7 bps to 2.480%. In other data, French industrial production fell 1.6% year-over-year, deepening the 1.8% decline seen in May which had been revised down from -1.2%. Economists had expected the output level to have increased 0.5% over the same period. On a monthly basis, industrial production in France contracted 0.4%, down from the 0.6% gain expected. June's fall adds to the 2.9% drop seen in May, revised down from an initial figure of -2.6%. The Italian consumer price index reportedly increased 4.1% year-over-year in July as expected, up from June's 3.8% rise. Month-over-month, Italian consumer price inflation was confirmed to have reached 0.5% in July following June's deceleration to 0.4%. December 2008 Euribor contracts are subsequently down two ticks to 95.050 and March 2009 contracts are down 3.5 ticks to 95.280. Helaba Research's Ulrich Wortberg notes how market sentiment has shifted toward a European Central Bank rate cut in the near future. "Expectations of rising key rates vanished after ECB chairman Trichet placed greater emphasis on economic risks than he had done previously, claiming that the economic cooldown was expected 'in part' [i.e. not to the extent that is currently evident] and that the bank is 'humble' in the face of incoming economic data," he wrote. "This week's economic data, particularly the European industrial production and growth data, will generally fuel economic concerns." In the U.K. the 10-year Gilt future is down 11 ticks to 108.27 and the 10-year yield is up 0.8 bps to 4.691%. Each reacted in moderation to the 4:30 a.m. EDT announcement that UK output producer prices rose 10.2% on an annualized basis in July, the largest gain recorded in the series' history, up from June's 10.0% jump. Despite the rise, economists had expected an even, more marked increase in prices and forecast a 10.3% rise, year-over-year. March Short Sterling is down nine ticks to 94.555, conversely dropping 6.3 ticks to that point on the data. All data taken at 7:33 a.m. EDT. By Ryan Szporer, rszporer@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Megan Ainscow, mainscow@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.