Japanese bonds –Japanese monetary policy makers expressed caution towards the ebullient attitude among investors over the glowing health of the U.S. economy. In minutes of its January meeting Bank of Japan officials noted that despite the appearance of better health, the economy had some way to go. Given the U.S. “economy continued to be burdened with balance-sheet adjustments, the prevailing view among market participants about the economic outlook might be somewhat too optimistic.” The caution helped lift sentiment towards domestic government bonds sinking yields by three basis points to 1.295%.
Canadian bills – Bond prices are marginally lower this morning more in sympathy to events elsewhere than at home. The January cost of living rose by 0.3% and weakened the annual pace of change to 2.3% from 2.4% in December. The Bank of Canada’s core and preferred measure was unchanged leaving prices 1.4% higher than a year ago. The rate is well below the 2% ceiling faced by the central bank raising the appeal of domestic bonds relative to elsewhere. The 10-year benchmark remained unchanged at 3.48% with the premium paid by U.S. investors widening to 14 basis points.
Australian bills – Aussie government bond prices eased sending yields two basis points higher. The Chinese central bank late in the day announced a further 50 basis point increase in its reserve ratio requirement sending yet another indication that it’s not yet done with tightening its monetary policy. The news came too late in the session to impact shorter-dated bill prices, which were static to end the week.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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