Bond party spoiled by Bini Smaghi

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

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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