British gilts – Short sterling interest rate futures made healthy gains of eight basis points in light of a report showing rising cost pressures faced by producers were easing. Monthly output costs passed on by producers rose by 0.5% on the month compared to a 1.1% increase last month. The 10-year gilt yield slid by a further five basis points to 3.55% as buyers lifted the June futures contract to 117.31 for a two-week high.
Japanese bonds – June JBB futures surged in the immediate aftermath of the disruption created by the 8.9-magnitude earthquake. Stocks sank by 1.7% and investors dove for cover buying government debt. Ahead of course lays a recovery program that will require more issuance than the government can stomach, although the nation will ultimately accept. On Friday the benchmark 10-year yield slipped by two basis points to 1.25%.
Australian bills – The effect of the disaster impacting Japan was also felt in Australia where dealers bought domestic governments bonds as the region’s stock prices suffered. The 10-year yield shed a further four basis points to close at 5.44%. Bill prices also gained by four basis points in response and despite several strong pieces of Chinese data indicating that monetary efforts to rein in demand have so far fallen short.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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