British gilts – Short sterling has bucked the global trend towards lower yields on Thursday despite a GfK consumer confidence report for April showing a still despondent consumer. The -31 reading reported earlier matched the April reading as if we need more confirmation that a squeeze on income and rising taxes is challenging consumers. Short sterling prices dipped by a couple of basis points while the yield on the benchmark 10-year gilt softened by one pip to 3.31%.
Australian bills – Bill prices slipped by a couple of basis points sending expectations for the full amount of monetary policy tightening over the next 12 months back up to 25 basis points. Deputy Governor Ric Battellino at the Reserve spoke of a “very strong global economy” citing strength in the domestic exchange rate as evidence of still strong demand for Aussie resources. Benchmark government bond yields caught up with recent declines in global government bond yields falling by three basis points to 5.25%.
Japanese bonds – June JGBs crashed by 31 ticks overnight sending the contract tumbling to 140.58 by the close. The mood in government bonds was far more somber given a rally in commodity price and resurgent equity prices. Overnight the Nikkei jumped by 1.5%. Twenty-year bonds did rally after an auction met with better demand than anticipated, leading the maturity to a third daily gain. The yield on the 10-year bond recoiled from its weakest since November 24 adding two basis points to 1.135%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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