British gilts –Short sterling futures also saw a mixed reaction to the alleviation of pressure on the continent. Nearby maturities gained while deferred contracts dipped sending implied yields marginally higher as the yield curve steepened. Investors remain increasingly comfortable with the view that the Bank of England remains a long way from lifting monetary policy. The 10-year gilt yield added two basis points to stand at 3.19%.
Canadian bills – Thursday’s optimism over steady yields came in for a setback heading in to the weekend as Canadian bill prices reversed some of the prior day’s surge. The December contract is lower by three basis points but remains toward the top of the weekly range at 98.57 to imply a year-end three-month cash Libor of 1.43%. A weaker tone to credit was backed by a smaller than forecast dip in wholesale sales during April when sales dipped 0.1% or one-third of an anticipated fall. The stall in March data was also revised upward to reflect a less negative performance. Government bond yields added two basis points at the 10-year maturity to stand at 2.94%.
Australian bills – Aussie bills slid by seven basis points as the confusing week drew to a close. Dealers are responding to conflicting signs of economic weakness, bolstered by a stressful European picture while the head at the RBA this week appeared to threaten the market with a resumption of monetary tightening later in the year on account of rising inflation.
Japanese bonds – Japanese yields stood still as the yen strengthened and data pointed to lower consumer activity. The yield at the 10-year bond remained at 1.11% after department store activity for May fell by 2.4% nationwide and a deeper 4.3% in Tokyo in a further sign of economic weakness.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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