British gilts – European stocks at one point in the morning staged a substantial rebound before investors woke up to just how deep the problems are especially without the antidote of growth. The selling resumed and by lunchtime in the U.S. shows little sign of recovery. Gilt yields in Britain were unchanged with dealers torn between the impact of the U.S. downgrade, which impacts global growth, and that of the ECB’s sojourn into the secondary market for Spanish and Italian debt. The 10-year gilt stands at 2.69% while a gain for short sterling futures sent the implied yield lower by six basis points along the curve.
Australian bills – Bill futures traded in another sizeable range on Monday as investors responded to a fifth day of selling across stock markets around the Asia-Pacific region. Last week investors fast-concluded from the crumbs falling from the table at the central bank that it was more concerned about U.S. and European debt crisis that could yet end in a tailspin than it was about domestic inflation. Implied yields were already reflecting an about-face in the direction of short-term monetary policy before some profit-taking set in for Aussie bills. The 10-year government bond yield eased again to close at 4.52%, which compares to a short-rate set by the Bank at 4.75%. Weighing on sentiment on Monday was a decline in the number of jobs on offer in Australian according to an ANZ index of job advertisements for July. Its index declined by 0.7% having risen by 3.8% in June.
Japanese bonds – Government bond yields edged one basis point ahead to 1.003% on Monday as a strengthening of the yen induced further promises of intervention from Finance Minster Noda.
Canadian bills –Canadian bill futures have surged by a full one-quarter of a percentage point with dealers flattening out the yield curve as the prospect of monetary tightening follows Elvis. Bills of acceptance futures expiring in December saw the implied yield slide by 24 pips to 0.91% further eroding the distance with three-month Eurodollars. The spread has narrowed by one-percent over the last three months and halved in the past couple of weeks. Government bonds marched in lockstep with treasury yields sliding by 10-pips to 2.53%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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