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LONDON (Thomson Financial) - European government bonds were slightly higher, although movements remained limited as investors' sights are fixed on central bank decisions later this week.
The European Central Bank is widely expected to raise interest rates to 4.00 pct on Wednesday, leaving markets' attention on the accompanying statement and any hints for future rate moves.
"The focus will be if (president) Trichet still indicates that monetary policy remains accomodative and also if he chooses to reiterate that the bank will 'monitor very closely' all developments to price stability," said Stuart Bennett at Calyon.
If the ECB's tone is similar to that in March, another hike will appear likely, although bond prices are unlikely to fall too much in this event as another hike is already priced in, said Bennett.
Today, the only data of note for the euro zone is the April producer prices data, seen rising by 0.4 pct from the previous month, bringing the annual rate down to 2.3 pct from 2.7 pct in March. This should be due to lower oil prices compared with last year.
In the UK, gilts also opened a bit higher, in line with global flows, although technical problems at the exchange caused the market for cash gilts to close down until further notice.
With little in the way of data, the Bank of England policy decision on Thursday will be the focus.
The BoE is widely expected to remain on hold this month, although financial markets are betting on a hike sometime in coming months.
"An interest rate hike in June is highly unlikely but May's Inflation Report and minutes indicate that further tightening will be required," said Geoff Dicks, economist at the Royal Bank of Scotland.
The minutes to the last meeting, when the key policy rate was raised by a quarter point to its current six-year high of 5.50 pct, showed nine of ten rate-setters voted for a hike, while the possibility of a 50-point move was also considered.
Because financial markets are pricing in about a 20 pct probability of a hike, a no change outcome would likely provide some support to gilts in the short-term, analysts said.
LONDON (Thomson Financial) - European government bonds were slightly higher, although movements remained limited as investors' sights are fixed on central bank decisions later this week.
The European Central Bank is widely expected to raise interest rates to 4.00 pct on Wednesday, leaving markets' attention on the accompanying statement and any hints for future rate moves.
"The focus will be if (president) Trichet still indicates that monetary policy remains accomodative and also if he chooses to reiterate that the bank will 'monitor very closely' all developments to price stability," said Stuart Bennett at Calyon.
If the ECB's tone is similar to that in March, another hike will appear likely, although bond prices are unlikely to fall too much in this event as another hike is already priced in, said Bennett.
Today, the only data of note for the euro zone is the April producer prices data, seen rising by 0.4 pct from the previous month, bringing the annual rate down to 2.3 pct from 2.7 pct in March. This should be due to lower oil prices compared with last year.
In the UK, gilts also opened a bit higher, in line with global flows, although technical problems at the exchange caused the market for cash gilts to close down until further notice.
With little in the way of data, the Bank of England policy decision on Thursday will be the focus.
The BoE is widely expected to remain on hold this month, although financial markets are betting on a hike sometime in coming months.
"An interest rate hike in June is highly unlikely but May's Inflation Report and minutes indicate that further tightening will be required," said Geoff Dicks, economist at the Royal Bank of Scotland.
The minutes to the last meeting, when the key policy rate was raised by a quarter point to its current six-year high of 5.50 pct, showed nine of ten rate-setters voted for a hike, while the possibility of a 50-point move was also considered.
Because financial markets are pricing in about a 20 pct probability of a hike, a no change outcome would likely provide some support to gilts in the short-term, analysts said.
At Yield Change on
0935 BST pct previous close
June euribor future (Liffe) 95.84 unchanged
Sept euribor future (Liffe) 95.63 up 0.01
GERMANY
June bund future (Eurex) 111.81 up 0.10
3.75 pct Jan 2017 govt bond 94.69 4.44 up 0.07
FRANCE
3.75 pct Apr 2017 govt bond 94.21 4.49 up 0.10
ITALY
4.00 pct Feb 2017 govt bond 95.48 4.64 up 0.12
UK
June gilt future N/A N/A
4.00 pct Sept 2016 govt bond 90.73 5.27 up 0.07
June short sterling future N/A N/A
September short sterling future N/A N/
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