Tuesday Interest Rate Brief

Andrew Wilkinson submits: Global bond yields are standing easy ahead of the April FOMC meeting, which concludes its two-day meeting Wednesday with the first-ever press conference to be conducted by Ben Bernanke. And while U.S. bonds are leading major government yields lower, peripheral bond prices in Europe are once again in free-fall as investors grow increasingly concerned that debt restructuring is a near-certainty.

Andrew Wilkinson submits: The front end of the Australian yield curve took a bashing after a surprise decision by the central bank to tighten its monetary stance for the first time in six months. Short-dated bill prices crashed by 12 basis points as dealers rushed to lock-in borrowing costs.

An earlier rally for fixed income fuelled by weak growth and output data faded as equity investors proved a resilient bunch on Tuesday. There were blatant signs of worry sounding from central bankers in Britain and Australia as they warned about the potential for dislocation stemming from fragile financial markets.

Andrew Wilkinson submits: An anxious moment along the road to provide Greece with its next rescue payment and a higher than hoped for reading of U.S. inflation held back a rally for bonds. However, should risk aversion continue its rise before the weekend there seems little will stand in the path of a further swoon in yields to their lowest this year as evidence of a growth slowdown continues to show up.

Andrew Wilkinson submits: Fixed income trading got off to a blistering start in a week where news events are likely to determine the fortunes for bond prices for the remainder of 2010. The first in a series of critical surveys showed the Chinese manufacturing expansion continued and is likely to be followed by more of the same around the world extending also to the service sector.

Andrew Wilkinson submits: A strong bout of data meant bond traders were on the defensive on Tuesday with yields also pivoting around the price of crude oil, which in New York is once again pressing on the triple-digit mark. Yields are generally firmer in response to a series of purchasing managers’ surveys indicative of yet healthy recovery.

Andrew Wilkinson submits: Bond markets shrugged off early morning weakness reminiscent of that morning-after feeling. The 13 basis point slide in the benchmark treasury yield on Tuesday was the largest in eight months and investors were quick to bank profits on Wednesday wondering whether the move was simply too much in response to heightened geopolitical worries.

Andrew Wilkinson submits: Bond investors had emotions tugged both ways as a volatile Libyan situation drove safe-haven demand skyrocketing before hawkish commentary from an ECB member later dampened enthusiasm for government paper. Yields continue to remain towards the day’s lowest point, however, as enthusiasm for a stock market recovery becomes a distant memory.