Bonds: Bundesbank´s Weidmann sounds warning over expanded ECB QE

These were the movements in the most widely-followed 10-year sovereign bond yields:

US: 1.99% (-1bp)

UK: 1.67% (-4bp)

Germany: 0.40% (-4bp)

France: 0.73% (-2bp)

Italy: 1.51% (+2bp)

Spain: 1.62% (+1bp)

Japan: 0.23% (+2bp)

Greece: 9.59% (+13bp)

Portugal: 2.98% (+3bp)

Ten-year Gilts and German Bunds led gains on Thursday amid a much a weaker-than-expected readings for US durable goods orders in the month of December and a warning from Bundesbank chief Jens Weidmann that if the European Central Bank´s bond purchases grow too large then that could theoretically breach the ban on 'illegal' state financing by the ECB.

"If the purchase volume becomes too large, the purchases will have an impact on the secondary market similar to that of direct purchases from the states that are forbidden for us," Weidmann told the Frankfurter Allgemeine Zeitung.

Orders for goods made to last more than three years, or so-called durable goods, fell by 5.1% month-on-month in December (consensus: -0.50%).

The data prompted ex-Monetary Policy Committee member David Blanchflower to say the US Federal Reserve had committed a mistake at its 15 December 2015 meeting when it decided to embark on interest rates rises.

In Blanchflower´s opinion, the Fed underestimated the spill-over effects of the slowdown in China´s economy.

Data out from the Eurozone was not much cheerier, revealing as it did softer sentiment in both the euro area´s industrial and services sectors.

The European Commission´s business climate indicator for January dipped to a reading of 0.29 for January, which was down from the downwardly revised print of 0.39 seen in the month before.

Further afield, sovereign debt issued by some emerging markets, such as Turkey, found a bit of a bid. The yield on the country´s two-year government bonds retreated nine basis points to 11.1%.

To take note of however, Gabriel Sterne, Oxford Economics's Head of Global Macro Research said in a research note sent to clients that the fiscal situation facing oil producing countries was "alarming" if the 1980s were anything to go by.

"Markets are currently pricing in 2-3 notch downgrades for major EM oil and commodity producers. It will end up worse than that unless prices rebound quickly," Sterne said.

Lastly, an afternoon auction of $29bn in seven-year US Treasury notes was met with string demand. The proportion of indirect bidders jumped to 69.4% from 47.1% at the previous sale and the bid-to-cover ratio improved to 2.63 from 2.34.