Bonds: Bunds underperform after ECB, but Schatz higher

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

US: 2.58% (+2bp)

UK: 1.23% (+1bp)
Germany: 0.43% (+6bp)
Spain: 1.84% (+3bp)
France: 1.08% (+6bp)
Italy: 2.31% (+6bp)
Greece: 7.20% (+1bp)
Portugal: 4.03% (+4bp)
Japan: 0.10% (+2bp)

Gilts outperformed on Thursday, tracking US Treasuries more closely as they usually do, as traders' focus in government debt markets shifted towards the euro area.

As in the US, and the UK sometime ago, at least before Brexit, the gears of monetary policy appaered to be slowly shifting in the Eurozone.

Simply put, the economy appeared to be on a sound footing - political and electoral risk permitting - that the European Central Bank could beging to lay the first bricks of the tunnel leading out of quantitative easing.

Certainly, that was the hope of several economists, with Dr.Howard Archer, chief Eurozone+UK economist at IHS Markit talking to clients of "baby steps" on the part of rate-setters at the European Central Bank to exit their current policy stance.

For his part, Ben May at Oxford Economics wrote: "Although the underlying position of the ECB remains dovish, today’s ECB interest rate press conference signalled the start of a new phase for policy. While President Mario Draghi carefully calibrated his language and avoided saying anything that could be interpreted as outright hawkish, he no longer appeared to be trying to talk down the euro at all costs.

"For now, our view remains that the ECB will stick to its 2017 QE plans. But, absent any major shocks over the coming months, expect the language to gradually become less dovish over the spring and summer."

Worth noting, even as longer-term Bunds gave back substantial ground on Thursday (amid news that French presidential candidate Macron had overtaken his far-right rival Le Pen in another poll),

Ten-year German Bund yields jumped, amid news that French presidential candidate Macron had overtaken his far-right rival Le Pen in another poll, even as two-year German government debt advanced, pushing yields down by one basis point to 0.85% - in a bit of a contradictory move.

On a related note, Capital Economics said: "The 10-year Bund yield rose above 0.4% on Thursday for the first time in more than a month. Nonetheless, we doubt that the sell-off in the German government bond market will build up a head of steam given the prospects for ECB policy and we continue to expect the yield to end this year and next at only 0.5% and 0.75%, respectively."