Bonds: Euro area sovereign debt jumps, Gilts lag behind

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

US: 1.74% (+4bp)

UK: 0.87% (+6bp)
Germany: -0.02% (-1bp)
France: 0.28% (-4bp)
Spain: 1.01% (-3bp)
Italy: 1.34% (-2bp)
Portugal: 3.51% (+6bp)
Greece: 8.27% (0bp)
Japan: -0.06% (0bp)

Gilts underperformed by a wide margin as the selling pressure on the pound resumed and 10-year inflation breakevens continued to rise, having hit their highest since 2014 in the same week.

Acting as a backdrop, expectations for monetary policy tightening Stateside continued to creep higher ahead of the release of the US non-farm payrolls report scheduled for the next day.

At last count, Fed funds futures were assigning a 63.9% probability to a 25 basis point interest rate hike by the US Federal Reserve at its 14 December meeting.

In the euro area, it was exactly the opposite story, with sovereigns generally higher despite the multiple bond auctions which were held throughout the day.

Helping to butress sentiment, in remarks to Market News International European Central Bank vice-president Vitor Constancio dismissed reports earlier in the week that a consensus was building at the monetary authority to taper its asset purchase programme.

"QE will go on until we are satisfied that inflation is truly on the path of our objective, and at least until March of next year", going on to add that March was not necessarily an end-date for QE.

Earlier in the day, the French Treasury auctioned 50-year debt at a record-low average yield of 1.43% while Madrid was able to get off 10-year bonds at 1.07% and five-year instruments at a record low yield of 0.088%.

Furthermore, the minutes of the ECB´s last policy meeting revealed that the Governing Council believed it was critical that the “very substantial degree of monetary support (…) that is embedded in ECB’s staff projections” be maintained.

That, in the opinion of Barclays Research, was indicative of the fact that it was very likely that QE would be extended beyond the current end-date of March 2017.