Bonds: Gilts, Treasuries end flat amid Fedspeak

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

US: 2.22% (+0bp)

UK: 1.38% (+0bp)
Germany: 0.30% (-1bp)
France: 0.74% (+1bp)
Spain: 1.54% (+9bp)
Italy: 2.03% (+7bp)
Portugal: 3.67% (+18bp)
Greece: 7.39% (+1bp)
Japan: 0.03% (+2bp)

Ten-year Gilts were broadly tracking US Treasury prices on Wednesday, with remarks from one Fedspeaker initially weighing on prices and pushing yields to an intra-day high of 1.44%, but those from another, later in the day, driving a recovery.

Nonetheless, the overarching theme in markets continued to be the longer-term outlook for yields and the risk of protectionist trade policies in the States.

Speaking early in the day, St.Louis Fed president told an audience in London that only a surprise would keep the US central bank from raising rates in December.

Later in the session, another top US official, Neel Kashkari, the head of the Minneapolis Fed, said he wanted to see more progress on inflation, inflation expectations and unemployment before backing a rate hike.

Those two contradictory views saw government bond yields carve out gains, followed by declines, with the latter reinforced by weaker-than-expected data on US factory prices and industrial production.

However, it should be noted that Bullard in fact believed just one more rate rise would be needed in order to bring rates back to "neutral".

Also of interest, Bullard observed that policy changes mooted by the US President-elect in the past elections, such as on immigration and trade, were likely only to have an impact on the macroeconomy in the longer-term.

"Some types of policy changes that were (trailed) in the election would have an impact on the macro-economy only in the longer-term," he said, according to Market News International.

Bullard also pointed out the risk that well-intentioned policies, such as on infrastructure, might fall afoul of a proclivity on for pork barrel spending.

Back in the UK, markets appeared to brush off a weaker than expected reading on the UK labour market for September and October.

More significantly, in remarks prepared for a speech at Manchester University the MPC's Sir Jon Cunliffe said weakness in the pound was making it harder to keep interest rates low.

In any case, at one point in the session Fed funds futures were discounting approximately 94% odds of a December rate increase, up from 68% at the start of November.

Indeed, the upwards pressure on yields was such that even yields on Japanese 10-year JGBs were in positive territory and near their best levels since February.

Eurozone periphery debt was broadly lower.