Bonds: Gilts underperform despite weak employment data

These were the movements in some of the most widely-followed long-term sovereign bond yields:

US: 1.79% (+0bp)
UK: 1.51% (+3bp)
Germany: 0.15% (-2bp)
France: 0.49% (-2bp)
Spain: 1.53% (+0bp)
Italy: 1.41% (+2bp)
Portugal: 3.14% (+2bp)
Greece: 9.30% (+0bp)
Japan: -0.13% (-1bp)

Sovereign bond markets for the most part tread water on Wednesday, ahead of the European Central Bank’s policy meeting scheduled for the next day.

Gilts underperformed in that environment as the Monetary Policy Committee’s Ian McCafferty served a warning to the markets that his new-found ‘dovishness’ could easily revert back to hawkishness if the factors which have been weighing on inflation lifted.

Weakness in Gilts came despite the latest ONS data, published earlier on Wednesday, revealing that the number of people in unemployment in the UK increased by 21,000 to 1.7m over the three months to February, more than economists had been expecting.

"With employers appearing to have become more cautious in their hiring and the consumer mood darkening, economic growth looks set to slow further in the second quarter, after having likely already eased in the open three months of the year," said Chris Williamson, chief economist at Markit.

Propping up demand for German long-term debt, Berlin sold €3.2bn in 10-year bunds at an average yield of 0.15%, the least in a year.