Bonds: HSBC warns of recession signal from US Treasuries

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

US: 1.75% (+5bp)

UK: 1.40% (+2bp)

Germany: 0.14% (+2bp)

France: 0.49% (+2bp)

Spain: 1.60% (+0bp)

Italy: 1.48% (+0bp)

Portugal: 3.14% (-2bp)

Greece: 7.40% (-2bp)

Japan: -0.10% (+1bp)

Yields mover higher across the board on Monday after a top US central bank official said there were "good arguments" in favour of a Jne rate hike by the Federal Reserve.

In an interview with The Washington Post, the president of the Federal Reserve bank of Richmond, Jeffrey Lacker, said the case for raising rates in June “looked to be pretty strong” and that policymakers were very far from the benchmarks they had to guide them of where rates ought to be at the moment.

Nonetheless, he cautioned “but as I said, I don’t make up my mind until the meeting comes."

Yet not all observers were quite as sanguine.

Steven Major, head of fixed-income research at HSBC said: “the yield curve itself signals that things are not good looking into the future and talking about recession risk.”

He was referring to the fact that the spread between yield on two and ten-year US Treasury notes was just above its lowest level since December 2007.

“I’m worried about how far that curve has gone because as I am more on the steepening camp at the moment, I think this is probably too much too soon, he” added.

Yields on two-year US Treasury notes, which are more sensitive to expectations for Fed policy was four basis points higher to 0.78% as of 20:07 BST.

The above took place against the backdrop of considerably weaker than expected data releases out of China over the weekend which prompted the People's Bank of China to issue a statement saying that monetary policy would continue to be conducted in a prudent manner so as to create an appropriate financial and monetary environment to facilitate steady economic growth.

Rate-setters in Beijing also explained that weak credit data published on 13 May were in part the result of a swap programme put in place to local governments to swap more loans for cheaper municipal debt.

Chinese government borrowing surged in April and a measure of TSF adjusted to take that into account reached a 26-month high in April, Capital Economics's Julian Evans-Pritchard explained in a research note sent to clients on the same day.