Bonds: Portugal needs to do more, German finmin warns

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

US: 1.75% (+9bp)

UK: 1.41% (+11bp)

Germany: 0.26% (+7bp)

France: 0.66% (+6bp)

Italy: 1.65% (-6bp)

Spain: 1.74% (-4bp)

Portugal: 3.73% (-37bp)

Japan: 0.09% (+7bp)

Greece: 11.52% (-6bp)

Investors took profits at the end of last week after pushing the yield on long-term Gilts to a record low in the previous session, despite a stark warning from Germany's finance minister on the outlook for Portugal's public finances.

Risk-apettite ahead of the long-weekend Stateside was bolstered by sharp gains in bank shares on both sides of the Atlantic, as JP Morgan boss Jamie Dimon scooped up $26m in shares of the lender and Commerzbank and Deutsche Bank weighed in with better than expected results and news of a debt buy-back, respectively.

In that same vein, speaking to Bloomberg from Sydney, Marc Kiesel, Pimco’s global head of corporate bond portfolio management, said lender were well-capitalised and bank notes would ultimately gain as investors sought out higher yields.

Nonetheless, investors were left reeling by the heightened volatility in markets and were said to be expectant ahead of a speech by European Central Bank Mario Draghi, scheduled for the following Monday.

Citing conversations with policymakers, Reuters reported there was "firm support" within the governing council for a deposit rate cut at the ECB's next meeting, in March.

However, "appetite for more radical action is still limited" the newswire said.

Output in the UK's construction sector increased 1.5% month-on-month in December (consensus: 2.0%).

"The decline in construction in Q4 reflects both the downturn in the industrial sector and the squeeze on public construction projects. [...] Looking ahead, we expect the intensifying fiscal consolidation and the downturn in the manufacturing sector to continue to hold the construction sector back," Pantheon Macroeconomics said in reaction to the above figures..

Portuguese bonds recovered much of their losses on the previous day despite a stark warning from Germany's finance minister.

Speaking after a meeting of EU finance ministers in Brussels, Wolfgang Schaeuble said Portugal did not have enough "resilience".

“Portugal must do everything to counter uncertainty in financial markets,” he said.