Bonds: US jobs report underpins rise in yields

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

US: 2.26% (+4bp)
UK: 1.18% (+3bp)
Germany: 0.47% (+2bp)
France: 0.75% (+3bp)
Italy: 2.02% (+3bp)
Spain: 1.48% (+3bp)
Portugal: 2.87% (+1bp)
Greece: 5.46% (-6bp)
Japan: -.007% (-0bp)

Better than expected employment data out in the States underpinned gains in yields right around the globe at the end of the week.

The US economy generated another 209,000 jobs in July, the Department of Labor reported on Friday, which exceeded the 183,000 increase which economists had projected.

Unemployment also fell, with the jobless rate down by a tenth of a percentage point to 4.3% and average hourly earnings rising by 0.3% month-on-month, both as expected.

Reacting to the data, Michael Gapen from Barclays Research told clients: "It has been our long-held view that employment gains would remain sufficient to keep the unemployment rate in a downward trend, as has been the case in prior expansions. The July data are consistent with this view."

On a more critical note, in remarks to Bloomberg TV, Mohammed El-Erian pointed out how salary growth in the US had been too low, despite gains in employment.

He called on the White House to take action on infrastructure, tax reform and debt, saying the Trump administration could not rely on the central bank.

In the Gilts market meanwhile, the focus was on an interview by the Monetary Policy Committee's Ben Broadbent with BBC Radio.

Broadbent said the "maximum rate of pain" for British consumer from gains in CPI had now passed.

Furthermore, with the economy still expanding and joblessness at multidecade lows the UK may be able to handle a hike in Bank Rate "a little bit better".

"There may be some possibility for interest rates to go up a little,” he said.

Back in the euro area, German manufacturing orders jumped by 1.0% month-on-month in June, according to the Federal Office of Statistics, more than doubling economists' forecasts for a rise of 0.4%.

However, economists at Barclays pointed out that: "While June revealed stronger-than-expected factory orders, Q2 showed an overall expansion of only 0.8% q/q due to a sizeable contraction in April.

"[...] Overall, we believe that the moderate quarterly outturn is in line with our real GDP forecast of 0.6% in Q2, which we then expect to moderate to 0.5% in Q3 and 0.4% in Q4 17."