Bonds: Yields back up amid ECB doubts, US jobs report

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

US: 1.87% (+4bp)

UK: 1.48% (+5bp)

Germany: 0.24% (+7bp)

France: 0.58% (+4bp)

Spain: 1.56% (+2bp)

Italy: 1.46% (+4bp)

Portugal: 3.10% (+10bp)

Japan: -0.04% (-3bp)

Greece: 9.76% (+6bp)

Yields backed up almost across the board at the end of last week following a stronger-than-expected reading on the pace of job creation in the States amid doubts about just how far the European Central Bank would be wiling to go with further policy stimulus when it met next week.

Total non-farm payrolls employment rose 242,000 last month, beating analysts' expectations for a 195,000 increase.

The data prompted Jesse Hurwitz at Barclays to write to clients saying: "We continue to expect the FOMC to keep rates unchanged at its March meeting; however, consistent job growth and further improvement in other macroeconomic data could raise risks of a move as early as April. Our baseline forecast of rate hikes in June and December remains unchanged."

On a similar positive note, the five-year, five-year forward inflation-swap rate, a closely watched measure of inflation expectations followed by the European Central Bank, finished the week higher by 12 basis points to 1.50%, albeit after hitting a record low of 1.36% on 29 February, stoking worries the ECB would miss its medium-term inflation target.

Some market commentary on Friday also referenced a report from Market News International that there was still not a firm consensus within the ECB's governing council, its rate-setting organ, on adding to the central bank's current stimulus at its next meeting.

That may have contributed to the rise observed in yields on German two-year notes, which are more sensitive to ECB policy moves, which edged higher by under one basis point to -0.54%, after having hit a low of -0.586%.

The yield on the benchmark 10-year German bund also ended both the session and the week higher, up by nine basis points in comparison to its close on 26 February, for its first weekly gain since mid-January.

According to Bloomberg calculations, traders had nonetheless fully priced-in a 10 basis point reduction in the ECB's deposit rate to -0.4% at its next meeting, attaching an 86% probability to such an outcome. The odds of a reduction to -0.50% were put at 14%.

Despite all of the above, some market participants continued to be notably downbeat.

In an interview with Bloomberg TV, famed investor Jim Rogers said he was certain the US economy would fall in 2016.

"It's been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have," Rogers said.

In a similar vein, on Thursday HSBC strategists reportedly raised the weighting of cash in their recommended six-month tactical asset allocation by 11 percentage points to 17%, telling clients that "cash is King in a world with debt overhangs".

HSBC slashed its six-month allocation on seven to ten year German and Swedish government bonds to zero from 6% and 3% of its tactical portfolio before, respectively.

"While markets have stabilized following the January sell-off, we find limited reasons to add to equity risk. We prefer to have allocations to high-yield and emerging market debt where risk premia are more appealing," HSBC said.

The broker also noted the recent increased correlation between sovereing debt from the euro area periphery and stockmarkets, a signal, in its opinion, of increased political risk.

On a three-year strategic time horizon HSBC's allocation to cash remained at zero.