Bonds: Yields higher amid IMF warning on Brexit, pound weakness

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

US: 1.70% (-5bp)

UK: 1.38% (-3bp)

Germany: 0.12% (-3bp)

Spain: 1.60% (-2bp)

Italy: 1.47% (-3bp)

France: 0.47% (-4bp)

Japan: -0.11% (+1bp)

Portugal: 3.16% (-8bp)

Greece: 7.42% (+2bp)

Sovereign bonds were higher almost across the board, with longer-dated Gilts registering moderate gains amid weakness in the pound following much stronger-than-expected data on US retail sales and consumer confidence. Longer-dated bonds in the euro area put in a similar performance.

By the close of trading cable and euro/dollar were down by 0.60% to 1.4365 and 1.1309, respectively.

To take note of, during her visit to London International Monetary Fund boss Christine Lagarde warned of the impact that Brexit could be expected to have on UK home and stock prices.

The prevailing 'risk-off' appetite was perhaps summed up best by Bank of America-Merrill Lynch strategists Michael Hartnett Brian Leung.

In a research report sent to clients on 12 May, they pointed out what they termed the "deflationary" cross-asset price action to be seen.

"JGB's, German bunds, Amazon, US utilities, US staples all at all-time highs… [...] We stay cautious: Positioning = "grind higher"; Policy & Profits = "summer of shocks," they said.

BofA also highlighted the "big" $2.3bn ouflow seen from emerging market equity funds - the largest in 16 weeks.

Price action in the US Treasury market following the release of Friday's data was telling.

Friday’s better than expected US economic data initially sent the yield on the policy sensitive two-year US Treasury note up by two basis points to 0.78%, but by the closing bell it was down by one basis point at 0.75%. The yield on the benchmark 10-year Treasury yield was retreating two basis points to 1.73% two hours after the retail sales numbers flashed across traders' screens but ended down by five basis points at 1.70%.

As a result, by the closing bell the so-called 'spread' between yields on two-year and ten-year benchmark US Treasuries was at its lowest since 2007.

Critically perhaps, overnight the usually soft-spoken president of the Federal Reserve bank of Boston, Eric Rosengren, explicitly said he could conceivably support a rate hike at June's Federal Open Market Committee meeting.

By the end of the day, traders in Fed funds futures were left pricing-in 6% odds the Fed would tighten in June, up from 4% before the latest retail sales numbers were published.

Looking out to December, the probability assigned to a hike rose to 58% at one point during the session, up from 53% on Thursday.

To take note of, Greek 10-year bonds cemented their position as 2016's best performers, with their yield falling by 110 basis points to 7.42%.