Bonds: Spain contains rise in debt-to-GDP ratio
Sovereign bond yields backed up across the board on Tuesday, with Gilts as the main exception, ahead of the US central bank's policy meeting and despite weaker than expected figures on retail sales in the States which led several top investment banks to trim their projections for economic growth in the first quarter.
Excluding sales of automobiles and gasoline, what analysts refer to as the 'control-group' which is included in the Department of Commerce's quarterly estimates of GDP growth, retail sales were flat month-on-month (consensus: 0.2%) while the previous month's rise was revised lower by four tenth of a percentage point to 0.2%.
That led analysts at Pantheon Macroeconomics to revise down their forecast for first quarter consumption Stateside
from 3.0% to 2.5%.
Nonetheless, the think-tank said it remained to be seen whether spending had simply taken a hit from the volatility in capital markets at the start of the year, in which case a bounce in spending come March was possible.
Bond yields on the Eurozone's periphery rose on the back of profit-taking after an ECB-induced rally over the previous two session, although some market commentary referenced the looming political risks in the likes of Spain and worries about Lisbon's fiscal position.
On a more positive note, Spain's central bank said the country's debt ratio as a proportion of gross domestic product fell to 99.0% of GDP in the last three months of last year, from 99.3% in the same quarter of 2014, below its target for 99.7% and an estimate of 100.7% from the European Commission.
“The main take away is that the surge in public debt we’ve seen since 2007 in public debt has been contained,” Oxford Economics said in a research report sent to clients.
The yield on Spanish 10-year government debt rose by five basis points to 1.52%, while those on similarly-dated Italian bonds jumped by six basis points to 1.37%.
German 10-year Bunds fared even worse, pushing their own yield up by four basis points to 0.32%.
Yields on Japanese JGBs also participated in the downdraft, pushing the yield on Tokyo's 10-year debt higher by three basis points to -0.01%.
Similarly-dated Gilts edged higher pushing their yields down by one basis point to 1.54%.