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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Rarebird who wrote (51684)	1/27/2006 11:06:02 AM
From: shades	Respond to of 110194

=DJ European Govt Bonds Lower On US Housing Data . By Nicholas Winning Of DOW JONES NEWSWIRES LONDON (Dow Jones)--European government bonds were weaker late Friday, after stronger-than-expected U.S. housing data robbed the market of support generated earlier from weak U.S. growth numbers, analysts said. Bunds and gilts slumped, tacking a reversal in Treasurys, after the U.S. Commerce Department released data showing U.S. new home sales took an unexpected upward turn in December. They had rallied earlier on below-consensus gross domestic product figures for the world's biggest economy, although analysts had been wary of how long the gains would last, with most expecting the European Central Bank to raise interest rates again in coming months. "With the...ECB set to tighten in March and the (European) growth picture improving, bunds could well test their recent lows," said Nick Stamenkovic, a bond strategist at RIA Capital Markets in Edinburgh, Scotland. "But if they did, that could provide a good buying opportunity because I don't buy the (economic) recovery story in Europe just yet," he said. By 1530 GMT, the March bund future on Eurex was 0.05 lower at 120.21, after earlier hitting levels not seen since Nov. 30. The benchmark 10-year bund was 0.06 lower at 100.04, to yield 3.49%. Meanwhile, the March gilt future on Liffe was down 0.20 at 113.65. The 4.75% gilt due 2015 was 0.50 lower at 104.34, to yield 4.20%, as it felt the impact of heavy losses in longer-dated gilts. Bunds had got off to a wobbly start after German market research firm GfK said consumers in the euro zone's biggest economy were more optimistic about their economic prospects than the market was expecting. GfK's forward-looking consumer climate indicator for February surged to 4.6 points and the group also revised its January reading to 4.0 from an initial estimate of 3.8. The market expected a 4.0 reading for February, according to a Dow Jones Newswires survey of economists. But the market received support later on in the morning from a weaker-than-expected reading for euro-zone money supply growth, even though it remained above the ECB's 4.5% level it considers in line with price stability. The ECB said the annual rate of growth for M3, the broadest measure of money available in the euro zone, eased to 7.3% from 7.6% in November. The three-month moving average for M3 dropped to 7.6% for the October-December period from 8.0% for September-November. Economists expected an annual rate of 7.4% and a 7.7% rise in the three-month average, according to a Dow Jones Newswires survey. Next week, the Federal Reserve rate-setting meeting Tuesday will be key to the bond market outlook. As usual the language of the Fed statement will be scoured for clues about when U.S. rates might peak. The word "measured," for example, has become a signpost which analysts believe points to more gradual monetary tightening. "Should 'measured' stay (in the statement), that would effectively guarantee a further 25 basis point hike in March and start to raise the odds of a May hike too," HSBC said in a research note. Then Thursday the ECB sets its main interest rates. Most analysts expect the central bank to leave the repo rate unchanged at 2.25%, but the market will wait to see if bank president Jean-Claude Trichet indicates what the bank may do at its March meting. "The (money supply) data support the case for an ECB 25 basis point rate hike in March," Bank of America said in a research note. "We expect the ECB to drop some hawkish hints next Thursday." -By Nicholas Winning, Dow Jones Newswires; +44-20-7842-9346; nick.winning@dowjones.com