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Bond Markets

Yields down on stock weakness boon

LONDON: Major government bond yields fell on Monday with fixed-income markets benefiting from a slide in global stock markets.

At one point the benchmark bond for Europe, the 10-year cash Bund hit a new yield low for 2000 of 5.284 percent as investors moved into the relative safety of bonds and out of slipping equities.

"Everything was related to stocks today ... they dropped sharply and bonds got a good bid out of it," said a London-based bond trader.

Analysts said steady oil prices also gave leading government bond markets a better tone ahead of an Opec meeting at the end of the month. Oil prices recently hit fresh nine-year highs raising fears on the inflationary front.

"Rumours have been going around that they may sanction up to 2.5 billion barrells a day extra output which is obviously positive for the inflation outlook in most countries," said Steven Pearson, a research analyst at Halifax Group Treasury.

Prices of government bonds were better bid from the start of trade following weakness in Asian equities, with tech stocks particularly hit.

The slide continued in European markets with Germany's Dax . falling around 3.5 percent and Britain's FTSE 100 .FTSE closing 1.6 percent lower on the day.

This weakness was transmitted to U.S. equity markets with the technology-laced Nasdaq index bearing the brunt, falling 4.1 percent.

Halifax's Pearson said flows into bonds and out of equities were still limited as bond trading activity would remain relatively thin ahead of the Federal Open Market Committee meeting on March 21, in which a hike in interest rates is expected.

Markets are waiting for key U.S. February retail sales figures on Tuesday, followed by producer prices on Thursday and consumer price inflation numbers on Friday.

EURO DEBT

Along with the slide in equities, euro zone debt had earlier garnered some support from a firmer euro after European Central Bank President Wim Duisenberg was quoted as saying a weak currency was not in the European Union's interest.-Reuters