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Belgian bonds stayoff session lows

Belgian bonds close weaker

BRUSSELS: Weaker Belgian OLOs stabilised on Thursday afternoon above session lows, briefly dipping then recovering on news of a stronger-than-expected rise in the U.S. March producer price index.

The PPI rose 0.5 percent overall, above expectations of a 0.4 percent climb. Excluding food and energy prices, though, the index rose 0.1 percent, slightly less than expected. Weekly jobless claims fell more than expected to 347,000.

"We saw a bit of selling just after the figures but now we're higher than we were before," one trader said, adding the market was especially well bid up to five-year maturities.

By 1330 GMT June bond futures were 14 bps lower at 114.72 after a 114.56 low. The benchmark 2006 OLO yielded 6.73 percent, up from the previous close of 6.70. But its premium over Bunds narrowed yet further to 26 bps from 29 late Wednesday.

Many dealers said that while the spread was historically low, there was no reason why it could not go down to 25 bps and stay there for some time.

"It does seem low, but the French spread over Germany is even lower and seems much less logical," one dealer said.

In the money markets activity was subdued, with three-month T-bills unchanged at 3.28/30 percent.

One-week repos were steady at 3.29/32 percent, around the Belgian National Bank's central rate of 3.30 percent, indicating the market does not foresee a change in the central rate soon.

Earlier on Thursday the Bank of France lowered its intervention rate to 3.70 percent from 3.80 percent in line with market expectations.

The Belgian franc was little changed to the mark at 20.5380/95.-Reuter