By George Matlock
LONDON, May 6 (Reuters) - Euro zone government bonds rose on Tuesday after weaker UK services sector data and a larger-than- expected loss reported by the largest provider of U.S. home financing.
Bonds started the session weighed down ahead of key interest rate meetings later this week from the Bank of England and European Central Bank.
But weaker-than-expected Purchasing Managers' Index data sent Bunds chasing UK gilts higher.
Later, Fannie Mae <FNM.N> posted a net loss, after payment of preferred dividends, of $2.51 billion, or $2.57 per share, for the first quarter. That comes on the heels of a record $3.6 billion loss in the fourth quarter and marks the third successive quarterly loss for the home financing giant.
Wall Street analysts, on average, expected the company to report a loss of $1.48 per share excluding any special items, according to Reuters Estimates.
The U.S. housing market has been in the doldrums after a subprime mortgage market crisis which began last August.
"The 800,000 lots in the Bund future volumes suggest many investors are either on holiday or on the sidelines awaiting the ECB rate decision on Thursday," said a trader in London.
At 1520 GMT, the June Bund future <FGBLM8> was 23 ticks higher at 114.00. Two-year Schatz yields <EU2YT=RR> were 4.5 basis points lower at 3.763 percent, while 10-year Bund yields <EU10YT=RR> were 0.3 basis points higher at 4.13 percent.
"People have come back after the long weekend and they're not too keen to push things materially one way or the other ahead of the ECB," said Nomura rate strategist Sean Maloney.
Most euro zone markets were closed on May 1 for a holiday and investors made a long weekend of it, while UK markets were shut for a Bank Holiday on Monday.
Euribor interest rate futures <0#FEI:> were 4-5 basis points higher across the 2008 strip.
Inflation worries are expected to keep ECB rates on hold at 4.0 percent on Thursday with the market hoping comments from ECB President Jean-Claude Trichet will restore clarity after recent conflicting comments from policy makers. [ECB/INT]
Preliminary figures last week showed euro zone inflation dipped back to 3.3 percent in April after hitting a record high of 3.6 percent in March.
But with recent oil price spikes still to be factored in, it may not be out of the woods yet, with Trichet on Monday saying spiralling oil and food costs meant inflation risks remained "significant".
Crude oil <CLc1> steadied on Tuesday but held near $120 a barrel.
The Bank of England is also expected to keep rates on hold on Thursday with any cut seen more likely in June. [BOE/INT]
European two-year swap rates <EURAB6E2Y=> were 4.52 percent compared with 4.578 percent on Monday.
Ten-year European swap rates <EURAB6E10Y=> were 4.557 percent compared with 4.603 percent on Monday.
European bourses were lower as Swiss bank UBS <UBSN.VX> posted a large first-quarter loss.
In supply, Austria issued 550 million euros of its 4.35 percent March 2019 bond. The bid-to-cover ratio was slightly lower than at the previous sale on April 1, at 2.54 versus 2.70.
Meanwhile, Greece opened and within the day closed an order book for its new 10-year bond. An official source said the book size was more than 7 billion euros. One of the lead managers added that Greece planned to sell 4 billion euros of the paper, to yield 55 basis points more then German Bunds. More [ID:nL06354037]. (Editing by Stephen Nisbet) ((george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BONDS EURO
--------------MARKET SNAPSHOT AT 1540 GMT------------------
Futures continuous contract basis
FUTURES CASH YIELD
THREE MONTH EURO 95.260 (+0.040) 3.978 (+0.038)
TWO-YEAR SCHATZ 103.82 (+0.12) 3.774 (-0.033)
10-YEAR BUND 114.00 (+0.23) 4.131 (-0.030)
30-YEAR BUND 4.603 (-0.017)
Current levels versus prior European close
-----------------------------------------------------------
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LONDON, May 6 (Reuters) - Euro zone government bond futures hit session highs on Tuesday after Fannie Mae, the largest provider of U.S. home financing, reported its third successive quarterly loss in the three months to March.
At 1147 GMT the June Bund future <FGBLc1> was up 26 ticks on the day at 114.03 - a session high - compared with 113.83 just ahead of Fannie Mae's earnings.
The two-year Schatz yield <EU2YT=RR> was down 3.3 basis points at 3.774 percent.
Fannie Mae <FNM.N> posted a net loss, after payment of preferred dividends, of $2.51 billion, or $2.57 per share, for the first quarter. That comes on the heels of a record $3.6 billion loss in the fourth quarter.
Wall Street analysts, on average, expected the company to report a loss of $1.48 per share excluding any special items, according to Reuters Estimates. The 10 estimates ranged from a profit of 12 cents per share to a loss of $2.40 per share.
The U.S. housing market has been dogged after a subprime mortgage market crisis which began last August.
((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BUNDS
LONDON, May 6 (Reuters) - Euro zone government bonds erased losses on Tuesday, tracking gilts higher in the wake of weaker-than-expected UK service sector data and as European shares slipped further into the red.
At 0854 GMT June Bund futures <FGBLM8> were flat on the day at 113.77, close to session highs. Two-year yields <EU2YT=RR> were little changed at 3.81 percent and 10-year yields <EU10YT=RR> were a basis point lower at 4.15 percent.
Euro zone interest rate futures <0#FEI:> also pushed higher, sending implied yields lower.
"The UK PMI gave us a little boost and stocks are down a bit more but it's very thin volume, we're basically following gilts higher," said a trader.
Growth in Britain's dominant services sector all but dried up in April, sliding to a five-year low, as companies struggled against the sharpest rate of cost inflation on record, a survey showed on Tuesday [ID:nL05669211].
Meanwhile, European stocks extended their losses, led by Swiss lender UBS <UBSN.VX> after it unveiled big job cuts. ((Reporting by Kirsten Donovan; kirsten.donovan.reuters.com@reuters.net, +44 20 7542 8675))
By Kirsten Donovan
LONDON, May 6 (Reuters) - Euro zone government bonds dipped on Tuesday with trading likely to be subdued before interest rate decisions in the euro zone and UK on Thursday.
Trading was picking up after the week got off to a slow start due to a UK holiday on Monday. Japanese markets were also closed overnight.
"We're following the United States a bit lower but there's been very little overnight with Japan closed. It really is all about the European Central Bank and Bank of England rate decisions this week," said a trader.
Bunds rebounded and pared some of their losses after Friday's U.S. employment data in illiquid trade on Monday but surprisingly strong U.S. services sector data kept a lid on the rally.
At 0718 GMT, the June Bund future <FGBLM8> was 16 ticks lower at 113.61. Two-year euro zone bond yields <EU2YT=RR> were 2.4 basis points higher at 3.832 percent, with 10-year yields <EU10YT=RR> a basis point higher at 4.171 percent.
"People have come back after the long weekend and they're not to keen to push things materially one way or the other ahead of the ECB," said Nomura rate strategist Sean Maloney.
Shorter-term rate futures were little changed after falling on Monday as surging oil prices and comments from ECB President Jean-Claude Trichet underlined the view that euro zone rate cuts aren't on the cards yet.
Euribor interest rate futures <0#FEI:> were flat to half a tick higher across the strip to the end of 2009.
Inflation worries are expected to keep ECB rates on hold at 4.0 percent on Thursday with the market hoping comments from Trichet will restore clarity after recent conflicting comments from policy makers. [ECB/INT]
Preliminary figures last week showed euro zone inflation dipped back to 3.3 percent after hitting a record high of 3.6 percent in March.
But with recent oil price spikes still to be factored in, it may not be out of the woods yet, with Trichet on Monday saying spiralling oil and food costs meant inflation risks remained "significant".
Crude oil <CLc1> steadied on Tuesday but held near $120 a barrel.
The Bank of England is also expected to keep rates on hold on Thursday with any cut seen more likely in June. [BOE/INT]
European services PMIs are released on Tuesday with the euro zone number due at 0800 GMT, followed by producer price inflation data at 0900 GMT. [PMI-M]
"We've had preliminary figures so there's probably not going to be a big surprise here with the PMIs but what may be interesting is the country breakdown," said Nomura's Maloney. "If we keep seeing numbers from for example Spain and Italy diverging away from the stronger economies such as Germany, that could be a big source of debate at the ECB going forward."
European shares opened lower as Swiss bank UBS <UBSN.VX> posted a large first-quarter loss and announced job cuts. (For details please double click on [ID:nL068142])
Austria will kick-off this week's supply with a 550 million euro tap of its 4.35 percent March 2019 bond although the main event will be Germany's five billion euro reopening of its April 2013 OBL on Wednesday. (Reporting by Kirsten Donovan; Editing by Ruth Pitchford)
((kirsten.donovan.reuters.com@reuters.net, +44 20 7542 8675; editing by David Stamp))
--------------MARKET SNAPSHOT AT 0723 GMT ------------------
Futures continuous contract basis
FUTURES CASH YIELD
THREE MONTH EURO 95.230 (+0.010) 3.978 (+0.038)
TWO-YEAR SCHATZ 103.70 (-0.01) 3.832 (+0.024)
10-YEAR BUND 113.58 (-0.19) 4.175 (+0.014)
30-YEAR BUND 4.636 (+0.016)
Current levels versus prior European close
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Euro debt market [GVD/EUR] Debt technicals [TECH/DBT]
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Euro benchmark curve <0#EUBMK=>
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LONDON, May 6 (Reuters) - Euro zone government bonds opened lower on Tuesday with trading likely to be capped before interest rate decisions in the euro zone and UK on Thursday.
At 0606 GMT, the June Bund future <FGBLM8> was 11 ticks lower at 113.66. Two-year euro zone bond yields <EU2YT=RR> were 1.8 basis points higher at 3.826 percent, with 10-year yields <EU10YT=RR> just under half a basis point higher at 4.165 percent.
The week got off to a slow start due to a UK holiday on Monday and Japanese markets were also closed overnight.
"We're following the U.S. a bit lower but there's been very little overnight with Japan closed. It really is all about the European Central Bank and Bank of England rate decisions this week," said a trader.
Bunds rebounded and pared some of their losses after Friday's U.S. employment data in illiquid trade on Monday but surprisingly strong U.S. services sector data kept a lid on the rally.
Shorter-term rate futures were flat to slightly higher after falling on Monday as surging oil prices and comments from ECB President Jean-Claude Trichet underlined the view that euro zone rate cuts aren't on the cards yet.
Crude oil <CLc1> steadied on Tuesday but held near $120 a barrel.
European shares are set for a mixed start amid corporate earnings led by Swiss bank UBS <UBSN.VX>, which posted a large first-quarter loss and announced job cuts. (For details please double click on nL06197658)
European services PMIs are scheduled for release on Tuesday with the euro zone number due at 0800 GMT, followed by producer price inflation data at 0900 GMT. ((Reporting by Kirsten Donovan; kirsten.donovan.reuters.com@reuters.net, +44 20 7542 8675; editing by David Stamp))
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