LONDON (ShareCast) - Bond fell as worries grew that inflation is becoming the key consideration of central banks following the decision by the Bank of England and European Central Banks to leave rates on hold.
ECB president Jean -Claude Trichet
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added to the unease by commenting that risks to price stability have "increased further.''
"It's not excluded that, after having carefully examined the situation, that we could decide to move our rates by a small amount at our next meeting,'' Trichet said after the decision to leave eurozone rates at 4%.
European bonds slumped on the comments with the 10-year bund adding 8 basis points to 4.46% and short yields shooting up to 4.64%.
Gilts also suffered as the Bank of England left UK rates at 5% despite calls from industry to cut them to ease pressure on corporate profits. Ten-year gilt yields jumped by nearly 10 basis points to 5.04%.
US treasuries also fell back with the 10-year note's yield increased 4 basis points to 4.02%. Yesterday Federal Reserve chief Ben Bernanke said the inflation outlook is a "significant concern.''
The US Labor Department reported that applications for unemployment benefits fell by 18,000 to 357,000 last week, the lowest level since mid-April
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