G7 BOND MARKET ENDED IN MIX NOTE

USA

The yield on the benchmark 10-year Treasury note edged down to a one-week low of 1.56% on Friday, after touching a 3-week high of 1.649% early in the week, as traders remain concerned over persistent inflationary pressures and supply constraints although strong economic data and solid corporate results point to a resilient recovery. Investors also start to worry over full lockdowns in Europe after Austria reintroduced it and Germany could follow. On Thursday, a $14 billion auction of 10-Year TIPS was sold at a high yield of -1.145%, awarding almost 60% of bids at the high rate. There are no major economic releases scheduled for Friday but next week all eyes will turn to FOMC minutes for any further details on the Fed's tightening plans.

UK

The yield on UK 10-year gilts eased to 0.88% from a 2-week high of near 1% earlier in the week, as bond investors remain cautious despite growing bets that the Bank of England would raise rates soon after earlier in the month the central bank surprised markets by keeping rates steady. Brexit uncertainty is also weighing on the market after the British government threatened to activate emergency measures under Article 16 of the Northern Ireland protocol, which could trigger the EU to impose tariffs in response. On the economic data front, recent figures showed UK’s inflation rate climbed to a decade high and the UK labour market remained resilient even after the end of the furlough scheme.

JAPAN

The yield on the benchmark Japan 10-year JGB slipped to 0.07% on Friday, as traders took a breather amid a pandemic-induced global bond rally, after yields hit a two-week high of 0.081% in the prior session. At the same time, concerns about the government’s record $490 billion spending bill capped some of the downward momentum, with traders expecting an increase in bond issuance. The government said it expects to use leftover cash from the previous stimulus package and some reserves to help fund the bill, which includes handouts of $880 in cash and vouchers to under 18-year olds and over $17 billion in funds for struggling families.

GERMANY

Germany's benchmark Bund yield dropped below -0.3%, the lowest in near eight weeks as the European Central Bank is expected to take longer than most central banks to normalize monetary policy. On Friday, ECB president Christine Lagarde reinforced views that inflation pressures in the eurozone will fade and that tightening monetary policy could choke off the eurozone’s recovery. Meanwhile, fears surrounding a fourth wave of the pandemic across the continent dented sentiment after Germany and Greece followed Czechia, Austria and the Netherlands by imposing restrictions as infections resurged.

FRANCE

The yield on the French 10-year Government Bond dropped to around 0.01%, the lowest since 0.006% touched on September 22nd, amid expectation that the European Central Bank will take longer than other major central banks to normalize monetary policy. On Friday, ECB president Christine Lagarde reinforced the stance that recent inflation spikes are expected to ease and that conditions to raise rates are unlikely to be satisfied by next year. Meanwhile, the OECD has improved France’s growth forecast for this year to 6.8% (from 6.3%) and next year's to 4.2% (from 4%), but warned that public finances are severely strained and that spending must gradually ease.

CANADA

The yield on the Canadian 10-year government bond traded around 1.71% in mid-November, near to a 30-month high of 1.766% hit on November 1st, tracking a rebound in global government bond yields amid hotter-than-expected data for retail sales and inflation in the US. Both data geared up investors to bet in a sooner rate hike by the central banks. Retail trade in the US rose 1.7% in October over September, following an upwardly revised 0.8% gain in the prior period and beating market forecasts of 1.4% as higher prices leveraged stores' receipts and consumer spending gained a boost from an early holiday shopping season, supporting optimism about the economic recovery. At the same time, consumer inflation data showed that prices in the US rose in October the most since 1990 triggering a broad sentiment that inflation might not be transitory as previously thought.

ITALY

Italy’s 10-year government bond yield fell to around 0.9%, inching closer to the 3-week low of 0.854% on November 9th, amid expectations that the European Central Bank will not tighten monetary policy in the near future. ECB President Lagarde insisted that the conditions to raise rates are very unlikely to be satisfied next year, and reinstated that inflation pressure is expected to fade. Italian consumer inflation from October stands at a 9-year high, but unemployment levels are in a downward momentum. Meanwhile, covid infections continue to rise across the country, bringing political tension over the ideal restrictions on unvaccinated individuals to curb further cases.