On Thursday, August 5, at the market of European government bonds continued to form a mixed dynamics quotes. The second consecutive day the bidders do not show unanimity, as volatility in the market is gaining momentum. Morning session was held in anticipation of the announcement of the base rate of the ECB and Bank of England. Investors ad rates did not show too much activity, making nonetheless opted for short-term debt obligations of Germany and France, and long-term British Gilts. No doubt that the ECB's base rate of refinancing will be the same time low of 1%, the players were buying short-term European bonds. However, after the announcement of bids, as well as after the release of macroeconomic statistics for Germany investors changed their focus and began to buy, on the contrary, long-term assets. Although it is recognized that market expectations were confirmed both in terms of rates of the ECB, and in the base rate of the Bank of England. And only in the last hour of trading on the London Stock Exchange the tendency to form a single upward price movements, which resulted in almost all the most liquid debt obligations of governments of the leading European countries had completed the daily price increases.
The nature of trades in the market of European government bonds also formed under the influence of macroeconomic statistics, issued in Germany. According to information provided by the Ministry of economy, the volume of industrial orders in June, more than twice exceeded expectations. This is explained by the fact that companies on the background of global economic recovery have increased investment in the development of their business. Thus, the volume of industrial orders (adjusted for seasonality and inflation) in June this year jumped in comparison with May at 3.2%, while analysts forecast a growth rate at 1.4%. In annual terms, the increase of industrial orders amounted to 24,6%, which also exceeded the expectations of experts, the projected growth rate to 21,6%. First of all, demand is growing for products such traditionally highly developed sectors of the German economy as automobile and industrial equipment. For example, the profit growth in the III-quarter to 7% of the largest German company Siemens AG is mainly due to increased demand for the company's products in Asia and Australia.
Experts note that the volume of exports in June soared by 5.7% due to a jump in 11,3% of the volume of industrial orders from European countries. The volume of industrial orders in the country increased by only 0,3%. Important role in the growth of demand for the products of German industrialists abroad, as is known, has weakening of the euro against the dollar, which contributed to increase the competitiveness of German companies in difficult circumstances recovery of the global economy.
Meanwhile, as already noted, neither the ECB nor the Bank of England did not deem it necessary to change its basic interest rates, leaving them at a record low of 1,0% and 0,5% respectively. Major central banks of Europe still believe the priority task of maintaining the recovery process of the economy. And, although the problem in the euro zone to curb inflation should not be so acute as in Britain, where the threshold of 2% is exceeded, the monetary authorities and the euro zone, and the Foggy Albion feel is still too early to weaken support for the economy increases in base rates of refinancing. President of the Bank of England Mervyn King, said in particular that leaves unchanged the program stimulates the economy of redemption of bonds of 200 billion pounds. However, among the nine members of the Committee on Monetary Policy Bank of England, there have been disagreements. If at the previous meeting of the committee, Andrew Sentance voted to increase the base rate, at the last meeting, contrary to general opinion was made by David Miles, warned his colleagues about the need to be ready to buy a larger amount of debt.
Thus, the demand for debt of Germany, France and the UK during the day significantly increased, resulting in most of the papers completed trades very substantial price increases. Following the fourth trading session of the week yield a two-year Bunds in Germany increased by 1 bp, and a decade - has dropped by 4 bp The spread between them has narrowed from 186 to 181 bp
