Bond yields rise further

The euro is not much changed against the dollar and sterling this morning trading close to $1.0750 and just under 87p respectively, while the pound is still trading in and around $1.2350 against the US currency.

Government bond yields have risen again – benchmark US 10-year yields are now trading at 3.80% while equivalent German yields have increased to around 2.54%, with UK 10-yields, which have spiked sharply higher this week, now up to almost 4.40%.

ECB’s Knot says whenever the peak in Euro area interest rates is reached, they will have to remain high for some period of time to get inflation back to target.

Talks on the US “debt ceiling” appear to be making some progress with the outline of a deal beginning to emerge.

Retail sales in the UK rose by 0.5% in volume terms in April, partially reversing March’s fall of more than 1%. Over the 3 months to April sales volumes were up 0.8% on the November-December period, the fastest pace of growth since the 3 months to August 2021.

Economic data due today include PCE inflation for April in the US – the consensus expects the headline and core rates of inflation to be little changed from March at 4.3% and 4.6% respectively.