Bond yields still rising

There was a notable rise in government bond yields in the core markets last week. The US led the way with the benchmark 10-year yield climbing by around 17bps to just shy of 2.85%, while equivalent German and UK yields were both about 14bps higher at 0.75% and 1.57% respectively

Bond yields extended their rise on Friday following the release of the latest ‘payrolls’ report in the US. This  was somewhat stronger than the market expected, with employment increasing by 200,000 in January and the annual rate of increase in hourly earnings accelerating to its highest level (2.9%) since 2009

The dollar regained some ground after the payrolls report, albeit it was  lower over the week as a whole, strengthening to around $1.2450 against the euro (from over $1.25) and to $1.41 against sterling (from over $1.42). The pound is under some pressure generally as the Brexit talks resume this weel, with the UK and EU at odds over aspects of a potential transition period, while PM May is facing difficulties from  within her own party

The Bank of England announces its latest policy decision this Thursday. While it is widely expected to leave interest rates unchanged at 0.5%, it may strike a more positive tone on the outlook for the UK economy which could leave the door open for another rate increase relatively soon

Data due today includes services PMIs in the main economies, while Mario Draghi addresses EU Parliament