US government bonds steady as European shares hit new highs

US government bonds steadied on Friday after a rally in the previous session, while stock bourses in Europe climbed to new peaks as investors weighed data from the world’s two biggest economies.

The yield on the benchmark 10-year Treasury bond was flat at 1.583 per cent. The equivalent German bond yield added 0.02 percentage points to minus 0.28 per cent. Bond yields move inversely to prices.

US retail sales rose in March by the most in 10 months while the number of Americans filing for new unemployment benefits fell to a post-pandemic low of 576,000 last week, figures published on Thursday showed. But Treasuries, whose fixed interest payments are eroded by inflation, were snapped up after the data were released, confounding analysts who normally would have expected the upbeat data to be bearish.

The government bond market may be receiving a temporary boost, said Lombard Odier chief economist Samy Chaar, by haven buying after US president Joe Biden imposed sanctions on Russia and Chinese state-backed distressed debt manager Huarong Asset Management’s bonds plummeted in recent days. Dennis DeBusschere, head of portfolio strategy at Evercore ISI, noted that he had received a “ton of questions” from clients regarding the abrupt Treasuries move.

Stock markets, which had rallied in the previous session in a reaction that Daiwa economist Chris Scicluna pegged to Thursday’s “inexplicable decline in Treasury yields”, resumed their climb on Friday after China reported record quarterly GDP figures.

Europe’s Stoxx 600 index rose 0.3 per cent, touching a new record high. The UK’s FTSE 100 index, which has large weightings of miners and energy producers, added 0.4 per cent, exceeding 7,000 for the first time. Brent crude, the international oil benchmark, added 0.4 per cent to $67.19.

In Asia, Hong Kong’s Hang Seng index closed 0.6 per cent higher and Japan’s Nikkei 225 rose 0.1 per cent. China’s CSI 300 rose 0.4 per cent.

Futures markets signalled that the S&P 500, which advanced more than 1 per cent on Thursday to a new record, would trade flat at the New York opening bell.

The moves came after China reported an 18.3 per cent year-on-year increase in economic output. The highest-ever recorded increase in the nation’s GDP was slightly below analysts’ expectations and also flattered by the base effect of Covid-19 shutdowns this time last year.

Still, analysts at Capital Economics noted China’s quarter-over-quarter growth rate of 0.6 per cent had in fact “dropped back sharply” and with the exception of the first three months of 2020 was “slower than any other time during the past decade”.

Some analysts also expressed concerns about the validity of China’s economic growth statistics. “Little information is available on the GDP deflator, which is key to calculate real GDP,” commented Betty Wang, senior China economist at ANZ.

The dollar, as measured against a basket of currencies, traded flat.