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World Economic Weekly News

Due to the holiday period, the next Market Updates will be w/c 5th January 2009.

Week ended 12 December 2008

UK

Week in review:
Market Direction

  • Short dated gilt yields fell significantly lower over the week, 2 year maturities declining 12bp to 1.73%. Longer dated yields were higher by between 20 – 30bp.
  • Inflation linked gilts outperformed conventionals, the 20 year breakeven inflation rate rising 25bp to 2.85%.
  • The market continues to price a further 50bp of rate cuts by January.
  • 3 month libor eased by a further 19bp to 3.18%.
  • Sterling continued to struggle in the currency markets, falling by another 0.8 points to 79.3. The euro appreciated by another 2.5 cents versus sterling to 0.893 cents to the pound but cable did strengthen by over 3 cents to $1.492.

US

Week in review:
Market Direction

  • The yield curve flattened over the week with US 2 yr yields falling 15bp to 0.78% while 10 yr yields fell 10bps to 2.61%.

Eurozone

Week in review:
Market Direction

  • The German yield curve re-steepened further last week with 2yr yields rising from 2.05% to 2.23% whilst 10 yr yields rose from 3.03% to 3.27%. 30 year yields rose 40 basis points over the week, reversing most of the previous weeks out performance.

Japan

Week in review:
Market Direction

  • The 2yr JGB yield fell 3bps from 0.57% to 0.54% while the 10 yr rose 2bps from 1.37% to 1.39%.
  • The Nikkei, after another volatile weeks trading ended up 4%.