Bonds: Yields fall amid Fedspeak, analysts see euro area surprise in 2017
These were the movements in some of the most widely-followed 10-year sovereign bond yields:
US: 2.37% (-5bp)
UK: 1.34% (-5bp)
Germany: 0.29% (-2bp)
France: 0.80% (-3bp)
Spain: 1.47% (-7bp)
Italy: 1.89% (-7bp)
Portugal: 3.98% (-8bp)
Greece: 6.89% (+3bp)
Longer-term bond yields recovered after losses during the previous session on the back of the most recent set of monthly US jobs data, referencing the month of December.
The move in yields came despite Boston Fed president Eric Rosengren defending in a speech on Monday the need for a gradual but "somewhat more regular" pace of interest rate hikes.
Nonetheless, it was a bit too soon to begin discussing the next rate hike considering the uncertainties facing the economy, he said.
Speaking later in the day, his opposite number at the Atlanta Fed, Dennis Lockhart, said he continued to expect a "gradual pace" of tightening.
To take note of however, Lockhart said he had not factored changes to fiscal policy into his forecasts.
"Now I think it's time for the Fed and monetary policy to shift to more of a support role.
"[...] The job of mitigating secular trends and implementing structural adjustments lies ahead. Inducing supply-side and structural change is more the domain of Congress, the administration, and the private sector," Lockhart said.
There were no first-tier data releases Stateside on Monday, although the New York Fed's one-year inflation gauge jumped from 2.5% for November to 2.8% in December.
Inflation expectations at the three-year time frame on the other hand rose only slightly.
Euro area growth set to surprise?
German bunds underperformed following data showing that industrial production in the euro area's largest economy shot higher in November, expanding at a 2.2% month-on-month clip (consensus: 1.6%).
On a related note, analysts at Credit Suisse told clients the euro area was set to deliver an upside growth surprise in 2017, given that market expectations were too low.
"In all, this year looks extremely promising for risk assets in Europe. And because the euro area's past poor economic performance and the policy response to it have underpinned extremely low bond yields - not just in Europe, but across the globe - in recent years, there's a clear risk that as the vigour and resilience of the euro area economy becomes apparent to investors, support for those low bond yields will end."
Nonetheless, the Swiss broker noted the potential risk that "some members of the ECB Governing Council to push for a policy mistake - a premature withdrawal of stimulus."
There was also a risk for financial turbulence in emerging markets, especially China, linked to the new administration in the US.