Guillermo
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European bonds may gain - 2006/10/30 15:10
European government bonds may gain on speculation yields on benchmark debt already reflect the chances of further interest-rate increases.
Two-year debt has dropped, pushing yields near the highest since July 2002, after European Central Bank President Jean- Claude Trichet last week said "inflation risks remain on the upside." Traders expect the ECB to lift borrowing costs in December, the sixth rate increase in a year, interest-rate futures show.
Gains for bunds may be limited by speculation the ECB will have to raise rates further in the 12 nations that share the euro to stem inflation.
A report tomorrow may add to evidence last week that suggested ECB policy makers will need to raise rates into 2007 to stem inflation. Sales at German retailers rose an annual 1.9%, up from 1% in August, the report will say, according to economists surveyed.
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