11/03/2010
Global government bonds outperformed corporate bonds in February as investors digested contagion risks arising from a potential sovereign debt crisis in Europe, mixed global economic releases and worries over the impact of further monetary tightening in China. China made a second increase in the reserve requirement ratio, which many believe to be the start of significant monetary tightening. The Fed also caught markets off guard by raising the discount rate, although officials were quick to reassure markets that the move contained little monetary policy implications for 2010.
Global economic data was mixed in February, with US consumer sentiment and unemployment data still lagging. However, on a positive note, statistics showing a strong expansion in factory output in Europe, Asia and the US have helped allay fears of a double-dip recession.