* BoE in no rush to raise rates; sterling hits 1-month low
* Sources say ECB preparing rate cut, other measures next
* Lower rate outlook fails to lift European shares
* U.S. shares dip after record; defensive shares climb
(Adds oil settlements)
By Chuck Mikolajczak
NEW YORK, May 14 Benchmark government bond
yields in the United States and Germany fell on Wednesday after
sources told Reuters a European Central Bank rate cut next month
is "more or less a done deal," while U.S. stocks pulled back
from recent record highs.
Euro zone sources said the ECB plans a package of policy
options, including measures aimed at boosting lending to small-
and mid-sized firms.
The ECB's dovishness has helped hold down yields on German
and U.S. debt, though the expectation is stronger U.S. growth
will result in a rise in those yields over time.
Ten-year Bund yields hit a one-year low of 1.37 percent
while the 10-year Treasury note's yield
fell to 2.53 percent, the lowest since October. UK yields also
fell after the Bank of England said it was in no hurry to raise
"We've broken out of the range that we've been in for quite
some time," said Rick Klingman, a Treasuries trader at Societe
Generale in New York. "Globally there's a fixed income rally
going on ... people that thought the range would hold are being
forced out of those positions."
Bonds rallied even as U.S. wholesale prices increased 0.6
percent in April, the most in 1-1/2 years, a sign inflation
pressures may be creeping up.
The S&P 500 edged lower after setting its most recent record
closing high, its tenth of the year. Defensive sectors such as
utilities and telecoms were the best
performers as weakness in smaller-cap names fueled caution.
Oil continued its climb on fighting in Ukraine and a draw on
U.S. supplies. U.S. crude oil settled up 67 cents at
$102.37 a barrel, while Brent crude gained 95 cents to
Sterling fell to a one-month low against the dollar after
the BoE said it was in no rush to raise rates and that Britain's
economic recovery is still in its early stages.
MSCI's all-country world index slipped 0.06
percent. The FTSEurofirst 300 index of leading European
shares closed virtually unchanged, down 0.37 point at 13689.38
points, close to Tuesday's six-year high. The index has risen
6.5 percent from lows in March.
The Dow Jones industrial average fell 94.31 points,
or 0.56 percent, at 16,621.13. The Standard & Poor's 500 Index
was down 8.72 points, or 0.46 percent, at 1,888.73. The
Nasdaq Composite Index was down 25.24 points, or 0.61
percent, at 4,104.93.
Sterling backed off a 16-month high against the euro. The
euro was up 0.4 percent against sterling at 81.72 pence
Sterling was down 0.3 percent against the dollar at $1.6769
, while UK gilt yields fell to as low as 2.58 percent
(Additional reporting by Karen Brettell in New York; Editing by
Susan Fenton, Meredith Mazzilli and Dan Grebler; To read Reuters
Global Investing Blog click here;
for the MacroScope Blog click on blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on blogs.reuters.com/hedgehub)