* 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
(Adds opening of U.S. markets; changes byline, dateline,
By Chuck Mikolajczak
NEW YORK, May 14 Benchmark government bond
yields in the U.S. and Germany fell sharply 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 edged off
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 that stronger U.S.
growth will boost those yields over time.
Ten-year Bund yields hit a one-year low of 1.38 percent
while the 10-year Treasury note's yield
fell to 2.54 percent, the lowest since October. UK yields also
fell after the Bank of England said it was in no hurry to raise
"It reinforces the notion that from a global perspective
monetary policy is committed to lower (rates) for longer," said
Ian Lyngen, a senior government bond strategist at CRT Capital
in Stamford, Connecticut.
Bonds were rallying even as U.S. wholesale prices increased
0.6 percent in April, the most in 1-1/2 years.
The S&P 500 edged lower after setting its most recent record
closing high. Energy was the only group of the 10 major
sectors to advance, as oil continued its climb on continued
fighting in Ukraine. U.S. crude oil rose 59 cents to
$102.30 a barrel, while Brent crude gained 51 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.
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 $1.6778
, while UK gilt yields fell to as low as 2.60 percent
MSCI's all-country world index barely budged
at 417.56 after reaching a high of 418.24, its highest level
since November 2007.
The Dow Jones industrial average fell 34.39 points or
0.21 percent, to 16,681.05, the S&P 500 lost 2.26 points
or 0.12 percent, to 1,895.19 and the Nasdaq Composite
dropped 1.78 points or 0.04 percent, to 4,128.39.
The FTSEurofirst 300 index of leading European shares was
down a quarter of one percent at 1365 points, hovering
close to Tuesday's six-year high. The FTSEurofirst 300 has risen
some 7 percent from lows in March.
(Additional reporting by Blaise Robinson in Paris and Karen
Brettell in New York; Editing by Susan Fenton and Meredith
Mazzilli; 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)