The pound and euro slid against the dollar, while bonds and stocks rose as both officials used rhetoric to distance themselves from Federal Reserve Chairman Ben S. Bernanke's signal that the U.S. is preparing to start unwinding its $85-billion a month bond-buying program later this year. That had sparked a global selloff in bonds, forcing up yields in economies less able than the U.S. to cope with tighter credit.

“The ECB and BOE are declaring their monetary independence from the rising U.S. rate trend,” said Michael Saunders, chief western Europe economist at Citigroup Inc. in London. “It's the right thing to do, because European economies need low rates.”

Eoin Treacy's view US government bonds yields surged from May until late June in what was the largest deterioration in bond prices in at least a few years. This oversold condition was unwound somewhat over the last few weeks but the pause has so far been limited to a relatively similar sized reaction when compared to those posted in the last six months. The yield posted an upside key day reversal on Wednesday and followed through emphatically today, suggesting a low of at least near-term significance. A clear move below 2.6% would now be required to begin to question medium-term supply dominance.

This bearish activity has not been limited to US bonds. While both the ECB and Bank of England yesterday made efforts to distinguish their loose monetary policy from the tapering proposed in the USA, the weakness of their respective currencies may be having an effect on the attractiveness of their government bond markets. UK, Swiss, German, Canadian and Australian yields have similar patterns to Treasuries above. The New Zealand yield broke out of its short-term range today to reassert supply dominance.

JGB yields surged between April and late May to break the multi-year progression of lower rally highs and have paused above 0.8% over the last seven weeks. A sustained move below that level would be required to begin to question medium-term supply dominance.