Tuesday, 12 May, 2015

Bonds Extend Global Rout; Euro Gains While Region’s Stocks Slump

(Bloomberg) — Bonds dropped around the world, with German 10-year yields near the highest for 2015 and Japanese rates jumping the most in two years. The euro advanced and European stocks fell amid wrangling over whether Greece will qualify for further aid. Ten-year bund yields climbed five basis points by 8:19 a.m. in London, while the rate on Japanese bonds climbed as much as eight basis points and that on benchmark Treasuries added two basis points. The Stoxx Europe 600 Index dropped 1.4 percent and Standard & Poor’s 500 Index futures retreated 0.3 percent. Chinese shares in Hong Kong fell. The euro climbed 0.6 percent and a gauge of developing-nation currencies fell to a two-week low. Overblown expectations for the European Central Bank’s quantitative easing plan helped push global debt valuations to extreme levels, triggering a “large and vicious” selloff in European bonds that’s infected other markets, according to Goldman Sachs Group Inc. Greece has readied a repayment to the International Monetary Fund, officials said, as the ECB prepared to reassess emergency funding for the country’s banks. “This first half of May has one of the heaviest event-risk calendars we’ve seen in a long time,” said Manpreet Gill, a senior strategist at Standard Chartered Bank, said in a Bloomberg TV interview. “Markets are reacting to that and, given how strong the first quarter of the year was, they’re looking for a bit of a reason to take some profit. That’s what we’re seeing a little bit of across asset classes.” Bond Moves Germany’s 10-year notes paid as much as 0.692 percent Tuesday, more than 14 times the 0.049 percent that marked a record-low yield on April 17. Spanish and Italian bond yields jumped eight basis points. Japanese bonds due in a decade yielded as much as 0.47 percent, while rates on similar-maturity Australian debt jumped 19 basis points to as high as 3.04 percent, the topmost level since Dec. 8. New Zealand yields rose 10 basis points. The moves followed a slump in Treasuries that saw the 10-year yield surge as much as 14 basis points Monday, the most since March. The benchmark U.S. rate climbed to 2.29 percent Tuesday. U.S. policy makers could raise key rates at any meeting, depending on economic data, Federal Reserve Bank of San Francisco President John Williams reiterated on CNBC Monday. All 19 industry groups on the Stoxx 600 retreated Tuesday. Easyjet Plc slumped 6.8 percent after Europe’s second-biggest discount carrier posted its first winter profit in more than a decade and said strikes in France and the timing of the Easter holiday will weigh on third-quarter earnings. Buying Time The euro bought $1.1225 after losing 1.7 percent the past three trading days. Greece persuaded a German-led bloc of creditors that it is serious about delivering the tight budget policies needed to escape a default. A transfer order for the IMF repayment was put in Monday, two Greek officials said. The European Central Bank will reassess the emergency liquidity lines keeping the Greek banking system in business Wednesday. The Hang Seng China Enterprises Index fell 1 percent in Hong Kong. The Shanghai Composite Index increased 1.6 percent after surging about 3 percent Monday in the wake of China’s third interest-rate reduction in six months. Japan’s Topix index erased losses to finish 0.3 percent higher, while the the Kospi index in Seoul was little changed. Australia’s S&P/ASX 200 Index climbed 0.9 percent before the country’s annual budget is unveiled Tuesday. Rupee Slides A Bloomberg gauge of 20 emerging-markets currencies slipped for a second day. The Bloomberg JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded emerging-market currencies against the dollar, fell to as low as 112.07 Tuesday, heading for its lowest close since April 13. India’s rupee slid 0.5 percent to 64.1650 per dollar before data that’s forecast to show slowing growth in industrial production and consumer prices. The country reports wholesale-price figures Thursday. The ringgit slipped a fourth day, sinking as much as 0.8 percent to its weakest level since April 23 as the pullback in crude prices raised concern government finances in the oil-exporting nation will deteriorate. The won lost 0.4 percent. West Texas Intermediate crude has dropped 2.9 percent from this year’s highest settlement of $60.93 a barrel on May 6. U.S. crude inventories probably shrank by 500,000 barrels last week for a second straight decline, according to analysts surveyed by Bloomberg before an Energy Information Administration report due Wednesday. There is a global oversupply of at least 2 million barrels a day, according to Qatar’s former oil minister. Disclaimer The information contained in this communication from the sender is confidential. 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