US Treasuries hit by biggest sell-off in two yearsBy Richard Milne in London and Michael Mackenzie in New York
Published: December 8 2010 20:23 | Last updated: December 8 2010 22:18
US Treasuries suffered their biggest two-day sell-off since the collapse of Lehman Brothers, following a torrid month that has seen borrowing costs for western governments soar.
Germany, Japan and the US have all seen their benchmark market interest rates rise by more than a quarter in the past month while the UK’s has risen by nearly a fifth.
“You could argue that we are at a new stage where the global cost of capital goes higher and higher,” said Steven Major, global head of fixed income research at HSBC.
The yield on 10-year US Treasuries hit a six-month high of 3.33 per cent on Wednesday, up 0.39 percentage points from Monday and 1 percentage point higher than its October low. Japanese five-year yields also rose the most in two years, while Germany’s benchmark borrowing costs hit 3 per cent. “People are getting out of the market and moving to the sidelines, feeling shellshocked at the speed of the rise in yields,” said David Ader, strategist at CRT Capital.
US 10-year yields have risen by about 0.76 percentage points since November 8, those of Germany by 0.62 percentage points, the UK by 0.53 percentage points and Japan by 0.29 percentage points as the prices of the bonds has fallen.
Yields are still relatively low compared with long-term trends but investors are starting to fret that they could continue to move sharply higher. “Yields at this level are clearly unsustainable,” said Paul Marson, chief investment officer at Lombard Odier, the Swiss private bank.
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http://www.ft.com/cms/s/0/e550f996-0304-11e0-bb1e-00144feabdc0.html#axzz17ZY1SrVDBond Prices Plunge for 2nd Day on Deficit Fears Wednesday, 8 Dec 2010
U.S. Treasurys plunged Wednesday, extending Tuesday's sharp losses and pushing benchmark yields to a six-month high, after a deal in Washington to extend tax cuts fueled fears of inflation and a swelling budget deficit.
The dip in prices brought some buyers to the table in an auction of $21 billion of reopened 10-year notes, which was part of $66 billion of coupon-bearing securities sales this week. Trade was volatile and prices bounced off the lowest levels of the day after the auction, which analysts said saw about average demand.
Benchmark 10-year yields reached as high as 3.33 percent going into the auction, which meant a whopping 40 basis points had been added since Monday's close, and investors had decided the selling had gone far enough, said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
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http://www.ft.com/cms/s/0/aa719fe0-0103-11e0-8894-00144feab49a.html#ixzz17ZZbavaTSoaring US bond yields rattle investors
December 6 2010 08:37 | Updated: December 8 2010 21:47
Wednesday 22:05 GMT. Investors are struggling to cope with surging US Treasury yields, which are supporting the dollar and thereby hobbling the rally in riskier assets, particularly commodities. The FTSE All-World equity index is down 0.4 per cent, while some of traders’ erstwhile darlings, such as gold, are pulling back from recent records.
US Treasury yields moved sharply higher throughout Tuesday’s session and that trend is continuing today as investors try to gauge which of a number of factors is the primary driver of the rate bounce.
The 10-year yield was up 11 basis points to 3.25 – nearly 100 basis points above the bond’s low yield in October, when the US data was at its nadir and the Federal Reserve began contemplating “quantitative easing”. An auction of $21bn in 10 years saw demand at a yield of at 3.34 per cent, well past the 2.64 per cent yield at the auction last month. Yields came in a bit after the sale.
The S&P 500 index on Wall Street was up 0.4 per cent at 1,228, still near a two-year high. Equities, along with commodities, added a bit late in the day as gains in Treasury yields and the dollar moderated.
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http://www.ft.com/cms/s/0/cfb5cd58-022f-11e0-aa40-00144feabdc0.html#ixzz17ZaFXNMgCrude oil tipped to bubble over $100 a barrel
December 7 2010 23:11
For the first time in two years, oil bulls are starting to outnumber bears.The bulls’ push comes as the oil market is experiencing a “demand shock”, with consumption growth this year accelerating to almost its highest rate in 30 years.
This unexpected boom in demand has lifted benchmark oil prices sharply higher, to a 26-month high of more than $90 a barrel on Tuesday. Some traders believe the market could jump to $100 within weeks.
For the Opec cartel of oil producers, the jump in demand, as the global economy has started to recover from the worst recession in decades, is a headache. The group, which meets on Saturday to review member states’ production quotas, will examine whether the strength in oil consumption is likely to last, requiring it pump more crude.
Traders and analysts are divided on the outlook for oil, even if the bulls are in command.
The bullish sentiment contrasts with the mood in oil markets three months ago, when physical traders – who arguably have better intelligence than anyone else – thought prices were unlikely to rise further in 2011 and felt consumption growth was lacklustre.
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