Treasuries up on bargain buying, London shooting
Fri Jul 22, 2005 09:47 AM ET
NEW YORK, July 22 (Reuters) - U.S. Treasury debt prices rose on Friday as investors, mainly from Asia, jumped into a market looking for bargains and taking advantage of a big sell-off after China's scrapping of the yuan's peg to the dollar.
Buyers also came back into the market on news that British law enforcement officers shot dead an assailant on the London subway who was suspected of possibly conspiring of carrying out another bomb attack.
"There's the London thing, but (Asian) buyers came in overnight," a trader in New York at a Wall Street primary dealer said. "The yuan revaluation is not going to stop them, but it will slow them down," he added.
Compared with Thursday's intense session, Friday should be relatively calm. The day's only scheduled data offering is the Economic Cycle Research Institute's weekly U.S. economic index at 10:30 a.m.(1430 GMT).
The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) added 8/32 for a yield of 4.25 percent, an important technical barrier breached during Thursday's selloff. Benchmark yields ended the day on Thursday at 4.28 percent.
Two-year notes(US2YT=RR: Quote, Profile, Research) rose 1/32 to yield 3.92 percent, down from 3.94 on Thursday.
Five-year notes (US5YT=RR: Quote, Profile, Research) rose 4/32 to yield 4.06 percent, compared with 4.09 percent on Thursday. The 30-year bond (US30YT=RR: Quote, Profile, Research) rose 13/32 yielding 4.48 percent, up from Thursday's 4.50 percent.
While the yield spread between two- and 10-year notes was flat at 33 basis points on Friday, many traders said that given recent solid economic data and the yuan revaluation, they see downward pressure on the price of 10-year notes and therefore a widening two- to 10-year yield spread.
Asian central banks have been big buyers of U.S. debt in the last few years -- particularly longer-dated debt -- which has helped keep prices high, yields low and the spread between two- and 10-year notes unusually narrow.
Thursday's sell-off was inspired by expectations that over time the revaluation of the yuan is likely to lessen Asian central bank demand for U.S. debt.
The market on Thursday was so focused on the revaluation of the yuan and by bombings on the London subway that it ignored solid U.S. economic data that added to the current downside bias in the Treasuries market that points to higher yields.
Most prominent among those data series was the Philadelphia Federal Reserve's measure of business conditions in the Mid-Atlantic region, which includes eastern Pennsylvania, southern New Jersey and Delaware. It jumped to 9.6 in July , offsetting a drop to -2.2 in June. A number above zero points to growth in the factory sector.
Also more or less lost in Thursday's yuan-and-bomb intensity were the minutes from the Fed's June 30, policy meeting, which buttressed Fed Chairman Alan Greenspan's view that the economy is strong and interest rates are likely to head higher.
"At the June 30 meeting, FOMC members appear more or less united in their view that growth will be robust," Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said, in a research note.
"But inflation views are mixed," Shepherdson continued, noting that Greenspan appears more concerned about mounting inflationary pressures than some of his colleagues at the Fed, though he remains open to internal debate.
The Fed has raised official interest rates by a quarter-percentage-point at each of its last nine meetings in the last year, bringing the federal funds rate to 3.25 percent.
Financial markets fully expect the fed funds rate to reach 4.00 percent by the end of the year, but Greenspan's unusually direct pledge this week in Congressional testimony that rates were heading higher led markets to begin betting on the possibility of further rate increases in 2006.
© Reuters 2005. All Rights Reserved.
:smile:
- vado a comprarmi un quintale di Nutella
- per questo, a mio avviso, in situazioni di questa gravità dovrebbero intervenire le banche centrali e narcotizzare i mercati, o addirittura contribuire a "girarli" per mandare in malora quella speculazione...
