United States bonds ex­tend sell­off, yields boost dol­lar

The Pak Banker - - International3 -

SINGAPORE: U.S. govern­ment bonds ex­tended sharp losses on Wed­nes­day over U.S. tax pro­pos­als, boost­ing the ap­peal of the dol­lar as yields spiked and send­ing many in­vestors flee­ing for the side­lines.

Euro­pean shares fell in early trad­ing af­ter a strong run. The FTSEurofirst 300 (.FTEU3) in­dex of top Euro­pean shares was down 0.2 per­cent. It rose 0.9 per­cent on Tues­day, when it hit its high­est in­tra­day level since Septem­ber 2008. U.S. Trea­sury prices plunged in re­sponse to Pres­i­dent Barack Obama's pro­posal to ex­tend tax cuts that could sup­port eco­nomic growth in the short term but raise na­tional debt lev­els longer term. Debt prices around the world fell in the wake of the U.S. sell­off. The yield on 10-year Trea­suries rose more than 10 ba­sis points in Asia to 3.25 per­cent, its high­est level since late June and adding to an in­crease of more than 20 ba­sis points on Tues­day.

"The tax cuts have changed the mar­ket's land­scape," said Ari­hiro Na­gata, fixed in­come man­ager at Su­mit­omo Mit­sui Bank­ing Corp. "A lot of peo­ple are now chang­ing their sce­nar­ios. Many econ­o­mists are say­ing the tax cuts will push up U.S. growth by 0.5 to 1.0 per­cent­age point."

But the cost of the tax cuts would prob­a­bly swell the U.S. bud­get deficit, which prompted in­vestors to sell bonds and drive up the risk premi­ums on U.S. debt. The dol­lar strength pushed the euro to­ward im­por­tant sup­port lev­els around $1.3200 as the Euro­pean bloc comes un­der pres­sure over high debt lev­els.

The weaker yen gave Ja­panese stocks a boost on the prospects of im­proved earn­ings for ex­porters. -Reuters

NEW YORK: TV news an­chor Dana Tyler, ac­tors Matthew Gum­ley, Se­bas­tian Arcelus, Beth Leavel and Amy Spanger ring the clos­ing bell at the New York Stock Ex­change at the 87th An­nual NYSE Christ­mas Tree Light­ing & Clos­ing Bell at New York Stock Ex­change in New York City. -Reuters

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