Bonds fall with emerg­ing mar­kets as dol­lar gets lift from Fed’s Yellen

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THE Fed fac­tor dom­i­nated global mar­kets, bat­ter­ing bonds and de­vel­op­ing-na­tion cur­ren­cies while lift­ing the dol­lar. Trea­sury 10-year fu­tures slid the most in al­most two weeks and Ger­man bunds de­clined after Fed­eral Re­serve (the Fed) Chair­man Janet Yellen said an in­ter­e­strate in­crease is likely in com­ing months. Emerg­ing-mar­ket cur­ren­cies headed to­ward the worst month since Au­gust and gold fell for a ninth day in its long­est los­ing streak in a year. The dol­lar strength­ened against most of its 16 ma­jor peers. Euro­pean stocks swung between gains and losses, with trad­ing vol­umes less than half the daily av­er­age, amid mar­ket clo­sures in the United States and United King­dom.

The Bloomberg Dol­lar Spot Index was poised for its big­gest monthly jump since Septem­ber 2014, hav­ing surged as Fed eral Funds fu­tures showed the odds of a US in­ter­est- rate hike by July more than dou­bled to 54 per­cent. Yellen said on Fri­day that an im­prov­ing Amer­i­can econ­omy would prob­a­bly war­rant an­other in­crease in bor­row­ing costs “in the com­ing months,” a view also ex­pressed by sev­eral re­gional Fed chiefs in re­cent weeks.

“What Yellen said con­firmed the Fed is open for a June rate in­crease, and it’s now data de­pen­dent,” said Carl Ham­mer, chief cur­rency strate­gist at SEB A/B in Stockholm. “The Fed might be on hold next month due to Bri­tain’s Euro­pean Union ref­er­en­dum, but then make it ex­plicit there will be an in­crease in July. Our view is that there’s more room to add to pos­i­tive dol­lar bets.”

Yellen spoke after data showed US eco­nomic growth picked up more than was pre­vi­ously es­ti­mated in the first quar­ter. Re­ports sched­uled for this week in­clude April per­sonal in­come and spend­ing, and May pay­rolls.


TEN  YEAR Trea­sury fu­tures con­tracts for Septem­ber de­liv­ery slid 13/32, or $4.06 per $1,000 face amount, to 129 9/32, based on elec­tronic trad­ing at the Chicago Board of Trade.

Ger­man 10-year bunds fell, with yields ris­ing three ba­sis points to 0.17 per­cent, eras­ing their three-ba­sis point drop in the pre­vi­ous week. Yields on sim­i­lar-ma­tu­rity French bonds rose four ba­sis points to 0.51 per­cent.

Com­mod­ity trader Noble Group Ltd.’s dol­lar bonds due Jan­uary 2020 climbed to their high­est since Novem­ber, push­ing their yield down by 31 ba­sis points to 15.79 per­cent. The com­pany an­nounced plans to sell some of its US oper­a­tions and said CEO Yusuf Alireza has re­signed, with two co­heads set to re­place him.

“The res­ig­na­tion of the CEO is good news for bond­hold­ers, as it shows that the board is se­ri­ous about sta­bi­liz­ing the com­pany’s pro­file by tak­ing a less ag­gres­sive ap­proach,” says Charles Macgre­gor, head of Asian high-yield re­search in Sin­ga­pore at Lu­cror An­a­lyt­ics. “The sale of the Amer­i­cas En­ergy So­lu­tions will gen­er­ate mean­ing­ful cash that should re­solve liq­uid­ity con­cerns.”


THE MSCI Emerg­ing Mar­kets Cur­rency Index de­clined 0.3 per­cent at 7:40 a.m. in New York, and is down 3 per­cent in May, snap­ping a three-month run of gains. South Korea’s won re­treated 1 per­cent on Mon­day. For the month, South Africa’s rand led losses, slid­ing 9.8 per­cent.

The yuan dropped as much as 0.3 per­cent to a four-month low in Shanghai after the Peo­ple’s Bank of China weak­ened its daily fix­ing by 0.45 per­cent. With the United States poised to raise in­ter­est rates and pres­sure build­ing on China to ease mon­e­tary pol­icy, cash out­flows will ac­cel­er­ate, said Song Yu, China econ­o­mist for Gold­man Sachs/ Gao Hua Se­cu­ri­ties Co. in Bei­jing.

The Bloomberg Dol­lar Spot Index ad­vanced 0.1 per­cent, bring­ing its gain in May to 3.6 per­cent. Swe­den’s krona ad­vanced against all of its 16 ma­jor cur­ren­cies, as data showed the na­tion’s econ­omy con­tin­ued to ex­pand in the first quar­ter amid record stim­u­lus from the cen­tral bank.

The euro gained, after a re­port showed eco­nomic con­fi­dence in the 19-na­tion cur­rency bloc rose for a sec- ond month in May to a four-month high. The cur­rency climbed 0.2 per­cent to $1.1142, par­ing the de­cline this month to 2.7 per­cent.

The yen fell as much as 1 per­cent to 111.45 per dol­lar after an aide to Prime Min­is­ter Shinzo Abe said a salestax in­crease will prob­a­bly be de­layed. Ja­pan re­leased re­tail sales fig­ures on Mon­day, show­ing that growth stalled in Asia’s sec­ond-big­gest econ­omy, bol­ster­ing the case for a planned sales-tax in­crease to be post­poned.


GOLD for im­me­di­ate de­liv­ery dropped as much as 1 per­cent to $ 1,199.80 an ounce, a level last seen in Fe­bru­ary, and is down 7 per­cent in May, the big­gest monthly de­cline since June 2013. Money man­agers’ cut bullish bets on the metal by the most this year dur­ing the week ended May 24, ac­cord­ing to US Com­mod­ity Fu­tures Trad­ing Commission data. Sil­ver slid 1.5 per­cent, while plat­inum re­treated 0.5 per­cent, as the prospect of higher US bor­row­ing costs damped the ap­peal of non­in­ter­est- bear­ing as­sets.

Cop­per fu­tures slipped 0.9 per­cent in New York, snap­ping a four- day ad­vance. The Lon­don Metal Ex­change was closed on Mon­day.

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