Global rout in fixed income securities

‘I do think there are bottom fishers, bargain hunters, waiting to come in’

US, EUROPEAN and Japanese bonds fell as governments in some of the biggest markets sell debt amid a rout in fixed income securities.

The global sell-off is intensifying after already pushing US yields to the highest level this year and driving Germany’s 10year yield 14 times higher in less than a month.

The US planned to auction $24 billion (R287.5bn) of threeyear notes yesterday, the same amount of 10-year securities today and $16bn of 30-year bonds tomorrow.

“It all sounds like we’re absolutely doomed in the bond markets, but I think it is a realisation that’s hitting bond investors that they need to be extremely cautious at the moment,” Bill Blain, a Londonbased strategist at Mint Partners said.

“I don’t think we’ve seen the end of this period of play, but at the same time I do think there are bottom fishers, bargain hunters, waiting to come in when they see sovereign-bond market yields make sense.”

Benchmark treasury 10-year yields rose 4 basis points, or a 0.04 percentage point, to 2.33 percent in the morning in New York, and touched 2.35 percent, the highest since November 20. The yield jumped 13 basis points on Monday.

Japanese 10-year bond yields increased 6 basis points to 0.45 percent and Australia’s added 19 basis points to 3.05 percent. Germany’s 10year bond yield rose 10 basis points to 0.71 percent, up from a record-low 0.049 percent reached on April 17.

In Japan, a 10-year

bond auction drew bids for 2.24 times the amount for sale, the lowest in six years. The nation’s finance ministry is due to sell 30year debt tomorrow.

“Sellers are dominating, following the surge in yields in the US,” Akito Fukunaga, the chief interest rate strategist at Barclays in Tokyo, said. “The market will remain vulnerable until the 30-year bond auctions in the US and Japan.”

The company’s US arm is one of the 22 primary dealers that underwrite the US debt.

Long bonds, last year’s superstar of the treasury market, are punishing investors this year, sending 30-year yields to the highest level since November, while Goldman Sachs is warning that they are a “poor investment”.

US 30-year bonds slumped more than 8 percent in the past two weeks, leaving investors with a loss of 4.8 percent since December 31.

“Long-dated bonds remain a poor investment,” Francesco Garzarelli, a strategist at Goldman Sachs International in London, wrote in a report on Monday. “Prospective returns on government bonds remain negative.”

Treasury 30-year yields rose 4 basis points to 3.08 percent yesterday, climbing from this year’s low of 2.22 percent set on January 30.

Even as treasuries fell in April, Pacific Investment Management Company’s (Pimco) Total Return Fund added to its holdings of US government and related securities.

Pimco’s $110.4bn Total Return Fund grew its holdings of government and related debt to 23.4 percent of assets at the end of April from 21.6 percent a month earlier, according to the company’s website on Monday.

The figure was 35.3 percent in February. In addition to treasuries, holdings in the category may also include related assets such as futures and agency bonds, the website shows. – Bloomberg ECOBANKTransnational’s Ivory Coast unit must pay former chief executive Thierry Tanoh about $14 million (R168m) after the lender failed to obey a judgment in January, according to Tanoh’s lawyer. The bank was fined 8.2 billion CFA francs (R165m) by a commercial court in Abidjan, Soualiho Diomande, Tanoh’s attorney, said yesterday. The chamber found that the lender had paid dividends from accounts seized after it lost a defamation case against Tanoh. A spokesman for Ecobank said it was appealing the decision. A London court ordered Tanoh to stop pursuing the case in Ivory Coast and a wrongful-termination one in Togo last month. Tanoh’s employment contract is based on British law and, therefore, the two West African courts don’t have jurisdiction. Tanoh left the bank more than a year ago. – Bloomberg

of 10-year US securities sale is planned for today

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