Trading volume in U.S. Treasuries is approaching the highest on record as investors drop wagers that the Federal Reserve will raise interest rates. About $623 billion in U.S. government debt changed hands by 12 p.m. New York time, according to ICAP Plc, the world’s largest interdealer broker. That’s just below the record $662.2 billion traded on May 22, 2013, when former Fed Chairman Ben S. Bernanke mentioned the possibility of slowing bond purchases.
“The market has been forced to wake up fast as we are getting capitulation to the broader global forces,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “The Fed is data dependent. Europe is very weak and the U.S. is starting to show weakness, and the market is taking notice, pushing the timing of tightening back, until there is a reason not to.” The increase in volume comes as Treasuries surged, with 10-year yields falling below 2 percent for the first time since June 2013, after a report showed U.S. retail sales fell a more-than-forecast 0.3 percent in September.
Rates on federal fund futures show the probability of a September 2015 rate increase fell to 30 percent, down from 46 percent yesterday and 67 percent two months ago, according to data compiled by Bloomberg. The chances for an increase in December 2015 were 54 percent, making it the first instance for a likely central bank move.
Moving Average
The five-day moving average of the amount of U.S. government bonds changing hands on a daily basis has risen to $495 billion, the most since June 2013, according to ICAP data going back to 2004. That compares with an average of $332 billion this year.
A measure of Treasury volatility increased for a third day yesterday to the highest level in more than nine months. Bank of America Merrill Lynch’s MOVE Index, which measures price swings based on options, climbed to 74.6 basis points yesterday, the most since Jan. 8.
“When investors began to sense that the Fed’s policy rate in the next cycle might not rise as much in the past, a key fundamental basis that many thought would provide a basis for rising rates was weakened, and the short base slowly covered,” said Tony Crescenzi, a strategist and fund manager at Pacific Investment Management Co. in Newport Beach, California in an instant message. “The more that yields fell the more pain the short base felt, forcing this classic capitulation trade.”
Greek Bonds Extend Selloff, Pushing Yield Up Most in Two Years
Greece’s 10-year (GDBR10) bonds fell for a third day, pushing the yield up by the most in more than two years, on concern the government’s plan to end its bailout early will leave the nation unable to raise funding.
The selloff spread today to other higher-yielding markets, with Italian rates climbing the most since June. The yield on Greek 10-year securities reached an eight-month high after Alternate Finance Minister Christos Staikouras yesterday reiterated the country’s intention to raise cash by selling seven-year notes. Greek stocks fell the most in almost two years. German 10- and 30-year yields tumbled to records amid concern the global economy is slowing.
“The main factor that is pushing Greek yields higher is the uncertainty, or their plan to exit the bailout early, and the market clearly isn’t cheering for that,” said Jan von Gerich, a fixed-income analyst at Nordea Bank AB in Helsinki. “It’s clear that they are not ready to make it on their own yet. If they need to finance themselves from markets in large volumes that is not going to work with current yields.”
Greece’s 10-year yield increased 85 basis points, or 0.85 percentage point, to 7.85 percent at 5 p.m. London time. That’s the biggest increase since July 2012. The rate touched 8.01 percent, the highest since Feb. 6. The 2 percent securities due in February 2024 declined 4.66, or 46.60 euros per 1,000-euro ($1,275) face amount, to 70.785.
Stocks Plunge
The bonds have fallen for five successive weeks amid speculation the government’s plans to hold onto power by ending an international bailout will lead the nation away from austerity plans designed to control the debt and deficit. Greeks stocks slumped with the Athens Stock Exchange Index dropping as much as 10 percent, the most in six years.
Italy’s 10-year yield increased 12 basis points, while that on similar-maturity Spanish debt was seven basis points higher at 2.11 percent after dropping to a record 2.019 percent. In Italy the nation’s biggest opposition party said it will seek a referendum on its euro membership.
Greek bonds are sliding after euro-area finance ministers clashed with the nation’s leaders over their desire to sever a bailout program.
Greek Reforms
The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed upon with the European Union and the International Monetary Fund.
Trading of Greek government debt through the electronic secondary securities market, or HDAT, was 103 million euros yesterday, the highest since Sept. 24, ANA reported. Trading plunged to zero in October 2011 from a peak of 136 billion euros for the month of September 2004. The bonds of the nation that sparked the sovereign-debt crisis in 2009 had already lost 2.4 percent in the past week through yesterday, the worst performer among euro-area securities tracked by Bloomberg World Bond Indexes.
That cut their gain this year through yesterday to 17 percent, still the biggest after Portugal’s 20 percent. German bonds returned 8 percent in 2014 through yesterday, the gauges show. Spain’s earned 14 percent and Italy’s made 13 percent.
Record Lows
Germany’s benchmark 10-year bund yield slipped eight basis points to 0.76 percent and were as low as 0.719 percent, the least since Bloomberg started collecting the data in 1989. The nation’s 30-year yield fell 10 basis points to 1.66 percent and touched a record low of 1.601 percent.
French 10-year yields dropped to a new low even after the debt was placed on negative watch by Fitch Ratings late yesterday, falling to 1.112 percent. Treasury 10-year yields dropped below 2 percent for the first time since June 2013 after a report showed retail sales fell more in September than economists forecast. The 10-year yield declined 17 basis points to 2.03 percent and touched 1.86 percent, the lowest since May 2013.
Ten-year yields also dropped to records in Finland, which lost its AAA rating last week, Austria, Belgium and the Netherlands, countries with markets that are perceived to be more liquid and secure.
Growth Concerns
“This is really being driven by concerns over growth basically everywhere in the world,” said Elwin de Groot, a senior market economist at Rabobank in Utrecht, Netherlands. “Generally we are seeing risk appetite and demand for the more liquid paper and obviously bunds are still the choice there in particular.”
Yields slid across the region yesterday as Germany cut its growth outlook and investor confidence fell to the weakest level in two years, fueling concern that Europe’s biggest economy is heading for a recession and increasing pressure on the region’s central bank to implement asset-purchase stimulus, or quantitative easing.
“If things continue like they are now, then QE will really be the base scenario,” said de Groot, who expects the bund yield to drop to as low 0.7 percent in the next three months. The median of economist and strategist predictions compiled by Bloomberg is for the rate to end the year at 1.08 percent and rise to 1.14 percent by March.
Investors are betting that Germany’s consumer-price growth will be just over half the ECB’s target goal of 2 percent in the next decade, based on the 10-year break-even rate, a gauge of inflation expectations derived from the yield difference between bunds and index-linked securities. Volatility on Italian bonds was the highest in the euro area today, followed by those of Portugal, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
Debt Crisis Reawakens in European Bonds as Greece Roils Market
European government-bond traders would be forgiven for thinking they’d stepped back in time to 2012.
Today’s selloff in Greek securities, the biggest since July of that year, triggered a schism in sovereign debt evocative of those days before European Central Bank President Mario Draghi pledged to do whatever it took to defend the euro.
Yields on 10-year securities from Europe’s most-indebted nations surged, led by Greece and sweeping up Portugal, Ireland and Italy. At the same time, benchmark yields in the so-called core, which includes Germany and France, tumbled to records as investors sought the safest assets.
The differing fortunes of Europe’s sovereigns echo their performance during the region’s debt crisis, when concern the currency bloc may splinter drove the yield gap, or spread, between German bonds and those of Greece, Ireland, Italy, Portugal and Spain to the widest since the euro started in 1999. Following Draghi’s pledge to hold the currency bloc together, accommodative policies from the ECB have largely boosted bonds across the region in unison.
“We’ve seen a tipping off the edge in risk sentiment,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “Rather than what we’ve seen in the last few years, it’s what we used to see before that.” Greece’s 10-year (GDBR10) yield increased 82 basis points, or 0.82 percentage point, to 7.83 percent at 4:13 p.m. London time, the biggest increase since July 23, 2012. Draghi gave his speech, credited by an ECB lawyer this week as helping to save the euro, three days after that 199 basis-point spike in 2012.
The rate on similar-maturity Italian bonds increased nine basis points today, the most since June 10, to 2.39 percent, while that on Portuguese 10-year debt was 21 basis points higher at 3.28 percent.
Germany’s benchmark 10-year bund yield fell seven basis points to 0.77 percent after touching 0.719 percent, the lowest since Bloomberg started collecting the data in 1989. Yields on French 10-year bonds, put on watch for a possible downgrade by Fitch Ratings yesterday, tumbled as much as nine basis points to a record 1.112 percent.
Greek 10-year bonds yielded 706 basis points, or 7.06 percentage points, more than similar-maturity German debt today. The spread peaked at 42.4 percentage points in March 2012.
German Bond Yields Drop to Records on Economy; Greek Debt Slides
German government bonds rose with their euro-area peers, pushing 10-year (GDBR10) yields from Austria to Spain down to records, as concern the global economy is slowing boosted demand for fixed-income assets.
French yields dropped to a new low even after the debt was placed on negative watch by Fitch Ratings late yesterday. That followed Standard & Poor’s Oct. 10 lowering of the nation’s outlook to negative from stable. Ten-year yields also dropped to records in Finland, which lost its AAA rating last week, Belgium and the Netherlands. Greek bonds extended their slide, pushing 10-year yields to a seven-month high.
“This is really being driven by concerns over growth basically everywhere in the world,” said Elwin de Groot, a senior market economist at Rabobank in Utrecht, Netherlands. “Generally we are seeing risk appetite and demand for the more liquid paper and obviously bunds are still the choice there in particular.”
Germany’s benchmark 10-year yield slipped two basis points, or 0.02 percentage point, to 0.82 percent at 11:45 a.m. London time after reaching 0.81 percent, the least since Bloomberg started collecting the data in 1989. The 1 percent bund due in August 2024 rose 0.14, or 1.40 euros per 1,000-euro ($1,265) face amount, to 101.66.
‘Base Scenario’
Yields slid across the region yesterday as Germany cut its growth outlook and investor confidence fell to the weakest level in two years, fueling concern that Europe’s biggest economy is heading for a recession and increasing pressure on the region’s central bank to implement asset-purchase stimulus, or quantitative easing.
“If things continue like they are now, then QE will really be the base scenario,” said Rabobank’s de Groot, who expects the bund yield to drop to as low 0.7 percent in the next three months. The median of economist and strategist predictions compiled by Bloomberg is for the rate to end the year at 1.08 percent and rise to 1.14 percent by March.
Greek bonds have slid this week, with 10-year yields breaching 7 percent for the first time since March, after euro-area finance ministers clashed with the nation’s leaders over their desire to sever a bailout program.
Greek Concern
The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed with the European Union and the International Monetary Fund. Ten-year rates increased 57 basis points today to 7.58 percent after reaching 7.59, the most since March 14. The yield has risen 0.98 percentage point since the end of last week.
The region’s more secure bonds are rallying as sliding energy prices dim inflation prospects, preserving the value of payments on fixed-income assets.
Investors are betting that Germany’s consumer-price growth will be just over half the ECB’s target goal of 2 percent in the next decade, based on the 10-year break-even rate, a gauge of inflation expectations derived from the yield difference between bunds and index-linked securities.
France’s 10-year yield dropped as much as four basis points to a record 1.158 percent, while the equivalent rate in Finland reached 0.934 percent. The yield on Dutch debt due in a decade touched 0.948 percent and that on similar-maturity Austrian bonds fell to 1.021 percent. Spanish rates declined to 2.019 percent. Volatility on German bonds was the highest in the euro area today, followed by those of Greece and Ireland, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
German government securities returned 8 percent this year through yesterday, Bloomberg World Bond Indexes show. Spain’s returned 14 percent and Italy’s made 13 percent.
source: Bloomberg
“The market has been forced to wake up fast as we are getting capitulation to the broader global forces,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “The Fed is data dependent. Europe is very weak and the U.S. is starting to show weakness, and the market is taking notice, pushing the timing of tightening back, until there is a reason not to.” The increase in volume comes as Treasuries surged, with 10-year yields falling below 2 percent for the first time since June 2013, after a report showed U.S. retail sales fell a more-than-forecast 0.3 percent in September.
Rates on federal fund futures show the probability of a September 2015 rate increase fell to 30 percent, down from 46 percent yesterday and 67 percent two months ago, according to data compiled by Bloomberg. The chances for an increase in December 2015 were 54 percent, making it the first instance for a likely central bank move.
Moving Average
The five-day moving average of the amount of U.S. government bonds changing hands on a daily basis has risen to $495 billion, the most since June 2013, according to ICAP data going back to 2004. That compares with an average of $332 billion this year.
A measure of Treasury volatility increased for a third day yesterday to the highest level in more than nine months. Bank of America Merrill Lynch’s MOVE Index, which measures price swings based on options, climbed to 74.6 basis points yesterday, the most since Jan. 8.
“When investors began to sense that the Fed’s policy rate in the next cycle might not rise as much in the past, a key fundamental basis that many thought would provide a basis for rising rates was weakened, and the short base slowly covered,” said Tony Crescenzi, a strategist and fund manager at Pacific Investment Management Co. in Newport Beach, California in an instant message. “The more that yields fell the more pain the short base felt, forcing this classic capitulation trade.”
Greek Bonds Extend Selloff, Pushing Yield Up Most in Two Years
Greece’s 10-year (GDBR10) bonds fell for a third day, pushing the yield up by the most in more than two years, on concern the government’s plan to end its bailout early will leave the nation unable to raise funding.
The selloff spread today to other higher-yielding markets, with Italian rates climbing the most since June. The yield on Greek 10-year securities reached an eight-month high after Alternate Finance Minister Christos Staikouras yesterday reiterated the country’s intention to raise cash by selling seven-year notes. Greek stocks fell the most in almost two years. German 10- and 30-year yields tumbled to records amid concern the global economy is slowing.
“The main factor that is pushing Greek yields higher is the uncertainty, or their plan to exit the bailout early, and the market clearly isn’t cheering for that,” said Jan von Gerich, a fixed-income analyst at Nordea Bank AB in Helsinki. “It’s clear that they are not ready to make it on their own yet. If they need to finance themselves from markets in large volumes that is not going to work with current yields.”
Greece’s 10-year yield increased 85 basis points, or 0.85 percentage point, to 7.85 percent at 5 p.m. London time. That’s the biggest increase since July 2012. The rate touched 8.01 percent, the highest since Feb. 6. The 2 percent securities due in February 2024 declined 4.66, or 46.60 euros per 1,000-euro ($1,275) face amount, to 70.785.
Stocks Plunge
The bonds have fallen for five successive weeks amid speculation the government’s plans to hold onto power by ending an international bailout will lead the nation away from austerity plans designed to control the debt and deficit. Greeks stocks slumped with the Athens Stock Exchange Index dropping as much as 10 percent, the most in six years.
Italy’s 10-year yield increased 12 basis points, while that on similar-maturity Spanish debt was seven basis points higher at 2.11 percent after dropping to a record 2.019 percent. In Italy the nation’s biggest opposition party said it will seek a referendum on its euro membership.
Greek bonds are sliding after euro-area finance ministers clashed with the nation’s leaders over their desire to sever a bailout program.
Greek Reforms
The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed upon with the European Union and the International Monetary Fund.
Trading of Greek government debt through the electronic secondary securities market, or HDAT, was 103 million euros yesterday, the highest since Sept. 24, ANA reported. Trading plunged to zero in October 2011 from a peak of 136 billion euros for the month of September 2004. The bonds of the nation that sparked the sovereign-debt crisis in 2009 had already lost 2.4 percent in the past week through yesterday, the worst performer among euro-area securities tracked by Bloomberg World Bond Indexes.
That cut their gain this year through yesterday to 17 percent, still the biggest after Portugal’s 20 percent. German bonds returned 8 percent in 2014 through yesterday, the gauges show. Spain’s earned 14 percent and Italy’s made 13 percent.
Record Lows
Germany’s benchmark 10-year bund yield slipped eight basis points to 0.76 percent and were as low as 0.719 percent, the least since Bloomberg started collecting the data in 1989. The nation’s 30-year yield fell 10 basis points to 1.66 percent and touched a record low of 1.601 percent.
French 10-year yields dropped to a new low even after the debt was placed on negative watch by Fitch Ratings late yesterday, falling to 1.112 percent. Treasury 10-year yields dropped below 2 percent for the first time since June 2013 after a report showed retail sales fell more in September than economists forecast. The 10-year yield declined 17 basis points to 2.03 percent and touched 1.86 percent, the lowest since May 2013.
Ten-year yields also dropped to records in Finland, which lost its AAA rating last week, Austria, Belgium and the Netherlands, countries with markets that are perceived to be more liquid and secure.
Growth Concerns
“This is really being driven by concerns over growth basically everywhere in the world,” said Elwin de Groot, a senior market economist at Rabobank in Utrecht, Netherlands. “Generally we are seeing risk appetite and demand for the more liquid paper and obviously bunds are still the choice there in particular.”
Yields slid across the region yesterday as Germany cut its growth outlook and investor confidence fell to the weakest level in two years, fueling concern that Europe’s biggest economy is heading for a recession and increasing pressure on the region’s central bank to implement asset-purchase stimulus, or quantitative easing.
“If things continue like they are now, then QE will really be the base scenario,” said de Groot, who expects the bund yield to drop to as low 0.7 percent in the next three months. The median of economist and strategist predictions compiled by Bloomberg is for the rate to end the year at 1.08 percent and rise to 1.14 percent by March.
Investors are betting that Germany’s consumer-price growth will be just over half the ECB’s target goal of 2 percent in the next decade, based on the 10-year break-even rate, a gauge of inflation expectations derived from the yield difference between bunds and index-linked securities. Volatility on Italian bonds was the highest in the euro area today, followed by those of Portugal, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
Debt Crisis Reawakens in European Bonds as Greece Roils Market
European government-bond traders would be forgiven for thinking they’d stepped back in time to 2012.
Today’s selloff in Greek securities, the biggest since July of that year, triggered a schism in sovereign debt evocative of those days before European Central Bank President Mario Draghi pledged to do whatever it took to defend the euro.
Yields on 10-year securities from Europe’s most-indebted nations surged, led by Greece and sweeping up Portugal, Ireland and Italy. At the same time, benchmark yields in the so-called core, which includes Germany and France, tumbled to records as investors sought the safest assets.
The differing fortunes of Europe’s sovereigns echo their performance during the region’s debt crisis, when concern the currency bloc may splinter drove the yield gap, or spread, between German bonds and those of Greece, Ireland, Italy, Portugal and Spain to the widest since the euro started in 1999. Following Draghi’s pledge to hold the currency bloc together, accommodative policies from the ECB have largely boosted bonds across the region in unison.
“We’ve seen a tipping off the edge in risk sentiment,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “Rather than what we’ve seen in the last few years, it’s what we used to see before that.” Greece’s 10-year (GDBR10) yield increased 82 basis points, or 0.82 percentage point, to 7.83 percent at 4:13 p.m. London time, the biggest increase since July 23, 2012. Draghi gave his speech, credited by an ECB lawyer this week as helping to save the euro, three days after that 199 basis-point spike in 2012.
The rate on similar-maturity Italian bonds increased nine basis points today, the most since June 10, to 2.39 percent, while that on Portuguese 10-year debt was 21 basis points higher at 3.28 percent.
Germany’s benchmark 10-year bund yield fell seven basis points to 0.77 percent after touching 0.719 percent, the lowest since Bloomberg started collecting the data in 1989. Yields on French 10-year bonds, put on watch for a possible downgrade by Fitch Ratings yesterday, tumbled as much as nine basis points to a record 1.112 percent.
Greek 10-year bonds yielded 706 basis points, or 7.06 percentage points, more than similar-maturity German debt today. The spread peaked at 42.4 percentage points in March 2012.
German Bond Yields Drop to Records on Economy; Greek Debt Slides
German government bonds rose with their euro-area peers, pushing 10-year (GDBR10) yields from Austria to Spain down to records, as concern the global economy is slowing boosted demand for fixed-income assets.
French yields dropped to a new low even after the debt was placed on negative watch by Fitch Ratings late yesterday. That followed Standard & Poor’s Oct. 10 lowering of the nation’s outlook to negative from stable. Ten-year yields also dropped to records in Finland, which lost its AAA rating last week, Belgium and the Netherlands. Greek bonds extended their slide, pushing 10-year yields to a seven-month high.
“This is really being driven by concerns over growth basically everywhere in the world,” said Elwin de Groot, a senior market economist at Rabobank in Utrecht, Netherlands. “Generally we are seeing risk appetite and demand for the more liquid paper and obviously bunds are still the choice there in particular.”
Germany’s benchmark 10-year yield slipped two basis points, or 0.02 percentage point, to 0.82 percent at 11:45 a.m. London time after reaching 0.81 percent, the least since Bloomberg started collecting the data in 1989. The 1 percent bund due in August 2024 rose 0.14, or 1.40 euros per 1,000-euro ($1,265) face amount, to 101.66.
‘Base Scenario’
Yields slid across the region yesterday as Germany cut its growth outlook and investor confidence fell to the weakest level in two years, fueling concern that Europe’s biggest economy is heading for a recession and increasing pressure on the region’s central bank to implement asset-purchase stimulus, or quantitative easing.
“If things continue like they are now, then QE will really be the base scenario,” said Rabobank’s de Groot, who expects the bund yield to drop to as low 0.7 percent in the next three months. The median of economist and strategist predictions compiled by Bloomberg is for the rate to end the year at 1.08 percent and rise to 1.14 percent by March.
Greek bonds have slid this week, with 10-year yields breaching 7 percent for the first time since March, after euro-area finance ministers clashed with the nation’s leaders over their desire to sever a bailout program.
Greek Concern
The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed with the European Union and the International Monetary Fund. Ten-year rates increased 57 basis points today to 7.58 percent after reaching 7.59, the most since March 14. The yield has risen 0.98 percentage point since the end of last week.
The region’s more secure bonds are rallying as sliding energy prices dim inflation prospects, preserving the value of payments on fixed-income assets.
Investors are betting that Germany’s consumer-price growth will be just over half the ECB’s target goal of 2 percent in the next decade, based on the 10-year break-even rate, a gauge of inflation expectations derived from the yield difference between bunds and index-linked securities.
France’s 10-year yield dropped as much as four basis points to a record 1.158 percent, while the equivalent rate in Finland reached 0.934 percent. The yield on Dutch debt due in a decade touched 0.948 percent and that on similar-maturity Austrian bonds fell to 1.021 percent. Spanish rates declined to 2.019 percent. Volatility on German bonds was the highest in the euro area today, followed by those of Greece and Ireland, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
German government securities returned 8 percent this year through yesterday, Bloomberg World Bond Indexes show. Spain’s returned 14 percent and Italy’s made 13 percent.
source: Bloomberg