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Canadian growth surprise spurs futures weakness
Mon, Mar 1 2010, 15:56 GMT
Bond prices are a little easier to begin the week with a stories of a potential solution to the problems facing the Greek government as it considers issuing bonds to replace forthcoming maturities. A strong reading for fourth quarter Canadian growth also sent bill prices down sharply as investors mull the impact on decision making at the central bank.
– Futures prices are lower by a tick from December outwards – but given the
recent curve flattening seen last week, this is minor news. The December
contract has an implied yield of 0.81%, while a four tick drop in March notes
lifted the 10-year yield to 3.62% today.
March bunds are 11 ticks lower at 124.33 where the yield
stands at 3.11% and still extremely close to cycle lows as Euro-tension remains
in place. The rumored German proposal to have state-owned banks buy Greek
government debt that fails to find natural buyers may steer a course between
German politicians and tax payers given the potential for what could become an
underwriting process that lessens the cost of debt and allows the taxpayer to
actually profit from the deal.
There was a day when pressure on the pound would force
interest rates higher. The implicit rule-of-thumb was used by traders to measure
the effective easing in the overall monetary stance when the pound shed its
value. But that’s not the case these days – at least not for today – and short
sterling is down in line with euroibor futures. March gilts are, however, facing
a tougher time staying afloat and are down 23 ticks on the day at 115.33 to
yield 4.07%.
–10-year government bond prices marked time ahead of
Tuesday’s interest rate decision from the RBA with the yield static at 5.42%.
Some of today’s positive sentiment was lost when China’s PMI revealed the
slowest pace of expansion in a year. Its PMI read 52.0 for February after 55.8
in January.
Bills dropped
significantly after a 5% annualized pace of expansion for the fourth quarter.
Futures prices from December out are six ticks lower as yields rise for fear of
a sooner-than-expected rate rise from the Bank of Canada. Bond yields rose to
3.41%.
JGB future declined by 14 ticks to yield
1.30% after a government official again suggested that the Bank of Japan do more
by buying bonds directly to lower yields and spur recovery.