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Yields off to a slow start to the week
Mon, Mar 15 2010, 14:30 GMT
Global long ends are back in rally mode as most Asian stock markets pulled back after recent gains and investors prepare for disappointment from an EU meeting in Brussels. Fears are that any agreement on principles that could lead to the provision of financial assistance to Greece as it moves forward with fiscal reform will not make the Eurozone’s sovereign debt crisis disappear.
–Eurodollar futures remain higher after a New York Fed manufacturing survey
indicated positive manufacturing activity within the sector albeit at a lesser
pace. Investors also await the outcome of the March FOMC meeting Tuesday and
will examine the statement for any change to the Fed’s comments about the
longevity or otherwise of the ultra-low monetary policy stance. December
expiration Eurodollars are higher by three basis points at 99.13 carrying an
implied yield of 0.87%. June note futures are in a very narrow trading range to
commence the week and sit one tick higher at 116-26 to yield 3.71%.
–Aussie bills rose in light of weakness in regional
stock prices. Bill prices added three basis points as implied yields dropped
along the curve. Dealers await the latest RBA minutes this week and will scour
the notes in the hunt for clues as to how much more tightening the central bank
feels it may need to add on top of the 1% it’s already administered. December
bills at 94.66 imply a 5.34% yield.
Canadian bills are
extremely quiet with no change to note.
bund prices
are 10 ticks higher at 122.65 after a day of weakness on Friday. Short European
futures prices are also higher in early afternoon trading with the December
contract higher by three ticks to 98.79 where the implied yield stands at
1.21%.
Short sterling futures have accentuated gains at the back end
of the curve where prices are three ticks higher, while the front of the yield
curve is only marginally higher. June gilts at 114.32 are higher by 37 ticks and
are the strongest among European markets after a Moody’s Investor Services
report warned that the nation’s AAA credit rating remains safe – for now.
Deteriorating fiscal conditions and a perilous post election situation may yet
rob the nation of a rating it has always been assures of. Gilts are higher over
the potential for the Bank of England to ease its quantitative stance further in
light of comments from one member of the committee who noted the potential for
GDP to head into reverse for one quarter.
Bonds rose 10 ticks at the June future
to close at 138.95 where the yield is 1.31%. This week the Bank of Japan is due
to conclude a two-day policy meeting at which it is widely expected to bow to
government wishes to provide further assistance to a banking system struggling
to revive demand for loans.