looking for the nearest psycho ward
Although I won't be buying more miners just yet, that chart hardly induces me to sell any. Speaking of psycho's, is there anyone who thinks the current ramp is anything apart from a short lived bear market rally, boosted by the potential of a rate cut? A rate cut will be sold the day it's announced almost...if that.
Treasuries jump on confidence data
news.ft.com
Expectations of a US rate cut intensified on Tuesday after a consumer confidence survey dropped to the lowest level since 1993, sending Treasuries sharply higher.
The Conference Board's index of consumer confidence fell to 79.4 in October from 93.7 in September, far lower than consensus expectations of a reading of 90.
This raised expectations that the Federal Reserve might cut rates as soon as next week if forthcoming data on employment and manufacturing are soft.
"The extent of the decline in consumer confidence in October is both dramatic and surprising," said economists at Bear Stearns in a report. "If the degree of weakness in the labour market suggested by this report is confirmed in the October payrolls and unemployment data, then a rate cut this year is likely to take place."
October payrolls will be released on Friday, and the Fed's Open Market Committee meets on November 6.
The 10-year US Treasury note gained 1 5/32 to 103 7/16, sending the yield down to 3.946 per cent, and the 30-year bond was up 1 11/32 higher at 105 11/32 with a yield of 5.018 per cent. The two-year note rose 1/4 to 10011/16, yielding 1.768 per cent.
Eurozone government bond prices also rallied on the back of the US data, as stock market prices fell. The interest rate outlook and the stock market backdrop continue to drive bond prices.
An announcement by the German government that it intended to borrow €6bn more this year than planned had no impact on prices. It will increase auctions of two, five and 10-year debt by €2bn each. Traders said the increase was expected, due to the larger than expected budget gap already experienced by Germany.
The two-year German schatz yield ended the day 7.2 basis points lower at 3.121 per cent. The 10-year German bund yield was 6.4bp lower at 4.493 per cent.
In the UK, strong domestic data were overshadowed by the US statistics showing potential weakness and a fall in stock prices. The UK gilt future rose 0.42 to 119.02.
UK consumer credit grew £2.04bn in September, just below the record £2.11bn growth seen in December.
Cash prices were steady Tuesday, with the two-year gilt yield unchanged at 3.625 per cent and the 10-year yield at 4.585 per cent.
Japanese government bond prices rose after candidates backed by the ruling coalition won a majority of seats in Sunday's by-elections - increasing the possibility that prime minister Junichiro Koizumi would maintain the government's debt issuance at Y30,000bn this year.
Increasing the country's debt issuance leads to concern about oversupply in the market, which could depress JGB prices.
Investors also bought JGBs on hopes that the Bank of Japan would further loosen monetary policy when it meets Wednesday. Some economists say that the BoJ could increase its current account target to a range of Y15,000bn to Y18,000bn.
But traders are also cautious ahead of the government's broad "anti-deflation" package, set to be released this week.
Economics minister Heizo Takenaka was forced to postpone the announcement of the package last week, after senior Liberal Democratic party officials deemed it too harsh.
Mr Takenaka's plan calls for a change in the way banks treat deferred tax assets as part of their capital base, which could send their capital adequacy ratios below 8 per cent.
The benchmark 10-year JGB rose 0.268 to 100.535, sending the yield down 0.03 to 1.04 per cent. The key 10-year JGB futures contract was unchanged at 141.60. |
