Think you are right on the money on Asia...now why would Dollar be clubbered against Yen..perhaps what Market sees is big and continious inflows of Money to Asia, thus indirectly helping Japan heavily invested there Big Time...
y Julie Rannazzisi, CBS MarketWatch
Last Update: 5:43 PM ET Jan 4, 1999
Corporate bonds
NEW YORK (CBS.MW) -- Treasurys remained in the red Monday,
recovering only marginally as U.S. stocks erased the lion's share of the
session's gains in late afternoon dealings.
Long-term Treasurys were stuck with the heftiest losses, weighed down
by the dollar's incredibly poor showing against the Japanese yen.
The 30-year benchmark bond (TRE=Z3-GB) was
off 27/32 to yield ($TYX) 5.15 percent. The
10-year (TRE=Z0-GB) lost 1/4 to yield ($TNX)
4.681 percent while the two-year (TRE=Y2-GB)
was off 2/32 to yield 4.579 percent. The discount
rate on the 52-week bill (BIL=Y1-GB) was off 3
basis points at 4.34 percent. In the futures pit, the
March T-bond contract closed off 10/32 to
127-15.
Elsewhere, the difference between the yield on a
30-year bond and 2-year note widened to 57.1
basis points from 54.6 at the close Thursday,
reflecting the underperformance of long-term issues.
The yield curve actually narrowed in early dealings,
but long issues fell apart when the greenback began
to crumble.
James Kochan, first vice president of fixed-income
research at Robert Baird & Co., said the long bond
could now test 5 1/4 percent yield. That's a level that may stop the
bleeding since it may spur purchases from bargain hunters. The 30-year
reached a high of 5.18 percent yield in intra-day dealings Monday.
The biggest Treasury offender Monday was the greenback, which
continued to get clobbered against its major trading partners.
The first day of euro trading took place without any major glitches and
saw the new currency strengthen in a show of confidence from investors,
injecting vigor into European stock and bond markets.
Strategists expect dollar/euro to remain on its weakening path as players
readjust their portfolios to include the euro.
Mitchell Held, co-head of economic market analysis at Salomon Smith
Barney, observed that the fundamentals point to a weakening of the dollar
against the euro and a strengthening against the yen in the next six months.
That's because growth prospects for Japan appear horrid while European
economies are expected to fare better than the U.S. on the growth front.
Dollar/yen was recently at 111.75, off a whopping 1.8 percent, while
dollar/euro stood at 1.1830, a smidgen higher compared to Thursday's set
rate of 1.17. See latest currency rates.
Meanwhile, stocks gyrated and the Dow Jones Industrial Average closed
up only 2.84 points after posting gains of as much as 168.90 during the
session. See Market Snapshot.
Bigger issues at work
The release of yet another weak report from the National Association of
Purchasing Management was overlooked by market players as bigger
issues appeared to be at work.
Bill Kirby, senior vice president at Prudential Securities, cited pressure
from the dollar and stocks but observed that Treasurys were seeing
increased competition from spread products, such as corporates, asset
and mortgage-backed securities.
Issuance in these markets is expected to be heated this month and investor
appetite for these deals appears to be healthy indeed after the scare that
froze the sector in the third quarter of 1998.
Domestically, Kirby said investment dollars would make their way into
spread products in the near-term, putting Treasurys at a disadvantage.
And European issuance is expected to take place at a healthy clip, with
ample room for the new euro-denominated paper to be well-received as
institutions increase their holdings of euro securities.
Charles Quigley, Treasury strategist at Chase Securities in London, said
the corporate market began with a bang in 1999, with myriad issues
launched in various currencies keeping investors busy. Borrowers that
waited until the new year to bring their deals to market have come back
with a vengeance, he remarked.
The prospect of a large new issue calendar in the U.S. corporate market
also put a damper on Treasury prices Monday, with some hedge-related
plays pressuring the intermediate sector.
Market participants are also keeping a watchful eye on Japan, which saw
a mind-boggling rise in yields in recent weeks. Japanese bonds ended on
the plus side Monday but investors are worried sharply higher Japanese
yields will have an extremely negative impact on U.S. issues. See related
story. Quigley noted that the recent rout in Japanese bonds is a significant
development, and will take its toll on international bond markets.
NAPM index strangely a yawn
The day's economic calendar was punctuated by the NAPM's index,
which came in at 45.1 percent in December compared to November's
46.8 percent. A survey of analysts and economists polled by CBS
MarketWatch.com had predicted the index to come in at 47.1 percent in
December. But the market barely paid attention to the release, typically
one of the biggest movers, as economic data took a backseat Monday.
Within the index, weakness was detected in the prices paid index, the
employment index and the export orders subcomponent. The new orders
index rose a smidgen to 46.0 percent from 45.5 percent in November.
See full story.
"It's a number that should have produced something of a rally," Kochan
said, though he noted that one of the leading components of the index --
new orders -- managed to eke out a small gain.
The capstone of the week will hit the market Friday, when the
employment report for December will be unleashed.
Tuesday will see the release of only second-tier releases, including
November construction spending, seen up 0.4 percent, and the weekly
retail sales data from BTM/Schroder and LJR Redbook. See daily
calendar, weekly calendar, and earnings calendar.
Elsewhere, Atlanta Federal Reserve Bank President Jack Guynn,
speaking at a luncheon Monday before the downtown Atlanta Rotary
Club, predicted a small slowdown in the U.S. economy in 1999. He
expects gross domestic product to grow at around 2.5 percent and
predicts slower consumer spending. He predicts inflation to grow at a 2
percent clip this year. Regarding the dollar and the euro, Guynn said it was
too early to gauge the impact the former would have on the latter.
Focusing on commodities, the closely-watched Bridge/Commodity
Research Bureau was up a hefty 2.60 to 193.82 while New York light
sweet crude for February delivery rose 29 cents to $12.34. |
