BS: Treasuries, Stocks Advance as Fed Meets; Irish Bonds Decline
Nov. 3 (Bloomberg) -- Treasuries rose, driving the 30-year yield to a one-week low, while stocks and U.S. index futures gained as the Federal Reserve discusses additional stimulus and after Republicans won control of the House of Representatives. Irish bonds plunged on bank loss concern.
The yield on the 30-year U.S. note fell to 3.90 percent at 9:05 a.m. in New York, after earlier declining to 3.887 percent, the lowest since Oct. 25. The extra yield that investors demand to hold Irish 10-year bonds instead of German bunds climbed to a record 497 basis points. The Standard & Poor’s 500 Index futures increased 0.1 percent and the Stoxx Europe 600 Index gained 0.4 percent. Cotton advanced 3.7 percent to an all-time high and crude oil jumped as much as 1.4 percent to $85.04 a barrel.
The Fed will probably restart buying bonds to fuel economic growth, pledging to purchase $500 billion or more in securities, 29 of 56 economists in a Bloomberg survey said. Republicans gained at least 60 House seats yesterday, capitalizing on concern about government spending and delivering a rebuke to President Barack Obama’s domestic agenda.
“Given the disparate voices within the Fed we think the approach will be a balance between promising the potential for big action but committing less up front and giving themselves lots of wiggle room to adapt to changing circumstances,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report today. “It’s unlikely that the Fed will want to disappoint the market.”
Treasuries
The yield on the 10-year Treasury note declined two basis points to 2.57 percent. The government said it plans to auction $32 billion of three-year notes, $24 billion of 10-year securities and $16 billion of 30-year bonds next week.
Irish 10-year bonds dropped for the seventh straight day, sending the yield up 10 basis points to 7.52 percent on concern that the government will have to pump more money into Allied Irish Banks Plc, whose subordinated-debt swaps signal a 60 percent probability of default within the next five years. The cost of insuring Irish sovereign debt against default surged to a record, with credit-default swaps rising 15.5 basis points to 533.5, according to CMA, a data provider.
The difference in yield, or spread, between Portuguese 110- year notes and German bunds, Europe’s benchmark government debt securities, widened six basis points to 383 basis points. The Greek-German spread increased five basis points to 837 basis points.
Bondholders to Pay
German Finance Minister Wolfgang Schaeuble said the euro’s stability depends on making investors pay for future debt crises, brushing aside warnings that Germany’s demands are hurting Europe’s most indebted countries.
The S&P 500 has rallied 0.9 percent to a six-month high this week and surged 17 percent since July 2 as odds that Republicans would take control of the U.S. House increased.
Service industries in the U.S. probably expanded in October at a pace that shows limited improvement in the economy, according to a Bloomberg survey of economists. The Institute for Supply Management’s non-manufacturing index rose to 53.5 last month from 53.2 in September, the survey showed. The data is due at 10 a.m. New York time.
ADP Report
Companies in the U.S. boosted payrolls by more than forecast in October, data from a private report showed today. Employment increased by 43,000, according to figures from ADP Employer Services. The median estimate of 38 economists surveyed by Bloomberg News called for a 20,000 gain. Another report today may indicate factory orders increased.
About 78 percent of companies in the S&P 500 that have reported earnings since Oct. 7 have topped analysts’ estimates for per-share profit, according to data compiled by Bloomberg. Suncor Energy Inc. and WellPoint Inc. are among the companies scheduled to announce results today.
The Stoxx 600 advanced for a fifth day, the longest stretch of gains since July. Coloplast A/S, the world’s largest maker of ostomy and urology products, jumped 12 percent after profit topped forecasts. Societe Generale SA, France’s second-biggest bank, rallied 4.3 percent as earnings more than doubled. Statoil ASA fell 6.1 percent after cutting its output target. Anheuser- Busch InBev NV lost 2.2 percent as profit missed estimates.
The MSCI Emerging Markets Index gained for a fifth day, adding 0.9 percent. The Hang Seng China Enterprises Index of Hong Kong-traded shares advanced 2.2 percent, the biggest rally among equity indexes worldwide, after Goldman Sachs Group Inc. said the city’s shares have the most to gain from extra liquidity released by stimulus measures and China’s economic growth. South Korea’s Kospi Index rose 0.9 percent to the highest level since December 2007 as Deutsche Bank increased its outlook for the nation’s shares.
--With assistance from Claudia Carpenter, Mark Gilbert, David Merritt, Michael Patterson, Michael Shanahan and Daniel Tilles in London. Editors: Stephen Kirkland, Justin Carrigan
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Paul Sillitoe in London at psillitoe@bloomberg.net
