BLBG:Treasuries Drop, Dollar Weakens on Moody’s Downgrade Warning as Gold Rises
Treasuries and the dollar weakened, while the cost of insuring U.S. debt against losses rose to the highest level in more than a year after Moody’s Investors Service said America may lose its Aaa rating. European stocks fell, U.S. index futures were little changed and gold advanced.
The Dollar Index retreated 0.3 percent at 10:54 a.m. in London, while the 10-year Treasury yield added two basis points to 2.90 percent. Credit-default swaps on U.S. debt jumped 4.5 basis points to 55, the highest since February 2010, according to CMA. Italy’s 10-year yield rose 16 basis points after a debt sale. The Stoxx Europe 600 Index lost 0.9 percent while futures on the Standard & Poor’s 500 Index rose less than 0.1 percent. Gold climbed to an all-time high of $1,589.80 an ounce.
Moody’s began its first U.S. review since 1995 as talks to raise the $14.3 trillion debt limit stall, reflecting concern political gridlock will lead to a default. Federal Reserve Chairman Ben S. Bernanke will testify for a second day before lawmakers after saying yesterday he’s prepared to provide more stimulus if needed. Italy’s Senate votes on budget cuts to tame Europe’s second-largest debt burden.
“There’s uncertainty and confusion about whether we are going to see executives and legislators settle on the debt limit and the Moody’s review suggests that there may be a problem if they cannot reach a deal,” said Tim Leung, who manages about $1.5 billion at IG Investment Ltd. in Hong Kong.
Dollar, Yen
The dollar depreciated 0.5 percent against the euro to $1.4232, and weakened as much as 1.2 percent versus the Swiss franc to a record. The New Zealand dollar strengthened against all 16 major peers monitored by Bloomberg after a report showed manufacturing and farming led the fastest quarterly growth in more than a year, spurring speculation the central bank will raise interest rates this year.
The yen, little changed versus the greenback, slid about 1 yen per dollar within a few minutes of the start of London trading amid speculation the nation will intervene in markets to limit its gains.
The yield on the 30-year Treasury bond climbed four basis points to 4.21 percent before the U.S. sells $13 billion of the securities, the last of three auctions this week totaling $66 billion.
The yield on the Spanish 10-year bond rose six basis points, driving the premium investors demand to hold the debt instead of benchmark German bunds seven basis points higher to 314 basis points. The Portuguese two-year yield jumped 10 basis points. Italy’s five-year note yield rose six basis points to 5.10 percent after the government sold almost 5 billion euros ($7.1 billion) of debt.
Daily Mail
Two stocks fell for each that advanced in the Stoxx 600. Software AG, Germany’s second-biggest maker of business software, plunged 12 percent after reporting a decline in sales. Daily Mail & General Trust Plc lost 4.4 percent as the publisher of the Daily Mail newspaper said advertising revenue fell.
The gain in S&P 500 futures indicated the U.S. equities gauge will climb for a second day. JPMorgan Chase & Co., the second-largest U.S. bank, is due to report earnings before the start of U.S. trading today. Google Inc., the biggest Internet search company, will release results after markets close.
A report at 8:30 a.m. in Washington may show retail sales fell 0.1 percent in June after a 0.2 percent May decrease, according to the median forecast of 79 economists surveyed by Bloomberg News. Other data might show wholesale prices dropped last month and initial claims for jobless benefits declined to 415,000 last week from 418,000 in the prior period.
Emerging Markets
The MSCI Emerging Markets Index rose 0.1 percent. The Bombay Stock Exchange Sensitive Index climbed 0.9 percent after June inflation was lower than economists’ estimated. The gauge fell 0.8 percent earlier after bomb blasts last night killed at least 17 people in India’s financial hub. The Shanghai Composite Index rose 0.5 percent to the highest level in a week, while Russia’s Micex Index slipped 0.2 percent.
Soybeans rose for the ninth consecutive day, the longest streak since August, advancing 0.4 percent. Silver futures jumped 1.2 percent to $38.595 an ounce after jumping 7.1 percent yesterday.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
