BLBG:Bond Risk Rises in Europe to Record as S&P Futures Fall on Debt; Oil Drops
French and Belgian bonds slumped as the cost of insuring European government debt against default rose to a record on concern the region’s credit crisis is crimping global growth. U.S. index futures declined, while European stocks were little changed.
The yield on France’s 10-year bond climbed 10 basis points to 3.63 percent at 6:23 a.m. in New York. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose eight basis points to an all-time high of 373, and the euro weakened 0.8 percent after Germany failed to find buyers for 35 percent of the bonds it offered at an auction. Standard & Poor’s 500 futures slipped 0.6 percent, while the Stoxx 600 Europe Index rose less than 0.1 percent. Oil retreated 1.9 percent.
European services and manufacturing output contracted for a third month in November, while a preliminary gauge indicated China’s manufacturing shrank by the most since March 2009, reports by Markit Economics and HSBC Holdings Plc showed. Luxembourg Finance Minister Luc Frieden said talks on the rescue plan for Dexia SA are “continuing intensively.”
“The costs of Dexia’s guarantee are putting Belgium’s finances under such pressure that France may have to take a larger slice of the losses, which some analysts feel could be the straw that may break the back of France’s credit rating,” Bill Blain, a strategist at Newedge Group in London, wrote in a research note. “Concerns on U.S. debt, economic performance and rising China fears contribute to the miserable background.”
Bond Risk
The yield gap between Belgian 10-year notes and benchmark German bunds widened to a euro-era record. The yield on Spain’s 10-year bonds increased five basis points to 6.65 percent. Credit-default swaps insuring French government bonds rose seven basis points to 247, Belgium was 11 basis points higher at 362 and contracts tied to Spanish debt climbed four basis points to 489, all records, CMA prices show. a Moody’s Investors Service analyst said.
“The credit picture in Europe will continue to be negative for quite some time since policy makers at the core are trying to reconcile conflicting objectives,” Bart Oosterveld, a managing director at Moody’s Investors Service, said at a conference in Paris today.
Italian 10-year bond yields rose six basis points, paring an advance of as much as 17 basis points, as the European Central Bank bought the nation’s debt, according to three people with knowledge of the transactions, who declined to be identified because the trades are confidential. A spokesman for the ECB in Frankfurt declined to comment today.
Germany’s 10-year bond yield rose four basis points to 1.96 percent. The government failed to get sufficient bids at an auction of benchmark 10-year bunds today to reach its maximum sales target of 6 billion euros ($8.06 billion).
The cost for European banks to fund in the U.S. currency approached the highest level since December 2008. The three- month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, fell to 135 basis points below the euro interbank offered rate, with four basis points of a record.
The euro fell 0.3 percent against the yen, and slipped for a fourth straight day versus the Swiss franc, the longest run of declines since Sept. 5. The pound declined 0.3 percent to $1.5584 as Bank of England minutes from this month’s meeting showed policy makers were unanimous in their decision to maintain the target for asset purchases this month, as some officials said an increase in stimulus may be needed in future.
Three shares fell for every two that gained in the Stoxx 600. Mining shares retreated after Australia’s lower house of parliament passed legislation for a tax on coal and iron-ore profits. Rio Tinto Group declined 1.5 percent.
Johnson Matthey Plc added 2.9 percent after the producer of a third of all catalysts reported a 43 percent jump in fiscal first-half profit. Axa SA rose 2.7 percent after Chief Executive Officer Henri de Castries said the company’s margins are satisfactory and it is continuing to buy French government debt.
Durable Goods
The decline in U.S. futures indicated the S&P 500 will drop for a sixth day. A Commerce Department report due at 8:30 a.m. in Washington may show that durable goods orders dropped 1.2 percent in October, economists said. A separate release at the same time will probably show personal spending increased 0.3 percent last month, slowing from a 0.6 percent gain in September, according to economists surveyed by Bloomberg.
The $29 billion of seven-year Treasury notes being sold today yielded 1.41 percent in pre-auction trading, versus 1.791 percent at the previous sale of the securities on Oct. 27.
Crude fell to $96.10 a barrel in New York after the American Petroleum Institute said fuel supplies climbed 5.42 million barrels last week. An Energy Department report today may show they rose by 1 million barrels, according to a Bloomberg News survey. Gold for immediate delivery fell 0.6 percent to $1,689.43 an ounce, while copper retreated 1.3 percent.
The MSCI Emerging Markets Index lost 1.4 percent at 9:50 a.m. in London, declining for a seventh day, the longest slump since 2009. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 2.8 percent. Benchmark gauges in India, South Korea and Taiwan lost more than 2 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: at swallace6@bloomberg.net
