BLBG:Spain, Italy Yields Fall As Dollar Fluctuates Before Fed
Spanish and Italian bonds rose for a second day on speculation European leaders are seeking ways to cut countries’ borrowing costs. Stocks and U.S. index futures rose as Greece’s Pasok party leader Evangelos Venizelos said the country is forming a government and before the Federal Reserve announces whether it will take new steps to boost the economy.
The yield on the Spanish 10-year bond fell 18 basis points to 6.86 percent at 7:45 a.m. in New York, with the equivalent maturity Italian yield 12 basis points lower. The Stoxx Europe 600 (SXXP) Index added 0.3 percent and Standard & Poor’s 500 Index futures increased 0.2 percent. Japan’s Topix rallied 1.7 percent to the highest since May 15 after exports beat estimates. The Dollar Index fell less than 0.1 percent. Turkey’s lira gained after Moody’s Investors Service upgraded the country’s debt. Cotton climbed 1.2 percent after jumping 6 percent yesterday.
Venizelos said a policy statement for the government is still being drafted and that a meeting later today will take final decisions on who will be appointed to the government. The Fed is expected to announce added stimulus measures as soon as this week’s meeting, according to 12 of the 21 primary dealers who trade with the central bank. French President Francois Hollande said European leaders are exploring ways for the rescue fund to buy debt from countries like Italy that have taken fiscal consolidation measures.
“The Federal Open Market Committee is taking center stage with expectations once again high that the Fed will finally do something to stimulate increasingly sluggish growth,” said Markus Huber, head of German sales trading at ETX Capital in London. “The Fed will have to deliver something today.”
Extending Maturities
The yield on the 30-year Treasury bond rose less than one basis point to 2.74 percent. The Fed will probably decide today to expand Operation Twist beyond $400 billion to spur growth and buy protection against a deeper crisis in Europe, according to a Bloomberg News survey of economists.
Fifty-eight percent of respondents in a June 18 poll said the Fed will prolong the program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio. The current program ends this month.
U.S. futures were little changed after a four-day rally in the S&P 500. Procter & Gamble Co. (PG) dropped 1.6 percent in European trading after the world’s largest consumer-products company cut its forecasts.
Three shares rose for every two that fell in the Stoxx 600. Aer Lingus Group Plc jumped 13 percent in Dublin trading as Ryanair Holdings Plc revived its push to purchase the airline with an offer valuing the company at 694 million euros ($883 million). Reckitt Benckiser Group Plc and Unilever fell more than 1 percent after P&G cut is outlook.
ESM Funds
Spain’s two-year note yield fell 13 basis points and Italy’s yield slipped 17 basis points. Hollande said “we’re looking at the ways and means” to use the European Stability Mechanism, the euro region’s bailout fund.
“There’s some talk about the ESM buying Spanish and Italian bonds and it looks like it’s going to be discussed at a European level,” said Padhraic Garvey, head of developed debt markets at ING Groep NV in Amsterdam. “That is giving Italy and Spain a short-term boost but it’s only talk at the moment, there’s nothing concrete.”
The yield on the German 10-year bund rose six basis points and the two-year note yield added two basis points. Germany sold 4.005 billion euros ($5.09 billion) of two-year notes at an average yield of 0.10 percent.
The New Zealand dollar weakened against all 16 of its major peers after a report showed the nation’s current-account deficit widened more than economists estimated.
Cotton Rallies
Cotton has climbed 19 percent in five days on speculation stockpiles won’t be enough to meet demand with a sale pending to China, the world’s largest buyer. China is seeking to buy 1 million metric tons of cotton, according to two executives familiar with the matter. Brent crude dropped 0.5 percent to $95.29 a barrel and copper declined 0.6 percent.
The MSCI Emerging Markets Index (MXEF) added 0.5 percent, poised for its highest close since May 14. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 0.3 percent. Turkey’s benchmark equity gauge jumped 1.1 percent the lira strengthened 0.5 percent against the dollar after Moody’s raised its rating on the country’s debt to one level below investment grade.
To contact the reporters 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
