BLBG: Treasuries Retreat As U.S. Stocks Fluctuate Before Fed
Treasuries fell and U.S. stocks drifted between gains and losses as investors awaited the Federal Reserve’s policy statement. Spanish and Italian bonds rallied on bets European leaders will cut borrowing costs, while the euro strengthened as Greece began to form a government.
The rate on the benchmark 10-year U.S. Treasury note added five basis points to 1.67 percent at 10:15 a.m. in New York. The Standard & Poor’s 500 Index fluctuated near 1,358 as Adobe Systems Inc. and Procter & Gamble Co. slid on earnings forecasts that disappointed investors. Spanish 10-year yields fell 30 basis points to 6.74 percent and Italian yields dropped 17 points. The euro rose 0.3 percent to $1.2723, a one-month high.
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A visitor stands and watches stock index information displays at the Madrid Stock Exchange in Madrid. Photographer: Angel Navarrete/Bloomberg
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June 18 (Bloomberg) -- Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., talks about the outlook for global bonds and investment strategy. Gross speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)
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June 19 (Bloomberg) -- Mark Mobius, executive chairman of Templeton Emerging Markets Group, speaks about the outlook for emerging-market stocks, China central bank monetary policy and his investment strategy. Mobius is buying more equities in emerging markets as economic growth remains buoyant in China and valuations plunge from historical averages. He also discusses Europe's debt crisis. Mobius spoke in Singapore with Bloomberg's Weiyi Lim. (Source: Bloomberg)
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June 20 (Bloomberg) -- Tim Harris, chief investment officer at Lloyds TSB Private Banking Ltd., talks about asset allocation and the European sovereign-debt crisis. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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June 20 (Bloomberg) -- Duncan Wooldridge, chief Asian economist at UBS AG, talks about Europe's sovereign debt crisis and its implications for Asian economies and financial markets. Wooldridge speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
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June 20 (Bloomberg) -- Andrew Bosomworth, a money manager at Pacific Investment Management Co., talks about the prospect of the European Central Bank resuming its bond-buying program. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
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June 20 (Bloomberg) -- Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs Group Inc. in Hong Kong, talks about Europe's sovereign debt crisis, Federal Reserve monetary policy and its implications for Asia's economies. He speaks with Susan Li, Rishaad Salamat, Mia Saini and Zeb Eckert on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
The Fed is may announce added stimulus measures as soon as this week, 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 that have taken fiscal consolidation measures. Greek political leaders agreed that New Democracy party head Antonis Samaras will lead a government that will seek relief from austerity measures tied to the nation’s bailout
“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 five basis points to 2.79 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.
The S&P 500 had closed higher for four straight days and reached its highest level since May 10 yesterday amid speculation policy makers will do more to safeguard the economic recovery.
The index has averaged a gain of 0.7 percent on days of Fed announcements since December 2008, according to Bespoke Investment Group, with an advance 71 percent of the time. The gauge averaged a gain of 0.5 percent before the announcements and a 0.2 percent advance from the time of the statement through the close, Bespoke’s study showed.
Earnings Forecasts
Procter & Gamble Co., the world’s largest consumer-goods company, declined 3.6 percent after cutting its earnings and revenue forecasts for the second time in less than two months, hurt by slowing sales growth in Europe and the U.S. Adobe Systems Inc., the largest maker of graphic-design software, fell 5.4 percent for the biggest drop in the S&P as it forecast sales and profit that trailed estimates after it began selling its products via subscriptions.
Two shares rose for every one that fell in the Stoxx 600. Aer Lingus Group Plc jumped 17 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.
Spain’s two-year note yield fell 24 basis points and Italy’s yield slipped 27 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.”
German Yields
The yield on the German 10-year bund rose eight basis points and the two-year note yield added four 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 13 of its 16 major peers after a report showed the nation’s current-account deficit widened more than economists estimated.
Japan’s Topix rallied 1.7 percent to the highest since May 15 after exports beat estimates.
The MSCI Emerging Markets Index (MXEF) added 0.4 percent, poised for its highest close since May 14. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 0.2 percent. Turkey’s benchmark equity gauge jumped 0.7 percent the lira strengthened 0.4 percent against the dollar after Moody’s raised its rating on the country’s debt to one level below investment grade.
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
