BLBG:German Bonds Rise As Euro Weakens, Bank Debt Risk Climbs
Germany’s borrowing costs fell to a record, the euro approached a two-year low versus the dollar and the cost of insuring bank debt rose amid concern Europe’s debt crisis will worsen. Corn jumped to a 10-month high and soybean meal gained to an all-time high.
The yield on Germany’s five-year note declined as much as three basis points to 0.282 percent and was at 0.289 percent as of 6:50 a.m. in New York. The euro weakened 0.5 percent to $1.2189. Credit-default swaps on senior bank bonds in Europe rose to a one-week high. The Stoxx Europe 600 Index (SXXP) added 0.2 percent after losing 0.2 percent. Standard & Poor’s 500 Index futures slipped 0.2 percent. Corn advanced 4.1 percent, soybeans climbed to the highest since July 2008 and soybean meal gained 2.9 percent on the U.S. drought.
Germany’s top court said it won’t rule on whether to suspend the euro-area’s bailout fund and fiscal pact until Sept. 12, more than two months after it held a hearing on the measures. The European Central Bank advocated imposing losses on senior bondholders of the most damaged Spanish banks, the Wall Street Journal said, citing people familiar with the discussions. Reports today showed inflation in the euro region held at the lowest since February 2011 last month and imports fell in May, before U.S. data that may indicate retail sales rose and manufacturing in the New York region picked up.
“Investors are not really concerned about returns, they just want to know they will get their money back,” said Gianluca Ziglio, an interest-rate strategist at UBS AG in London. “The market is still concerned about the euro-region situation. There is risk aversion and ongoing fear about the crisis escalating, which means investors will continue to focus on bonds from the core countries.
Record-Low Yields
Germany’s two-year note yield slipped to minus 0.058 percent, the least since Bloomberg began collecting the data in 1990. Rates on similar-maturity French and Dutch bonds reached 0.09 percent and minus 0.01 percent, respectively, also records. France’s five-year debt yield dropped six basis points to a record 0.866 percent.
The 10-year U.S. Treasury yield slipped one basis point to 1.48 percent.
The euro weakened 0.7 percent versus the yen as Japan’s currency appreciated versus all but one of its 16 major peers. The dollar slipped 0.2 percent versus the yen.
The Markit iTraxx Financial Index of credit-default swaps tied to the senior debt of 25 European banks and insurers snapped two days of declines and climbed seven basis points to 280, the highest since July 9.
Three shares gained for every two that fell in the Stoxx 600. SEB AB, the Swedish bank that’s the second-largest lender in the Baltic countries, jumped 6.8 percent after earnings topped estimates. G4S Plc tumbled 8.5 percent as the world’s biggest security company said it may incur a 50 million-pound ($78 million) loss after failing to provide enough guards for the Olympic Games.
Price-Fixing Settlement
The decline in S&P 500 futures indicated the U.S. equity gauge will fall for the seventh time in eight days. Visa Inc. and MasterCard Inc. climbed at least 1.8 percent in German trading after agreeing to a settlement in a price-fixing case brought by retailers over credit-card swipe fees.
Retail sales in the U.S. probably rose in June for the first time in three months as a gain in automobile demand outweighed spending on other goods, economists said before a report at 8:30 a.m. Washington time. The projected 0.2 percent advance would follow a 0.2 percent May drop, according to the median forecast of 72 economists surveyed by Bloomberg.
Other data today from the Federal Reserve Bank of New York is projected to show factories in its region expanded at a faster pace in July. A 10 a.m. report from the Commerce Department may show inventories at U.S. businesses increased.
Food Prices
Rallies in corn, wheat, soybeans and soybean meal, used in animal feed, may mean higher food prices after the Food & Agriculture Organization’s world food index dropped for three consecutive months through June. Corn is up 19 percent this year and soybeans climbed 32 percent. Wheat gained as much as 3 percent to $8.73 a bushel, the highest since Feb. 18, 2011. Soybean meal prices have jumped 49 percent this year and today rose to $468 for 2,000 pounds.
The MSCI Emerging Markets Index (MXEF) was little changed after rising as much as 0.3 percent. The Shanghai Composite Index (SHCOMP) fell 1.7 percent, the lowest level since March 13, 2009, as concern about slumping profits overshadowed speculation the government will introduce stimulus measures for the economy. The Philippine Stock Exchange Index (PCOMP) advanced 1.6 percent, the most in a month, after the central bank signaled it may ease monetary policy further this year. The Micex Index gained 0.2 percent in Moscow and the South Africa’s benchmark index fell 0.2 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net.
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
