BLBG; European Bonds Gain With Stocks as Credit Risk Falls
European bond gains sent yields to record lows, junk-rated corporate credit risk fell to the lowest level since 2007 and stocks advanced after the European Central Bank added stimulus measures. The dollar headed for its best week since April versus the yen before payroll data.
The 10-year Italian bond yield slid 13 basis points to 2.80 percent at 6 a.m. in New York. European high-yield bond risk fell for a fourth day. The Stoxx Europe 600 Index climbed 0.3 percent and Standard & Poor’s 500 Index futures added 0.1 percent, following a record-high close yesterday. The euro declined versus all but one of its 31 major peers, losing the most against higher-yielding currencies including South Africa’s rand. The dollar was little changed versus the yen, headed for a 0.6 percent gain this week. Copper slid 1 percent.
Yields on Spanish, Belgian and Irish 10-year securities also fell to all-time lows a day after the ECB took deposit rates negative, the first major central bank to do so, and offered liquidity to lenders to encourage credit growth. Data today showed German industrial production rose less than estimated. U.S. employers probably added more than 200,000 workers for a fourth month in May, powering payrolls past the pre-recession peak for the first time.
The ECB has “taken an important set of steps forward in trying to keep expectations of interest rates and policy rates lower for longer,” said Luca Jellinek, head of European rates strategy at Credit Agricole SA’s corporate and investment banking unit in London. “What they’re talking about is trying to reintegrate the European credit market and that’s very good for the periphery.”
Bonds Climb
Spain’s 10-year yields fell 12 basis points, or 0.12 percentage point, to 2.70 percent, the least since Bloomberg began compiling the data in 1993.
French five-year yields dropped to a record 0.55 percent, while Irish 10-year rates dropped to as low as 2.47 percent and the yield on similar-maturity Belgian bonds touched 1.82 percent.
The cost of insuring against losses on high-yield company debt fell in Europe, with the Markit iTraxx Crossover index of 60 mostly junk-rated borrowers dropping six basis points to 231 basis points, the lowest since June 2007.
More than two shares advanced for every one that declined on the Stoxx 600, with trading volumes 20 percent higher than the 30-day average, according to data compiled by Bloomberg.
Centrica Plc gained 1.2 percent after the Times reported speculation that the owner of British Gas may attract a takeover bid from Qatar, Electricite de France SA or a private-equity group. The newspaper did not say where it got the information.
Commerzbank Audit
Commerzbank AG climbed 2.7 percent after the lender’s chief executive officer told Neue Zuercher Zeitung that he predicts the ECB will find no problems during its audit.
Banca Monte dei Paschi di Siena SpA dropped 2.9 percent after announcing that it will offer new shares to investors at a 35.5 percent discount in a rights offer.
The S&P 500 has climbed 0.9 percent this week. The Labor Department will report that U.S. employers hired a net 215,000 people in May, according to economists surveyed by Bloomberg News. The world’s largest economy created 288,000 jobs in April. The release, due at 8:30 a.m. in Washington, will probably also show that the unemployment rate rose to 6.4 percent last month from 6.3 percent in April.
The U.S. 10-year yield fell two basis points to 2.56 percent, having climbed from 2.48 percent at the end of last week.
The MSCI Emerging Markets Index added 0.3 percent, extending this week’s gain to 0.9 percent. India’s S&P BSE Sensex climbing 1.2 percent to a record and Turkey’s benchmark gauge headed for its third weekly advance. Malaysia’s ringgit gained 0.5 percent against the dollar and Russia’s ruble strengthened 0.2 percent. Poland’s zloty advanced 0.3 pecent versus the euro.
Yuan Gains
Hong Kong’s Hang Seng Index slipped 0.2 percent, erasing a weekly gain and the Shanghai Composite Index retreated 0.5 percent. The yuan traded in Hong Kong jumped the most in a week after the central bank raised the currency’s daily fixing by the most in five months.
The International Monetary Fund said yesterday China’s policy makers still have tools to keep economic growth at a medium to high level. Trade data on June 8 may show exports climbed 6.6 percent from a year earlier in May, more than April’s 0.9 percent growth, according to the median estimate in a Bloomberg News survey.
The euro slipped 0.3 percent to $1.3627 after jumping 0.5 percent yesterday. It weakened 0.3 percent to 139.52 yen and 0.5 percent versus the rand.
Copper dropped for a fourth day, the longest streak since March 3, to the lowest since May 9. The U.S. is the biggest buyer of the metal after China. U.K. natural gas extended declines to the lowest since August 2010 on warm weather. Feeder cattle climbed as much as 0.5 percent to a record. Feeder cattle are young cattle bought by feedlots, where they’re fattened and sold as live cattle to meatpackers.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net Stephen Kirkland
