BLBG: Treasuries Fall, Gold Gains on U.S. Debt Rift
Treasuries declined while gold rallied to an all-time high as American lawmakers wrangled over the nation’s debt ceiling. The Australian and New Zealand dollars climbed to post-float records versus the U.S. currency.
Ten-year Treasury yields were two basis points higher as of 3:05 p.m. in Tokyo, while the dollar slid against 14 of its 16 major counterparts. The so-called Aussie rose 0.9 percent and the kiwi strengthened as much as 0.7 percent. The MSCI Asia Pacific Index added less than 0.1 percent, while Standard & Poor’s 500 Index futures climbed 0.1 percent following a two-day drop in the U.S. gauge. Euro Stoxx 50 Index futures retreated 0.4 percent. Gold topped $1,625 an ounce for the first time.
A House vote on Speaker John Boehner’s two-step plan to raise the U.S. debt ceiling was postponed, casting new doubt on whether lawmakers and President Barack Obama will come to an agreement before an Aug. 2 deadline. The stalemate may cost America its AAA rating, adding $100 billion a year to government costs while dragging down economic growth, according to Wall Street bond dealers. Data today will likely show durable goods orders in the U.S. grew at a slower pace last month.
“This kind of deadlock isn’t good for sentiment,” said Yoo Byung Ok, a Seoul-based fund manager at UBS Hana Asset Management Co., which manages about $17 billion. “While the U.S. will eventually reach a deal by the deadline, the more important issue is whether the nation will smoothly proceed with measures for reducing debt. A potential downgrade of the U.S. credit rating also gives concern.”
Treasuries fell, pushing the yield on 10-year notes to 2.97 percent. Commerce department figures today are forecast to show durable goods orders increased 0.3 percent in June, following a 2.1 percent gain the previous month.
Veto Threat
The dollar traded at 80.02 Swiss centimes, after falling yesterday to an all-time low of 79.98. It slid 0.2 percent to 77.74 yen. Boehner said yesterday his two-step plan, which would cut $3 trillion in government spending, can pass both chambers of Congress. The Obama administration threatened to veto the plan, which the Congressional Budget Office said would save less than advertised.
“Until the market sees a clear solution as to how the U.S. debt problem can be resolved beyond just a temporary lifting of the debt ceiling, it will continue to be jittery,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $323 billion as of March 31. “The typical American and the government have overspent over the last decade, so you need a repairing of balance sheets on the part of the consumer and the government to get the house in shape again.”
U.S. Earnings
Amazon.com Inc. (AMZN) jumped in extended trading after the world’s largest online retailer forecast third-quarter sales that may exceed the average analyst estimate, while Las Vegas Sands Corp. (LVS) rallied after the casino company’s second-quarter profit beat analysts’ forecasts. Dow Chemical Co., Boeing Co. and ConocoPhillips are among companies scheduled to report earnings today.
“Assuming there’s no default and it’s just a downgrade, we can focus on some other things,” Bob Doll, chief equity strategist at Blackrock Inc., the world’s largest money manager, said in a Bloomberg Television interview. “Corporate earnings are phenomenal.”
About four shares declined for every three that gained on MSCI’s Asia Pacific Index, which earlier fell as much as 0.5 percent. Japan’s Nikkei 225 Stock Average dropped 0.5 percent and Australia’s S&P/ASX 200 Index retreated 0.8 percent.
China Shipbuilding Industry Co. rallied 1.1 percent, pacing gains on the Shanghai Composite Index today, after data showed first-half profits at Chinese industrial companies rose 28.7 percent from a year earlier. Tokyo Electric Power Co. sank 16 percent, the biggest decline on the regional gauge, after a revised draft bill showed shareholders will be asked to help compensate those afflicted by the Fukushima Dai-Ichi nuclear plant disaster.
Asia-Pacific Economies
The Australian dollar rose as much as 1 percent to $1.1062 after the Bureau of Statistics said consumer prices rose 0.9 percent in the second quarter from the previous three months. The median estimate of 25 economists surveyed by Bloomberg News was for a 0.7 percent increase. New Zealand’s dollar rose 0.6 percent to 87.54 U.S. cents, earlier reaching a record 87.65, after the nation’s business confidence improved.
The won strengthened 0.2 percent to 1,049.98 per dollar after data today showed South Korea’s economy expanded 0.8 percent in the second quarter, matching the median estimate of economists surveyed by Bloomberg. The currency earlier reached 1,048.30, the strongest level in almost three years.
Default Risk, Gold
The cost of protecting Asian corporate and sovereign bonds from default dropped, with the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan falling half a basis point to 115.5 basis points, Credit Agricole CIB prices show.
Gold for December delivery rose as much as 0.5 percent to a record $1,627.70 an ounce. Immediate-delivery bullion advanced 0.4 percent to $1,625.70 an ounce.
Oil futures slipped as much as 0.5 percent to $99.05 a barrel in New York today after the industry-funded American Petroleum Institute said inventories climbed 3.96 million barrels to 358.2 million last week. An Energy Department report today may show supplies slipped 2 million barrels, according to a Bloomberg News survey of analysts. That would be the eighth weekly decline.
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net.
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
