Europe’s longer-dated bonds lead rally across the region Crude slips below $43 a barrel on Nigeria supply outlook Share on Facebook Share on Twitter Government bonds rallied around the world and U.S. stock-index futures rose as the countdown to crucial policy decisions by the Bank of Japan and the Federal Reserve entered its final stretch. Spain’s 10-year yield fell below 1 percent as traders assessed the potential results of a BOJ policy review, while Treasuries also advanced with a large majority of economists surveyed by Bloomberg predicting the Fed will keep policy unchanged. European stocks rose with U.S. equity-index futures. Oil declined amid projections of rising supply from Nigeria and expanding crude stockpiles in the U.S. New Zealand’s dollar climbed with milk prices. Shifting expectations regarding the outcomes of the BOJ and Fed meetings spurred volatility in financial markets over the past two weeks. A slew of weak American economic data has pushed the probability of a U.S. rate hike to 20 percent in the futures market, down from more than 40 percent in late August. The BOJ has been studying the effectiveness of its stimulus programs and economists are split over the likelihood of further easing on Wednesday. “The market is calibrating toward Wednesday, and of course the BOJ is the biggest unknown,� said Philip Marey, a strategist at Rabobank International in Utrecht, Netherlands. “The Fed has a difficult task in that it has to ensure market stability before they eventually hike later this year. They need to be slightly hawkish, but also dovish to soothe the market. It will be interesting to see how they pull it off.� New U.S. home construction fell more than projected in August as a plunge in the South more than offset gains in the rest of the country, a Commerce Department report showed Tuesday in Washington. Bonds The yield on Treasuries due in a decade fell three basis points to 1.69 percent as of 8:33 a.m. New York time. The yield has fallen from a more than three-month high of 1.75 percent reached last week. Two of the Fed’s 23 primary dealers -- Barclays Plc and BNP Paribas SA -- are going against the grain and betting on a surprise rate hike from the Fed on Wednesday. It’s the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show. Germany’s benchmark 10-year bond yields slipped three basis points to minus 0.011 percent. Spanish 10-year bond yields fell to less than 1 percent for the first time since Sept. 9. Italy’s 30-year yield dropped eight basis points to 2.35 percent and Portugal’s slid 10 basis points to 4.13 percent. Britain’s 30-year bonds also advanced, with the yield falling four basis points to 1.55 percent after a sale of securities due in 2047. Japan’s 10-year bond yield slipped 1-1/2 basis points to minus 0.06 percent. The country’s bonds were supported as the result of the central bank’s operation to buy super-long securities suggested investors may be reluctant to reduce holdings. The BOJ’s offer to buy maturities of more than 25 year drew selling interest worth 2.12 times amount the central bank intended to buy vs 2.21 at previous operation on Sept. 14 Trading started for a new series of indexes tied to European corporate credit-default swaps following a half-yearly review. The investment-grade Markit iTraxx Europe Index, which had two membership changes, was at 74 basis points compared with Monday’s close of 69 basis points for the previous series. The mainly junk-rated Markit iTraxx Crossover Index, with five alternations, was at 338 basis points versus 326 basis points. Currencies The dollar was little changed at 101.87 yen, after earlier falling as much as 0.4 percent. It was at $1.1185 per euro, recovering from a drop of as much as 0.3 percent. The BOJ should continue with both asset purchases and its negative interest rates policy, partly to prevent currency appreciation, Koichi Hamada, adviser to Prime Minister Shinzo Abe, was cited as saying in a Tokyo Shimbun report over the weekend. Any debate to cut back on the central bank’s easing program now will bring back a pre-Abenomics, deflationary age, he said. The U.K. pound slipped 0.4 percent to $1.2974, after sliding to its weakest level since Aug. 16. For more on how currency traders are preparing for the BOJ decision, click here. The kiwi surged 0.8 percent, the biggest gain among major currencies after the South African rand, as milk futures climbed to $3,000 per metric ton ahead of a GlobalDairyTrade auction. The average price at the last auction on Sept. 6 was $2,793. Milk is the nation’s biggest export. South Africa’s rand gained 1.1 percent, cementing its status as the biggest gainer among major currencies during September. The probability that South Africa’s sovereign credit rating could be cut in November by Moody’s Investors Service is about a third, the company’s Vice President Zuzana Brixiova told reporters in Johannesburg on Tuesday. Stocks S&P 500 Index futures advanced 0.4 percent, after U.S. equities ended Monday little changed. Wells Fargo & Co. gained 1.1 percent in early trading before Chief Executive officer John Stumpf addresses lawmakers on the bank’s response to wrongdoing by employees. The Stoxx Europe 600 Index rose 0.3 percent. Eni SpA dragged a gauge of oil-related companies to the worst performance on the Stoxx 600 after crude gave up yesterday’s gains on speculation a global glut will persist. Bayer AG climbed 1.8 percent after raising the peak sales forecast for its new-drug portfolio. GVC Holdings Plc added 4.4 percent after saying that its 2016 results will be at the upper end of market expectations. Japan’s Topix climbed 0.4 percent as trading resumed following a holiday on Monday, while the Nikkei 225 fell 0.2 percent. Nicholas Smith of CLSA Ltd. said he’s “absolutely certain� the BOJ will stop buying exchange-traded funds tracking the Nikkei 225 amid criticism its use of the measure is distorting the market, and buy more Topix and JPX-Nikkei Index 400 ETFs instead. Commodities West Texas Intermediate fell 1.1 percent to $42.81 a barrel and Brent slipped 1.1 percent to $45.46. Nigeria’s output reached 1.75 million barrels a day and will keep rising after government outreach and a cease-fire with militants allowed some production to restart, Minister of State for Petroleum Emmanuel Kachikwu said. U.S. crude stockpiles probably increased by 3.13 million barrels last week, according to a Bloomberg survey before government data Wednesday. Gold rose 0.1 percent to $1,314.90 an ounce, advancing for a second day. U.S. natural gas climbed for the third day out of four.

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