May 7, 2015, 11:18 AM
- The German 10-year Bund yield soared to as high as 0.70% earlier, but has since retreated to 0.60%, up one basis point on the day. 10-year yields in Spain and Italy flew to above 2%, but are now sharply lower on the session at 1.73% and 1.78%, respectively.
- The U.S. 10-year yield hit 2.30% during this period, and has now also pulled back to 2.22%, off two bps on the session.
- "This Bund [yield] rally has caused a great deal of dislocation for fixed income investors," says the team at Barclays, noting a rise in yields of this size (here's a chart) has occurred just two other times in the past 15 years, and pointing to only 5% in a recent survey saw bond yields higher than 50 bps by the end of June.
- The moves in Germany and elsewhere are classic "pain trades," says HSBC's Steven Major. "The pain trade is a steeper curve, so given what happened in the past few weeks, this pain could have been excruciating."
- Source: Bloomberg
- ETFs: EU, BNDX, BWX, PLW, STPP, IGOV, GOVT, FLAT, BUNL, ITLY, ITLT, GGOV, BUNT, TAPR
May 6, 2015, 4:36 AM
- A worldwide selloff in government bonds deepened today, buoyed by rising German Bund yields that recently hit record highs and narrowed their gap with U.S. Treasuries.
- Benchmark 10-year Bunds now trade at 0.53%, having hit a record low of 0.05% last month, when many expected them to turn negative.
- The vicious bond market meltdown is also raising pressing questions for investors - is this a correction or merely a trend change?
- ETFs: EMB, PCY, EU, BNDX, ELD, JGBS, EMLC, JGBD, DSUM, WIP, BWX, VWOB, AUNZ, ALD, IGOV, ILB, BUNL, LEMB, JGBL, EMAG, ITLY, ITIP, ISHG, BWZ, ITLT, EBND, CBON, BUNT, GGOV, JGBT, GTIP, PFEM, JGBB, EMSH, CHNB, FEMB
May 5, 2015, 10:12 AM
- The German 10-year Bund yield was below 0.10% as recently as two weeks ago, but it's up another 11 basis points today to the relatively sky-high level of 0.50%, and dragging along the rest of Western bond yields.
- Italian 10-years are up 28 bps to 1.76%; Spain up 28 bps to 1.74%; U.K. up 14 bps to 2.0%.
- "The bond market meltdown goes on," writes SocGen's Kit Juckes, though he believes it to be more correction, rather than a trend change.
- In the U.S., the 10-year yield is up another three basis points to 2.18% - about its highest level of 2015.
- Previously: Bill Gross: Bunds are short sale of a lifetime (April 21)
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, BUNL, TENZ, ITLY, LBND, ITLT, GGOV, BUNT, DLBL, TYBS, VUSTX
Apr. 29, 2015, 11:27 AM
- A sharp move higher in European yields is spreading to the States, where the 10-year Treasury yield is up six basis points to 2.06% despite news that GDP basically flatlined in Q1.
- Of course, we're already well into Q2 and most of the Fed is on record believing the Q1 growth slowdown to be an aberration already in the process of being reversed in Q2. The FOMC policy statement is due at 2 ET.
- The big action is in Europe, where the 10-year Bund yields have nearly doubled to 0.28%. Italian 10-year yields are up 16 bps to 1.5%, Spain up 13 bps to 1.45%, U.K. up 13 bps to 1.85%.
- TBT +3%, AGG -0.3%.
- Previously: More on GDP miss: Exports slide as dollar strengthens (April 29)
- Previously: GDP about flatlines in Q1 (April 29)
- ETFs: IEF, PST, EU, IEI, TYO, DTYS, UST, PLW, STPP, VGIT, GOVT, FLAT, TBX, BUNL, SCHR, GSY, ITLY, TYD, DTYL, ITE, ITLT, GGOV, BUNT, DFVL, FIVZ, TBZ, TAPR, DFVS, TYNS, SYTL
Apr. 21, 2015, 10:35 AM
- And why not, with the ECB pledging to buy €60B of it monthly for at least the next year-plus?
- For the eurozone as a whole, government debt rose to a record 91.9% of GDP in 2014, up from 90.9% a year earlier. Greece naturally leads the way, with debt up to 177.1% of GDP from 175% in 2013. Since the last bailout to end all bailouts (2012), Greece's debt/GDP ratio is up a whopping 25 percentage points, and the country stands today on the verge of either bailout number three or another default and maybe exit from EMU.
- Source, Bloomberg
- Bill Gross is out on Twitter calling German 10-year Bunds - currently yielding 10 basis points - the short of a lifetime ... Even better than the pound in 1993. The only question, he says, is timing. Another widowmaker trade?
- GREK -3.7%, NBG -9.8%
- ETFs: EU, BUNL, ITLY, ITLT, BUNT, GGOV
Apr. 7, 2015, 12:38 PM
- A breakdown shows the central bank purchased €11.1B of German bonds, €8.75B French, and €7.6B Italian, among others. The only EMU member states excluded were Greece and Cyprus - both banned from being part of QE until coming into compliance with their bailout programs - and Estonia.
- The ECB plan is to buy €60B worth of government paper through at least September of next year, but better-than-hoped news on the economy already has some speculating on a taper before then.
- ETFs: EU, BUNL, ITLY, ITLT, GGOV, BUNT
Mar. 30, 2015, 10:59 AM
- The ECB's €60B per month QE program includes sovereign bonds from two to 30 years in length, but the interest rate must be above the central bank's benchmark deposit rate of -0.2% - typically not an issue, but fixed-income these days is far from typical.
- German bonds are a cornerstone of the purchase program, writes Chris Whittall, accounting for about €11B of the monthly purchase total. The trouble is, 42% German paper is trading at yields below the -0.2% cutoff, leaving it ineligible for purchase by the ECB.
- “There are not enough long-term bonds unless there is a short-term selloff.” says HSBC's Elie El Hayek, and Morgan Stanley's Andrew Millward sees German paper all the way out to six years eventually trading at less than -0.2%, leaving 62% of that market ineligible for central bank purchase.
- The ECB could end up changing policy - i.e. lowering the deposit rate further, or lifting the cap of not owning more than 25% of any single bond issue.
- ETFs: EU, BUNL, ITLY, ITLT, GGOV, BUNT
Mar. 10, 2015, 10:31 AM
- Sliding stock prices will trump strong economic numbers any day. The U.S. 10-year Treasury yield shot up to 2.25% following Friday's nonfarm payroll beat, but it's returned all the way to 2.12% thanks to another sharp decline in the major equity averages.
- The S&P 500 and the DJIA have both turned negative for the year.
- And U.S. yields positively tower over those in Europe. The German 10-year yield is all the way down to 0.20%. Italy's at 1.23%, and Spain's at 1.25%.
- Want to put your money in German 5-year paper? It'll cost you 11 basis points per year to do so.
- TLT +1.05%, TBT -2.1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, PLW, GOVT, BUNL, ITLY, TENZ, LBND, ITLT, GGOV, DLBL, TYBS, BUNT, TAPR
Jan. 22, 2015, 9:38 AM
- It's an all-time low for Spain's 10-year note, which falls 14 basis points to 1.41% after the ECB launches a €60B per month asset purchase program. Italy's 10-year is down 12 bps to 1.56%.
- German 10-year Bund yields are down eight basis points at 1.40%, and the U.S. 10-year Treasury yield has undergone a major reversal, now lower by four basis points to 1.84% after rising as high as 1.94% after the ECB announcement. TLT goes green by 0.45% after being down more than 1.5%.
- ETFs: EU, BNDX, BWX, IGOV, BUNL, ITLY, ITLT, GGOV, BUNT
- Previously: ECB launches €60B per month QE (Jan. 22)
- Previously: Futures add to gains after ECB goes bigger than expected (Jan. 22)
Jan. 6, 2015, 7:16 AM
- The improbable (to most) rally in long-dated U.S. government paper continued overnight, with the 10-year yield dipping down all the way to 1.98%. It's bounced since, and currently stands at 2.00%, off three basis points on the session.
- It's a global rally, with bonds in the BAML Global Broad Market Sovereign Plus Index having an effective yield of just 1.28% - an all-time low (data is from 1996 on). A sampling: Japan 10-years 0.29%, German 10-years 0.47%, Spain 1.55%, U.K. 1.62%, Italy 1.77%, Australia 2.7%.
- TLT +0.5%, TBT -1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, JGBS, JGBD, BNDX, ZROZ, BWX, SBND, TLH, VGLT, DLBS, UBT, TLO, IGOV, BUNL, JGBL, ITLY, TENZ, LBND, ITLT, JGBT, GGOV, TYBS, DLBL, BUNT, JGBB
Jan. 2, 2015, 5:33 AM
- Eurozone manufacturing PMI remained subdued in December (below a flash estimate of 50.8) at 50.6, but above November's 16-month low of 50.1.
- "Euro zone factory activity more or less stagnated again in December," says Markit. "The weakness of factory output, combined with the subdued service sector growth signaled by the flash PMI, suggests the eurozone economy grew by just 0.1% percent in the fourth quarter."
- France and Italy's manufacturing sector continued to shrink in December, although Germany's figure was in line with earlier flash estimates at 51.2, as more new orders helped lead a return to growth.
- The new data is yet another sign toward Mario Draghi announcing QE at the ECB's next policy meeting.
- Euro Stoxx 50 index is -0.2%, while the euro is -0.5% at $1.2044.
- ETFs: FXE, VGK, EUO, FEZ, EWP, EWI, ERO, EU, EPV, IEV, EZU, HEDJ, DRR, FEU, EUFX, UPV, ITLY, ULE, FEP, ADRU, URR, ITLT, FEEU, FIEU, DBEU
Dec. 12, 2014, 11:24 AM
- The 10-year Treasury yield has tumbled all the way to 2.08% - a 16-month low if one forgets October's flash crash in yields. The 30-year is down to 2.77%.
- Checking Europe, German 10-year yields look about ready to challenge Japan, down another five basis points to 0.63% (Japan's at 0.40%). In the U.K., 10-year government paper yields 1.81%, Spain 1.88%, Italy 2.04% - all less than the U.S.
- 30-Day Fed Funds Futures contracts continue to price in a rate hike next year, but it's been pushed back to the September/October time frame.
- TLT +0.8%, TBT -1.6%
- The moves come, of course, as oil continues to carve out new multi-year lows (now down 3% on the session to $58.15 per barrel), setting off broad declines in the equity averages here and across the pond.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, TMF, PST, EU, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, TLO, VGSH, VGIT, SHV, TBX, SCHO, BUNL, GSY, ITLY, SCHR, TENZ, DTYL, TYD, LBND, ITLT, ITE, DTUS, GGOV, TYBS, SST, DLBL, BUNT, DTUL, DFVL, TUZ, TBZ, FIVZ, DFVS, TYNS, SYTL
Nov. 27, 2014, 6:44 AM
- Draft documents seen by Reuters show that the 2015 budgets of several European countries, including France, Italy and Belgium are at risk of breaking EU rules.
- The Commission specifically picked out the three for a second compliance review to take place in March. This gives the countries more time to adjust policy before the EU executive decides whether to fine France for missing consolidation targets or put Italy and Belgium under a disciplinary procedure because of their debt.
- On Friday, the Commission will publish the assessments of all of the draft budgets of the 18 euro zone countries, except Greece and Cyprus which remain under bailout programs.
- ETFs: EWI, EWQ, EWK, ITLY, ITLT
Oct. 28, 2014, 5:09 AM
- Business confidence rose to 96.0 in Oct. vs. 95.5 in Sept. and 95.0 expected.
- Economic sentiment rose to 89.3 vs. 86.9 in Sept.
- Construction confidence 77.5 vs. 75.5 in Sept. Services confidence 89.2 vs. 85.1. Retailer confidence 93.9 vs. 92.1.
- Source: Istat
- ETFs: EWI, ITLY, ITLT
- Previously: ECB stress test failures centered among Italian banks (Oct. 26)
Jul. 7, 2014, 4:39 AM
- Italian Economy Minister Pier Carlo Padoan says the country will not make its debt repayment to private sector suppliers until the end of the year. This marks the third time the payment was delayed in 2014.
- The European Commission has already opened a formal infringement procedure against Italy for failing to abide by its Late Payments Directive. The law requires governments to reduce payment delays to no more than 60 days.
- Italy currently owes approximately €75B ($102B) to private suppliers, and the suspended payments have triggered layoffs, factory closures and even bankruptcies.
- ETFs: EWI, ITLY, ITLT
Jun. 19, 2014, 5:34 AM
- Euro zone bond yields returned to historic lows today, after the Fed displayed a dovish outlook on its monetary policy yesterday. The Fed declared that interest rates will stay lower than normal until inflation and unemployment move back to target.
- Earlier this week, longer-dated euro zone bonds sold off as higher-than-expected U.S. consumer price inflation put forward the possibility the Fed may raise rates.
- Italian and Spanish 10-year yields fell 7 basis points to 2.78% and 2.69% respectively. Yields on top-rated euro zone bonds were 3-4 bps lower.
- ETFs: EU, ITLY, ITLT
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