bekopirozom:
Page 1 of 4
BN 10:54 Euro Rises to Record Against Yen on Rate-Increase Speculation
By Deborah Finestone and Joshua Krongold
April 4 (Bloomberg) -- The euro rose to a record against the
yen and a two-month high versus the dollar on speculation the
European Central Bank will raise its benchmark interest rate
further this year.
The United Arab Emirates and Qatar said they may buy euros
with some of their combined $30 billion of currency reserves on
expectations the currency will appreciate. The 12-nation currency
extended its gains after rising above $1.2208 per euro for the
first time since Jan. 27.
``There is likely to be more ECB tightening,'' said David
Durrant, an investment strategist in New York at Julius Baer
Investment Management, which manages about $38 billion. At the
same time, ``the Middle East is going to keep diversifying their
reserves.''
The euro climbed to $1.2256 at 10:53 a.m. in New York from
$1.2139 late yesterday. The euro advanced to 143.95 yen, the
strongest since the euro's January 1999 debut, from 142.85
yesterday. The dollar fell to 117.46 yen, from 117.68 yen.
Durrant expects the euro to reach $1.24 in three months, its
strongest since September.
ECB President Jean-Claude Trichet may signal the central
bank is prepared to raise rates further when its governing
council meets on April 6, traders said.
The 12-nation currency climbed 2.3 percent last quarter on
expectations the ECB will raise borrowing costs until year-end
while the Federal Reserve approaches the end of its rate
increases after 15 straight boosts.
`Hawkish Talk'
The ECB is increasingly likely to raise rates in May, Market
News International reported today, citing ``well-informed central
banking sources.''
``We're probably going to get some hawkish talk out of
them,'' said Firas Askari, head currency trader at BMO Nesbitt
Burns in Toronto. ``At the end of the day, the Fed is closer to
the end and the ECB has a ways to go.''
The euro extended gains after exceeding $1.22 and 143.50
yen, where traders had euro-buy orders, Askari said. The euro
hasn't closed above $1.22 since January.
The Frankfurt-based central bank, likely to keep its key
rate at 2.5 percent at this week's meeting, will increase
borrowing costs in May, according to the median estimate of 40
economists surveyed by Bloomberg. Trichet will hold a press
conference after the bank announces this week's decision.
Rate Bets
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 2 of 4
Investors expect the ECB to lift its benchmark rate to 3.25
percent by year-end, futures trading shows.
The Fed raised rates on March 28 to a five-year high of 4.75
percent. Futures traders are pricing in a 100 percent chance the
central bank will raise its benchmark to 5 percent at its next
meeting on May 10. The odds of another boost to 5.25 percent at
its June 29 meeting fell to 30 percent, from 38 percent
yesterday.
The yield advantage on 10-year U.S. Treasury notes narrowed
today relative to debt in Germany. U.S. 10-year notes yielded
101.6 basis points more than 10-year German bunds, 3 basis points
less than yesterday and the least since March 20.
Dallas Fed President Richard Fisher, Richmond Fed President
Jeffrey Lacker and Kansas City Fed President Thomas Hoenig all
speak today. Only Lacker is a voting member of the policymaking
Federal Open Market Committee this year.
The U.A.E., whose reserves rose almost 30 percent last year,
may agree to buy more of the 12-nation currency at the central
bank's May meeting, Sultan bin Nasser al-Suwaidi, the bank
governor, told reporters in Abu Dhabi. Central bank governors of
Kuwait and Qatar said they were reviewing the euro's performance.
``We sold euros last year when the currency was high, and
could buy again,'' Qatar's Central Bank Governor Sheikh Abdullah
bin Khaled al-Attiyah said. The emirate's policy is to hold as
much as 40 percent of its reserves in euros, and as much as 90
percent in dollars, he said, declining to give further details.
`Sell More Dollars'
``There's still appetite from central banks around the world
to continue to diversify out of dollars,'' said Scott Ainsbury,
who helps manage about $12 billion in currency investments at New
York-based FX Concepts Inc. ``In the second half of the year when
the Fed is done, we'll see some real pressure on the dollar.
We're looking to sell more dollars.''
The dollar may also weaken after the Hong Kong-based Wen Wei
Po newspaper reported that a deputy head of China's parliament
said his nation should gradually cut holdings of U.S. debt.
China is able to stop buying dollar-denominated bonds and
should instead increase imports from the U.S., the newspaper
reported, citing Cheng Siwei, vice chairman of the Standing
Committee of the National People's Congress.
``Any possible move out of Treasuries by the Chinese will
lead to a weaker dollar,'' said Jan Lambregts, head of research
at Rabobank Groep in Singapore.
The comments by Cheng represent his own view, an official at
the central bank press office subsequently said.
China held $262.6 billion of U.S. Treasuries as of Jan. 2,
according to Treasury data. Foreign reserves totaled $853.6
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 3 of 4
billion as of Feb. 28, Chinese Premier Wen Jiabao said in a
speech in Australia yesterday.
--With reporting by Prashant Rao in London, James Cordahi in
Dubai, Catherine Yang and Jake Lee in Hong Kong, Keiko Ujikane in
Tokyo and Chris Young in Sydney. Editor: M. Tannenbaum (djl)
Story illustration: Click on {EUR GPO } to
Graph the dollar per euro, and {JPY GPO } for
dollar-yen. See {TOP FRX } for more top currency news.
Click on {DXY GO } for the New York Board of
Trade's Dollar Index. Click on {USTW$ GP } for the
Fed's Major Currency trade-weighted dollar index.
To contact the reporters on this story:
Deborah Finestone in New York at (1) 212-617-2375 or
dfinestone@bloomberg.net;
Joshua Krongold in New York at (1) (212) 617-2380 or
jkrongold2@bloomberg.net.
To contact the editor responsible for this story:
Dave Liedtka in New York at (1-212) 617-8988 or
dliedtka@bloomberg.net
2.
04/03 Treasuries Are in Worst Slump Since 1999 on Fed Rates (Update2)
(Updates Treasury yields in sixth paragraph.)
By Michael McDonald
April 3 (Bloomberg) -- U.S. Treasuries are off to their
worst annual start in seven years and may drop further after the
Federal Reserve signaled that interest rates will rise.
U.S. government debt of all maturities lost an average of
1.2 percent this year, compared with a 1.6 percent decline in
the first quarter of 1999, according to Merrill Lynch & Co. data.
Treasuries fell 0.3 percent after the central bank last week
lifted rates by a quarter point for a 15th consecutive time, to
4.75 percent, and said ``further policy firming may be needed.''
Economists at Barclays Capital Inc. boosted their forecast
for the central bank's interest-rate target by 75 basis points
to 5.5 percent. Credit Suisse Securities USA LLC and Barclays
joined Bear Stearns & Co. in predicting 10-year note yields this
year will exceed 5 percent for the first time since 2002.
``There's going to be a steady grind'' to higher yields,
Richard Volpe, head of government bond trading at Bear Stearns
in New York, said last week. The firm is one of the 22 primary
dealers of U.S. government securities that trade with Fed.
Yields on 10-year Treasuries, which help determine
corporate and consumer borrowing rates, may reach 5.45 percent
this year, Volpe said. The firm, a long-time bond-market bear,
on Feb. 21 lifted its forecast for the central bank's federal
funds rate by a quarter point to 5.25 percent.
Higher Yields
The Treasury's benchmark 4.5 percent note due February 2016
yielded 4.85 percent today, up from 4.39 percent at the end of
2005. The price of the note was 97 1/4 as of 8:55 a.m. in London,
according to New York-based bond broker Cantor Fitzgerald LP.
Treasuries fell as the Standard & Poor's 500 Index of
stocks posted its biggest first-quarter gain in seven years,
rising 3.73 percent. In 1999, Treasuries declined 2.38 percent,
the only loss in the past 11 years.
Optimism ran high at the start of the year that the Fed was
almost done raising rates. The government on Jan. 6 said that
the nation added about half the jobs in December as forecast by
economists. A separate report three weeks later showed that
gross domestic product in the fourth quarter expanded at the
slowest pace since the end of 2002.
Treasuries began their decline after industry reports
showed gains in manufacturing and on signs of rising consumer
and business confidence. The Institute of Supply Management said
on March 1 its index rose for the first month in four in
February. The Labor Department said March 10 the economy added
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 2 of 3
243,000 jobs a month earlier, the most since November's gain of
354,000.
`Big Surprise'
``The market thinks the U.S. economy will be stronger than
they thought a few months ago,'' David Goldman, head of fixed-
income research at Cantor Fitzgerald in New York, said last week.
``That's been the big surprise.''
The economy likely expanded 4.7 percent last quarter, the
most since 2003, according to the medium estimate of 74
economists surveyed by Bloomberg News from Feb. 27 to March 7.
The Fed last week indicated inflation is still a threat to
the economy when it noted that the cost of commodities other
than energy rose. Gold, typically viewed as a hedge against
rising consumer prices, reached $594.60 an ounce, the highest
since January 1981, and gasoline surged 16 percent this year.
``Some further policy firming may be needed to keep the
risks to the attainment of both sustainable economic growth and
price stability roughly in balance,'' policy makers said in
their statement that accompanied the March 28 increase.
Changing Forecasts
Interest-rate futures show traders are certain policy
makers will increase the target to 5 percent by mid-year. The
odds of a move to 5.25 percent at the Aug. 8 meeting are about
60 percent, up from 3 percent on March 24.
Economists in New York at Barclays Capital, another primary
dealer and a unit of U.K. bank Barclays Plc, on March 29 raised
their forecast for the 10-year note to 5.15 percent by the third
quarter on the same day they increased their fed funds estimate.
Royal Bank of Scotland Group Plc on March 31 lifted its
yield estimate to 5 percent from 4.75 percent, and strategists
at Credit Suisse on March 30 said it may reach 5 percent by the
third quarter.
The median estimate of economists surveyed by Bloomberg at
the start of 2004 and 2005 was for the yield to rise above 5
percent by the end of both those years. Tame inflation helped
keep it below that level.
The inflation measure favored by the Fed, the price index
for personal consumption expenditures excluding food and energy,
rose 1.8 percent in February from a year earlier. The central
bank, which releases economic growth and inflation forecasts
semiannually, in February estimated the core PCE price index
would increase 1.75 percent to 2.5 percent this year.
`Following the Fed'
Ten-year yields will likely keep rising for as long as the
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 3 of 3
Fed lifts rates, according to Tom Seay, who oversees about $18
billion in bonds at Victory Capital Management in Cleveland.
``We're following the Fed,'' Seay said last week. ``You can
see this stair-step process. The Fed raises rates, we raise
rates.''
Seay in December said the Fed was poised to stop raising
borrowing costs and Treasuries maturing in about five years
would rally. As a result, the performance of his bond fund has
fallen with market indexes. Seay said he increased returns by
purchasing corporate debt and other fixed-income securities.
Page 1 of 4
BN 10:54 Euro Rises to Record Against Yen on Rate-Increase Speculation
By Deborah Finestone and Joshua Krongold
April 4 (Bloomberg) -- The euro rose to a record against the
yen and a two-month high versus the dollar on speculation the
European Central Bank will raise its benchmark interest rate
further this year.
The United Arab Emirates and Qatar said they may buy euros
with some of their combined $30 billion of currency reserves on
expectations the currency will appreciate. The 12-nation currency
extended its gains after rising above $1.2208 per euro for the
first time since Jan. 27.
``There is likely to be more ECB tightening,'' said David
Durrant, an investment strategist in New York at Julius Baer
Investment Management, which manages about $38 billion. At the
same time, ``the Middle East is going to keep diversifying their
reserves.''
The euro climbed to $1.2256 at 10:53 a.m. in New York from
$1.2139 late yesterday. The euro advanced to 143.95 yen, the
strongest since the euro's January 1999 debut, from 142.85
yesterday. The dollar fell to 117.46 yen, from 117.68 yen.
Durrant expects the euro to reach $1.24 in three months, its
strongest since September.
ECB President Jean-Claude Trichet may signal the central
bank is prepared to raise rates further when its governing
council meets on April 6, traders said.
The 12-nation currency climbed 2.3 percent last quarter on
expectations the ECB will raise borrowing costs until year-end
while the Federal Reserve approaches the end of its rate
increases after 15 straight boosts.
`Hawkish Talk'
The ECB is increasingly likely to raise rates in May, Market
News International reported today, citing ``well-informed central
banking sources.''
``We're probably going to get some hawkish talk out of
them,'' said Firas Askari, head currency trader at BMO Nesbitt
Burns in Toronto. ``At the end of the day, the Fed is closer to
the end and the ECB has a ways to go.''
The euro extended gains after exceeding $1.22 and 143.50
yen, where traders had euro-buy orders, Askari said. The euro
hasn't closed above $1.22 since January.
The Frankfurt-based central bank, likely to keep its key
rate at 2.5 percent at this week's meeting, will increase
borrowing costs in May, according to the median estimate of 40
economists surveyed by Bloomberg. Trichet will hold a press
conference after the bank announces this week's decision.
Rate Bets
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 2 of 4
Investors expect the ECB to lift its benchmark rate to 3.25
percent by year-end, futures trading shows.
The Fed raised rates on March 28 to a five-year high of 4.75
percent. Futures traders are pricing in a 100 percent chance the
central bank will raise its benchmark to 5 percent at its next
meeting on May 10. The odds of another boost to 5.25 percent at
its June 29 meeting fell to 30 percent, from 38 percent
yesterday.
The yield advantage on 10-year U.S. Treasury notes narrowed
today relative to debt in Germany. U.S. 10-year notes yielded
101.6 basis points more than 10-year German bunds, 3 basis points
less than yesterday and the least since March 20.
Dallas Fed President Richard Fisher, Richmond Fed President
Jeffrey Lacker and Kansas City Fed President Thomas Hoenig all
speak today. Only Lacker is a voting member of the policymaking
Federal Open Market Committee this year.
The U.A.E., whose reserves rose almost 30 percent last year,
may agree to buy more of the 12-nation currency at the central
bank's May meeting, Sultan bin Nasser al-Suwaidi, the bank
governor, told reporters in Abu Dhabi. Central bank governors of
Kuwait and Qatar said they were reviewing the euro's performance.
``We sold euros last year when the currency was high, and
could buy again,'' Qatar's Central Bank Governor Sheikh Abdullah
bin Khaled al-Attiyah said. The emirate's policy is to hold as
much as 40 percent of its reserves in euros, and as much as 90
percent in dollars, he said, declining to give further details.
`Sell More Dollars'
``There's still appetite from central banks around the world
to continue to diversify out of dollars,'' said Scott Ainsbury,
who helps manage about $12 billion in currency investments at New
York-based FX Concepts Inc. ``In the second half of the year when
the Fed is done, we'll see some real pressure on the dollar.
We're looking to sell more dollars.''
The dollar may also weaken after the Hong Kong-based Wen Wei
Po newspaper reported that a deputy head of China's parliament
said his nation should gradually cut holdings of U.S. debt.
China is able to stop buying dollar-denominated bonds and
should instead increase imports from the U.S., the newspaper
reported, citing Cheng Siwei, vice chairman of the Standing
Committee of the National People's Congress.
``Any possible move out of Treasuries by the Chinese will
lead to a weaker dollar,'' said Jan Lambregts, head of research
at Rabobank Groep in Singapore.
The comments by Cheng represent his own view, an official at
the central bank press office subsequently said.
China held $262.6 billion of U.S. Treasuries as of Jan. 2,
according to Treasury data. Foreign reserves totaled $853.6
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 3 of 4
billion as of Feb. 28, Chinese Premier Wen Jiabao said in a
speech in Australia yesterday.
--With reporting by Prashant Rao in London, James Cordahi in
Dubai, Catherine Yang and Jake Lee in Hong Kong, Keiko Ujikane in
Tokyo and Chris Young in Sydney. Editor: M. Tannenbaum (djl)
Story illustration: Click on {EUR GPO } to
Graph the dollar per euro, and {JPY GPO } for
dollar-yen. See {TOP FRX } for more top currency news.
Click on {DXY GO } for the New York Board of
Trade's Dollar Index. Click on {USTW$ GP } for the
Fed's Major Currency trade-weighted dollar index.
To contact the reporters on this story:
Deborah Finestone in New York at (1) 212-617-2375 or
dfinestone@bloomberg.net;
Joshua Krongold in New York at (1) (212) 617-2380 or
jkrongold2@bloomberg.net.
To contact the editor responsible for this story:
Dave Liedtka in New York at (1-212) 617-8988 or
dliedtka@bloomberg.net
2.
04/03 Treasuries Are in Worst Slump Since 1999 on Fed Rates (Update2)
(Updates Treasury yields in sixth paragraph.)
By Michael McDonald
April 3 (Bloomberg) -- U.S. Treasuries are off to their
worst annual start in seven years and may drop further after the
Federal Reserve signaled that interest rates will rise.
U.S. government debt of all maturities lost an average of
1.2 percent this year, compared with a 1.6 percent decline in
the first quarter of 1999, according to Merrill Lynch & Co. data.
Treasuries fell 0.3 percent after the central bank last week
lifted rates by a quarter point for a 15th consecutive time, to
4.75 percent, and said ``further policy firming may be needed.''
Economists at Barclays Capital Inc. boosted their forecast
for the central bank's interest-rate target by 75 basis points
to 5.5 percent. Credit Suisse Securities USA LLC and Barclays
joined Bear Stearns & Co. in predicting 10-year note yields this
year will exceed 5 percent for the first time since 2002.
``There's going to be a steady grind'' to higher yields,
Richard Volpe, head of government bond trading at Bear Stearns
in New York, said last week. The firm is one of the 22 primary
dealers of U.S. government securities that trade with Fed.
Yields on 10-year Treasuries, which help determine
corporate and consumer borrowing rates, may reach 5.45 percent
this year, Volpe said. The firm, a long-time bond-market bear,
on Feb. 21 lifted its forecast for the central bank's federal
funds rate by a quarter point to 5.25 percent.
Higher Yields
The Treasury's benchmark 4.5 percent note due February 2016
yielded 4.85 percent today, up from 4.39 percent at the end of
2005. The price of the note was 97 1/4 as of 8:55 a.m. in London,
according to New York-based bond broker Cantor Fitzgerald LP.
Treasuries fell as the Standard & Poor's 500 Index of
stocks posted its biggest first-quarter gain in seven years,
rising 3.73 percent. In 1999, Treasuries declined 2.38 percent,
the only loss in the past 11 years.
Optimism ran high at the start of the year that the Fed was
almost done raising rates. The government on Jan. 6 said that
the nation added about half the jobs in December as forecast by
economists. A separate report three weeks later showed that
gross domestic product in the fourth quarter expanded at the
slowest pace since the end of 2002.
Treasuries began their decline after industry reports
showed gains in manufacturing and on signs of rising consumer
and business confidence. The Institute of Supply Management said
on March 1 its index rose for the first month in four in
February. The Labor Department said March 10 the economy added
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 2 of 3
243,000 jobs a month earlier, the most since November's gain of
354,000.
`Big Surprise'
``The market thinks the U.S. economy will be stronger than
they thought a few months ago,'' David Goldman, head of fixed-
income research at Cantor Fitzgerald in New York, said last week.
``That's been the big surprise.''
The economy likely expanded 4.7 percent last quarter, the
most since 2003, according to the medium estimate of 74
economists surveyed by Bloomberg News from Feb. 27 to March 7.
The Fed last week indicated inflation is still a threat to
the economy when it noted that the cost of commodities other
than energy rose. Gold, typically viewed as a hedge against
rising consumer prices, reached $594.60 an ounce, the highest
since January 1981, and gasoline surged 16 percent this year.
``Some further policy firming may be needed to keep the
risks to the attainment of both sustainable economic growth and
price stability roughly in balance,'' policy makers said in
their statement that accompanied the March 28 increase.
Changing Forecasts
Interest-rate futures show traders are certain policy
makers will increase the target to 5 percent by mid-year. The
odds of a move to 5.25 percent at the Aug. 8 meeting are about
60 percent, up from 3 percent on March 24.
Economists in New York at Barclays Capital, another primary
dealer and a unit of U.K. bank Barclays Plc, on March 29 raised
their forecast for the 10-year note to 5.15 percent by the third
quarter on the same day they increased their fed funds estimate.
Royal Bank of Scotland Group Plc on March 31 lifted its
yield estimate to 5 percent from 4.75 percent, and strategists
at Credit Suisse on March 30 said it may reach 5 percent by the
third quarter.
The median estimate of economists surveyed by Bloomberg at
the start of 2004 and 2005 was for the yield to rise above 5
percent by the end of both those years. Tame inflation helped
keep it below that level.
The inflation measure favored by the Fed, the price index
for personal consumption expenditures excluding food and energy,
rose 1.8 percent in February from a year earlier. The central
bank, which releases economic growth and inflation forecasts
semiannually, in February estimated the core PCE price index
would increase 1.75 percent to 2.5 percent this year.
`Following the Fed'
Ten-year yields will likely keep rising for as long as the
-----------------------------====================----------------------------- -
Copyright (c) 2006, Bloomberg, L. P.
Page 3 of 3
Fed lifts rates, according to Tom Seay, who oversees about $18
billion in bonds at Victory Capital Management in Cleveland.
``We're following the Fed,'' Seay said last week. ``You can
see this stair-step process. The Fed raises rates, we raise
rates.''
Seay in December said the Fed was poised to stop raising
borrowing costs and Treasuries maturing in about five years
would rally. As a result, the performance of his bond fund has
fallen with market indexes. Seay said he increased returns by
purchasing corporate debt and other fixed-income securities.
TIPPSAROK