By Joseph Adinolfi, MarketWatch
10-year bund yield falls to all-time low
NEW YORK (MarketWatch)--The yield on the 10-year note closed
higher, snapping three sessions of declines, after gauges of
inflation and business investment in the U.S. came in stronger than
expected.
The yield on the 10-year note was up 4.3 basis points to 2.012%
in recent trade, its largest one-session gain in nearly nine days.
Earlier in the trading session, it had fallen as low as 1.932%, its
lowest intraday level in two weeks, according to Tradeweb data.
The two-year yield was up 3.1 basis points to 0.642%, closing
higher for the second straight session.
The headline consumer-price index contracted by 0.7% in January,
its third decline in a row, in line with the consensus forecast of
economists polled by MarketWatch.
But core CPI, which strips out volatile energy and food prices,
rose 0.2%, beating a consensus forecast for 0.1% growth.
The strong core CPI reading helped drive the selloff in
Treasurys, as investors bet that signs of rising inflation could
lead to an earlier Fed rate hike, wrote Ian Lyngen, senior rates
strategist at CRT Capital Group, in an afternoon research note.
U.S. durable-goods orders climbed a seasonally adjusted 2.8% in
January, beating the 0.5% growth consensus forecasts from a
MarketWatch poll of economists and suggesting that manufacturers
are preparing to increase production.
Yields moved higher after an auction of seven-year notes
(http://www.marketwatch.com/story/seven-year-note-auction-generates-lackluster-demand-2015-02-26)
generated weak demand.
"The 7-year has a strong history of tailing at auction, so we
weren't surprise by that -- even if it was the largest tail since
October," Lyngen wrote.
In Europe, frenzied buying ahead of the European Central Bank's
first purchases of sovereign debt drove the German 10-year bund
yield to an all-time low of 0.285%, down 4.1 basis points on the
day.
The Italian 10-year yield was down 11.2 basis points to 1.347%,
while the Spanish 10-year was down 9.6 basis points to 1.286%. The
Portuguese 10-year yield was down 13.3 basis points to 1.887%.
Tom di Galoma, head of rates and credit trading at ED & F
Man Capital Markets, said bond investors were loading up on
eurozone debt hoping that demand from the ECB will allow them to
sell quickly, and at a premium.
"European rates are not going up, and the ECB hasn't even
started buying yet," said Tom di Galoma, head of rates and credit
trading at ED & F Man Capital Markets. "People are just loading
the boat, hoping they'll get taken out at higher levels."
The ECB is expected to begin its first 60-billion euro purchase
of public- and private-debt after its March 6 meeting.
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