Treasuries rise on hedge fund rumours
US Treasury prices rose pushing yields lower, as investors were forced to cover short positions on general market unease following rumours about hedge fund troubles in the aftermath of General Motors’ credit downgrade.
The problems were thought to centre around a derivatives position hit hard by the double volitile blow of billionaire investor Kirk Kerkorian’s investment in the struggling carmaker last Wednesday causing a 18% rise in the share price and the unexpected timing of Standard & Poor’s downgrade of GM to junk the very next day.
Unexpectedly strong demand for the first leg of the Treasury’s three big quarterly refunding sales helped lift prices further and by late trade in New York, the yield on the benchmark 10-year Treasury was 6.4 basis points lower at 4.2224 per cent, while the two-year bond yield dipped 7bp to 3.691 per cent.
The US Treasury sold $22bn in three-year paper at a high yield of 3.821 per cent – the highest since May 2003 – attracting bids worth 2.38 times the amount on offer.
Sales of $15bn in five-year paper and $14bn in 10-year notes are scheduled for Wednesday and Thursday, respectively.
Elsewhere, the same market rumours together with investors’ positioning in the markets and weakened equities conspired to push eurozone government bond yields to historic lows. As prices surged, bond yields fell to 3.34 per cent before rising again to 3.364 per cent.
But other factors, including the heavy buying of long-dated bonds, were also pushing up prices.
The yield on the 30-year Bund was down 5bp at 3.915 per cent after earlier hitting 3.894 per cent, the lowest since February. The yield on the two-year Schatz slumped 5bp to 2.209 per cent.
The bullish sentiment also carried gilt prices higher in the UK, where a set of dismal economic data provided further support.
The British Retail Consortium reported like-for-like retail sales were down 4.7 per cent on the year in April for the worst performance in a decade.
The yield on the benchmark 10-year Japanese government bond rose half a basis point to 1.285 per cent. Prices came under pressure as hedge funds sold to clear space for a 10-year bond government bond auction.
The problems were thought to centre around a derivatives position hit hard by the double volitile blow of billionaire investor Kirk Kerkorian’s investment in the struggling carmaker last Wednesday causing a 18% rise in the share price and the unexpected timing of Standard & Poor’s downgrade of GM to junk the very next day.
Unexpectedly strong demand for the first leg of the Treasury’s three big quarterly refunding sales helped lift prices further and by late trade in New York, the yield on the benchmark 10-year Treasury was 6.4 basis points lower at 4.2224 per cent, while the two-year bond yield dipped 7bp to 3.691 per cent.
The US Treasury sold $22bn in three-year paper at a high yield of 3.821 per cent – the highest since May 2003 – attracting bids worth 2.38 times the amount on offer.
Sales of $15bn in five-year paper and $14bn in 10-year notes are scheduled for Wednesday and Thursday, respectively.
Elsewhere, the same market rumours together with investors’ positioning in the markets and weakened equities conspired to push eurozone government bond yields to historic lows. As prices surged, bond yields fell to 3.34 per cent before rising again to 3.364 per cent.
But other factors, including the heavy buying of long-dated bonds, were also pushing up prices.
The yield on the 30-year Bund was down 5bp at 3.915 per cent after earlier hitting 3.894 per cent, the lowest since February. The yield on the two-year Schatz slumped 5bp to 2.209 per cent.
The bullish sentiment also carried gilt prices higher in the UK, where a set of dismal economic data provided further support.
The British Retail Consortium reported like-for-like retail sales were down 4.7 per cent on the year in April for the worst performance in a decade.
The yield on the benchmark 10-year Japanese government bond rose half a basis point to 1.285 per cent. Prices came under pressure as hedge funds sold to clear space for a 10-year bond government bond auction.
May 12, 2005
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