A Convergence of Bond Yields
February 9, 2017
Ten-year sovereign debt yields fell 6, 5, and 3 basis points in Spain, Italy and France but rose 8 bps in Greece, 2 bps in the U.S. and U.K. and 1 bp in Germany.
The dollar advanced 0.7% against the kiwi, which was depressed when the Reserve Bank of New Zealand’s policy statement left the Official Cash Rate there unchanged at 1.75% but also said a decline in the kiwi is needed.
Dollar movements otherwise were mixed and narrow, with gains of 0.4% against the Swiss franc, 0.3% relative to the yen, and 0.1% versus the euro and peso but dips of 0.2% against sterling and 0.1% relative to the Canadian and Australian dollars.
Bank shares led European stocks up 0.9% in France, 0.7% in Switzerland and Germany, 0.6% in Spain and 0.3% in Britain. Earnings reports have been pretty favorable this quarter. In the Pacific Rim, the Japanese Nikkei fell 0.5% and below the 19K level, but gains were recorded of 0.8% in Hong Kong, 0.6% in New Zealand, 0.5% in Taiwan and China, and 0.4% in Singapore.
West Texas Intermediate oil and Comex gold rose 0.3% and 0.1% to $52.65 per barrel and $1,240.70 per troy ounce.
Bangko Sentral ng Pilipinas left its key interest rates and reserve requirements unchanged. Inflation in The Philippines during the coming two years is projected to be within the 2-4% target, but risk around the baseline forecast is tilted upward. The reverse repo rate of 3.0% was last changed in September 2014.
Japanese core domestic machinery orders increased by a greater-than-expected 6.7% in December. Government and foreign orders for machinery each fell following outsized jumps in November.
Japanese M2 money grew 4.1% on year in January, up from 3.9% last quarter. Broad liquidity also accelerated to 2.2%.
Japanese stock and bond transactions last week generated a net JPY 215 billion capital inflow, compared to an outflow of JPY 1.53 trillion the week before.
Japanese machine tool orders posted an on-year advance in January, the second rise in a row after a gain of 4.4% in December. The trend had previously been downward.
Germany’s current account surplus moved inward slightly to EUR 24.0 billion in December but as in 2015 posted a record high of EUR 266.0 billion in 2016, 5.2% larger than the year before. The seasonally adjusted trade surplus fell about 15% on month to 18.4 billion euros and was also below the 2016 monthly average of EUR 21.1 billion.
Britain’s Royal Institute of Chartered Surveyors’ house price index unexpectedly improved, printing at 25% in January after a reading of 23% in December, but it was below November’s 29% score.
Seasonally adjusted unemployment in Switzerland stayed enviably low at 3.3% in January. The Greek jobless rate, by contrast, was unchanged in November at a lofty 23%.
Mainland GDP growth in Norway accelerated last quarter to 0.3%, but the full-2016 pace of 0.8% was still at a 7-year low. Total GDP increased 1.0%, a 3-year low.
Dutch CPI inflation accelerated to 1.7% in January (1.6% when harmonized).
Building permits in New Zealand fell 7.2% in December on top of a 9.2% monthly decline in November.
South African factory output in December rose 0.3% on month but was 0.8% below the end-2015 level.
Former Alabama Senator Jeff Sessions was confirmed to be the next U.S. Attorney General. It increasingly looks like Trump will get all his appointees confirmed.
Still to come: weekly U.S. jobless insurance claims, Canadian home prices, a Bank of Mexico policy decision, and public comments from the St. Louis and Chicago Federal Reserve presidents. Japanese Prime Minister Abe visits U.S. President Trump tomorrow.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.