US Treasuries ride higher on further evidence of a slowdown
US Treasuries ride higher on further evidence of a slowdown
By Tony Tassell
Copyright The Financial Times Limited 2006
Published: November 2 2006 02:00 | Last updated: November 2 2006 02:00
More evidence of a slowing US economy sparked further gains in US Treasury bonds yesterday as expectations of cuts in interest rates early next year were bolstered.
The dollar also fell to fresh one-month lows against the euro and the yen and dropped to its lowest level so far this year against sterling.
Growth in US factory activity in October fell to its weakest level since May 2003, when sentiment was hurt by the war in Iraq, according to the US Institute for Supply Management.
The ISM index of national factory activity fell to 51.2 in October from 52.9 in September. The headline level was well below market expectations of 53 and it marked the third consecutive month of slowing manufacturing activity. A reading above 50 indicates growth in manufacturing while one below suggests a contraction.
The data came after weak US third-quarter gross domestic product figures last Friday and similarly soft data on manufacturing activity in the Chicago region on Tuesday. It foreshadowed critical data on US payroll growth tomorrow.
"The steady inflow of weaker news is having a big impact on the bond market, where the yield curve is inverting further, measurable inflation expectations are falling . . . and rate cut odds are rising," Tony Crescenzi, chief bond market strategist at Miller Tabak & Co, said.
Ten-year US Treasury yields fell 2.8 basis points to 4.580 per cent. That is more than 20bps lower than the closing level of 4.788 per cent on Friday October 20.
Markets are now pricing at least a 25bp cut in the US Federal Reserve's benchmark Fed Funds rate to5 per cent by halfway through next year.
The ISM data dragged down US equities on concerns over slowing economic growth. By mid-afternoon, the Dow Jones Industrial Average was 0.2 per cent lower, the S&P 500 index lost 0.3 per cent and the Nasdaq Composite fell 0.4 per cent.
Europe fared better, lifted by a better day for mining and commodity companies. After four-days of losses, the FTSE Eurofirst 300 index firmed 0.37 per cent 1,449.34.
In Asia, equity markets were mixed. The Hang Seng hit a fresh high while Jakarta closed at a record for the fourth day in a row, boosted by news of falling inflation. Tokyo slipped, dragged down by Softbank. The Nikkei 225 Average fell 0.15 per cent to 16,375.26.
In commodity markets, gold rose to a seven-week high boosted by the fall in the dollar. By midday in New York, bullion was up $9.70 to $615.70 an ounce.
By Tony Tassell
Copyright The Financial Times Limited 2006
Published: November 2 2006 02:00 | Last updated: November 2 2006 02:00
More evidence of a slowing US economy sparked further gains in US Treasury bonds yesterday as expectations of cuts in interest rates early next year were bolstered.
The dollar also fell to fresh one-month lows against the euro and the yen and dropped to its lowest level so far this year against sterling.
Growth in US factory activity in October fell to its weakest level since May 2003, when sentiment was hurt by the war in Iraq, according to the US Institute for Supply Management.
The ISM index of national factory activity fell to 51.2 in October from 52.9 in September. The headline level was well below market expectations of 53 and it marked the third consecutive month of slowing manufacturing activity. A reading above 50 indicates growth in manufacturing while one below suggests a contraction.
The data came after weak US third-quarter gross domestic product figures last Friday and similarly soft data on manufacturing activity in the Chicago region on Tuesday. It foreshadowed critical data on US payroll growth tomorrow.
"The steady inflow of weaker news is having a big impact on the bond market, where the yield curve is inverting further, measurable inflation expectations are falling . . . and rate cut odds are rising," Tony Crescenzi, chief bond market strategist at Miller Tabak & Co, said.
Ten-year US Treasury yields fell 2.8 basis points to 4.580 per cent. That is more than 20bps lower than the closing level of 4.788 per cent on Friday October 20.
Markets are now pricing at least a 25bp cut in the US Federal Reserve's benchmark Fed Funds rate to5 per cent by halfway through next year.
The ISM data dragged down US equities on concerns over slowing economic growth. By mid-afternoon, the Dow Jones Industrial Average was 0.2 per cent lower, the S&P 500 index lost 0.3 per cent and the Nasdaq Composite fell 0.4 per cent.
Europe fared better, lifted by a better day for mining and commodity companies. After four-days of losses, the FTSE Eurofirst 300 index firmed 0.37 per cent 1,449.34.
In Asia, equity markets were mixed. The Hang Seng hit a fresh high while Jakarta closed at a record for the fourth day in a row, boosted by news of falling inflation. Tokyo slipped, dragged down by Softbank. The Nikkei 225 Average fell 0.15 per cent to 16,375.26.
In commodity markets, gold rose to a seven-week high boosted by the fall in the dollar. By midday in New York, bullion was up $9.70 to $615.70 an ounce.
posted by Carlos T Mock @ 12:39 PM
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