Treasury prices rallied yet again Friday on amplified worries that global banks may take more massive writedowns for their exposure to shaky credit markets.
The credit markets have been in a perilous state since August; souring home loans made to borrowers with weak credit are creating havoc for the banks and investors who bought securities backed by the bad mortgages. Although this has caused investors to shun many types of corporate bonds, it also has sparked numerous rallies for Treasurys and some other types of government-backed debt.
"Unless you are trading Treasurys, spreads have been widened on your fixed-income investments," said Kevin Giddis, managing director of fixed-income at Morgan Keegan & Co.
A spread represents the difference between the yield on a corporate bond and the yield on a government note of comparable maturity. Wider spreads speak to investor uneasiness, while tighter spreads are an indication of confidence.
The bond market closed one hour early at 2 p.m. EST Friday ahead of Veteran's Day and will be closed for observance of the holiday on Monday.
The benchmark 10-year Treasury note rose 17/32 to 100 7/32 with a yield of 4.22 percent, down from 4.28 percent in late trade Thursday.
The 30-year note advanced 1 3/32 to 106 11/32 with a yield of 4.63 percent, down from 4.66 percent.
The 2-year note gained 5/32 to 100 13/32 with a yield of 3.41 percent, down from 3.48 percent.
After hours trade had some impact on yields. At 5:30 p.m. the 10-year yield was 4.22 percent, unchanged from the official 3 p.m. close, while the 30-year yield fell to 4.61 percent from 4.63 percent. The 2-year yield rose to 3.42 percent from 3.41 percent.
The 3-month yield dropped to 3.27 percent from 3.40 percent Thursday as the discount rate fell to 3.19 percent from 3.32 percent.
Risk aversion plays were back in force on Friday, causing heavy losses for stocks and new gains for Treasurys, after Wachovia Corp. revealed it may take a $1.1 billion writedown for October alone. The writedown would account for the declining value of securities backed by risky collateral. Wachovia also sharply increased its loan loss provisions.
Barclays PLC has denied rumors it soon will take a $10 billion writedown for bad credit. But in the current environment, even denied rumors are exerting influence.
In Japan, meanwhile, the Nikkei newspaper reported that Mizuho Financial Group Inc.'s Mizuho Securities Co. is being hit by large subprime losses.
All these reports follow news that Citigroup Inc. may write down an additional $11 billion for its subprime-related losses. Merrill Lynch & Co. Inc. has written down $8.4 billion and Morgan Stanley has taken a $3.7 billion writedown for similar losses.
The subprime worries took a toll this week on even the safest parts of the corporate bond market, which last month showed signs of stabilizing. The constant assault of bad news about poor-quality debt made investors shun even higher-rated offerings, causing Hyundai Motor Co and at least five other borrowers to halt bond sales.
The University of Michigan on Friday issued the preliminary reading of its consumer sentiment survey showing a decline to 75.0 in November from 80.9 in October. The result was below analysts' estimates. Consumers have been one of the engines of the economy, and if their spending slows significantly the overall economy will suffer, too.
However, Action Economics said on its Web site that "the bond market shrugged off University of Michigan sentiment weakness, which merely added one more bleak fact to the market maelstrom."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Saturday, November 10, 2007
reasurys rally again on credit fears
Treasury prices rallied yet again Friday on amplified worries that global banks may take more massive writedowns for their exposure to shaky credit markets.
The credit markets have been in a perilous state since August; souring home loans made to borrowers with weak credit are creating havoc for the banks and investors who bought securities backed by the bad mortgages. Although this has caused investors to shun many types of corporate bonds, it also has sparked numerous rallies for Treasurys and some other types of government-backed debt.
"Unless you are trading Treasurys, spreads have been widened on your fixed-income investments," said Kevin Giddis, managing director of fixed-income at Morgan Keegan & Co.
A spread represents the difference between the yield on a corporate bond and the yield on a government note of comparable maturity. Wider spreads speak to investor uneasiness, while tighter spreads are an indication of confidence.
The bond market closed one hour early at 2 p.m. EST Friday ahead of Veteran's Day and will be closed for observance of the holiday on Monday.
The benchmark 10-year Treasury note rose 17/32 to 100 7/32 with a yield of 4.22 percent, down from 4.28 percent in late trade Thursday.
The 30-year note advanced 1 3/32 to 106 11/32 with a yield of 4.63 percent, down from 4.66 percent.
The 2-year note gained 5/32 to 100 13/32 with a yield of 3.41 percent, down from 3.48 percent.
After hours trade had some impact on yields. At 5:30 p.m. the 10-year yield was 4.22 percent, unchanged from the official 3 p.m. close, while the 30-year yield fell to 4.61 percent from 4.63 percent. The 2-year yield rose to 3.42 percent from 3.41 percent.
The 3-month yield dropped to 3.27 percent from 3.40 percent Thursday as the discount rate fell to 3.19 percent from 3.32 percent.
Risk aversion plays were back in force on Friday, causing heavy losses for stocks and new gains for Treasurys, after Wachovia Corp. revealed it may take a $1.1 billion writedown for October alone. The writedown would account for the declining value of securities backed by risky collateral. Wachovia also sharply increased its loan loss provisions.
Barclays PLC has denied rumors it soon will take a $10 billion writedown for bad credit. But in the current environment, even denied rumors are exerting influence.
In Japan, meanwhile, the Nikkei newspaper reported that Mizuho Financial Group Inc.'s Mizuho Securities Co. is being hit by large subprime losses.
All these reports follow news that Citigroup Inc. may write down an additional $11 billion for its subprime-related losses. Merrill Lynch & Co. Inc. has written down $8.4 billion and Morgan Stanley has taken a $3.7 billion writedown for similar losses.
The subprime worries took a toll this week on even the safest parts of the corporate bond market, which last month showed signs of stabilizing. The constant assault of bad news about poor-quality debt made investors shun even higher-rated offerings, causing Hyundai Motor Co and at least five other borrowers to halt bond sales.
The University of Michigan on Friday issued the preliminary reading of its consumer sentiment survey showing a decline to 75.0 in November from 80.9 in October. The result was below analysts' estimates. Consumers have been one of the engines of the economy, and if their spending slows significantly the overall economy will suffer, too.
However, Action Economics said on its Web site that "the bond market shrugged off University of Michigan sentiment weakness, which merely added one more bleak fact to the market maelstrom."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The credit markets have been in a perilous state since August; souring home loans made to borrowers with weak credit are creating havoc for the banks and investors who bought securities backed by the bad mortgages. Although this has caused investors to shun many types of corporate bonds, it also has sparked numerous rallies for Treasurys and some other types of government-backed debt.
"Unless you are trading Treasurys, spreads have been widened on your fixed-income investments," said Kevin Giddis, managing director of fixed-income at Morgan Keegan & Co.
A spread represents the difference between the yield on a corporate bond and the yield on a government note of comparable maturity. Wider spreads speak to investor uneasiness, while tighter spreads are an indication of confidence.
The bond market closed one hour early at 2 p.m. EST Friday ahead of Veteran's Day and will be closed for observance of the holiday on Monday.
The benchmark 10-year Treasury note rose 17/32 to 100 7/32 with a yield of 4.22 percent, down from 4.28 percent in late trade Thursday.
The 30-year note advanced 1 3/32 to 106 11/32 with a yield of 4.63 percent, down from 4.66 percent.
The 2-year note gained 5/32 to 100 13/32 with a yield of 3.41 percent, down from 3.48 percent.
After hours trade had some impact on yields. At 5:30 p.m. the 10-year yield was 4.22 percent, unchanged from the official 3 p.m. close, while the 30-year yield fell to 4.61 percent from 4.63 percent. The 2-year yield rose to 3.42 percent from 3.41 percent.
The 3-month yield dropped to 3.27 percent from 3.40 percent Thursday as the discount rate fell to 3.19 percent from 3.32 percent.
Risk aversion plays were back in force on Friday, causing heavy losses for stocks and new gains for Treasurys, after Wachovia Corp. revealed it may take a $1.1 billion writedown for October alone. The writedown would account for the declining value of securities backed by risky collateral. Wachovia also sharply increased its loan loss provisions.
Barclays PLC has denied rumors it soon will take a $10 billion writedown for bad credit. But in the current environment, even denied rumors are exerting influence.
In Japan, meanwhile, the Nikkei newspaper reported that Mizuho Financial Group Inc.'s Mizuho Securities Co. is being hit by large subprime losses.
All these reports follow news that Citigroup Inc. may write down an additional $11 billion for its subprime-related losses. Merrill Lynch & Co. Inc. has written down $8.4 billion and Morgan Stanley has taken a $3.7 billion writedown for similar losses.
The subprime worries took a toll this week on even the safest parts of the corporate bond market, which last month showed signs of stabilizing. The constant assault of bad news about poor-quality debt made investors shun even higher-rated offerings, causing Hyundai Motor Co and at least five other borrowers to halt bond sales.
The University of Michigan on Friday issued the preliminary reading of its consumer sentiment survey showing a decline to 75.0 in November from 80.9 in October. The result was below analysts' estimates. Consumers have been one of the engines of the economy, and if their spending slows significantly the overall economy will suffer, too.
However, Action Economics said on its Web site that "the bond market shrugged off University of Michigan sentiment weakness, which merely added one more bleak fact to the market maelstrom."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Analyst says Hawaiin economy to slow
Hawaii's economy will see an 11th straight year of growth in 2008, but at a slower pace than this year, an economist says.
Leroy Laney, consultant for First Hawaiian Bank and professor at Hawaii Pacific University, said in the bank's annual look-ahead on the state's economy that cooling real estate markets and a slowdown in tourism growth are affecting overall growth.
Overall, he sees a state affected by national trends and hovering on the edge of recession.
The forecast said visitor numbers are expected to grow slightly, but increased travel from the U.S. mainland will not be enough to offset low numbers from Japan.
Unemployment, still close to the lowest in the nation, is expected to increase and job growth to slow somewhat because of a continued slack-off in construction, Laney said.
The slower growth trend is expected to continue for several years, with no new economic boom in sight, he said.
Median home prices across the islands continue to go up in most neighborhoods, although some sellers have been hit with long waits with fewer homes selling.
"The speculators expecting to flip a property in a year or so are gone, and those just wanting to buy a place to live in are shopping for price more carefully," Laney told the First Hawaiian Bank business Outlook Forum on Wednesday.
For 2008, Laney predicted continued high construction costs despite less residential construction. Planned military housing, however, will keep government contractors busy, he said.
Inflation will remain high, he said, with job growth dropping from 2 percent this year to 1 percent next year. That, in turn, will hold back personal income growth, and inflation should drop to 4 percent, he said.
The impact will also be felt on state tax revenue, he said, with the state already seeing a return to single-digit growth after the boom years of 2004 and 2005.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Leroy Laney, consultant for First Hawaiian Bank and professor at Hawaii Pacific University, said in the bank's annual look-ahead on the state's economy that cooling real estate markets and a slowdown in tourism growth are affecting overall growth.
Overall, he sees a state affected by national trends and hovering on the edge of recession.
The forecast said visitor numbers are expected to grow slightly, but increased travel from the U.S. mainland will not be enough to offset low numbers from Japan.
Unemployment, still close to the lowest in the nation, is expected to increase and job growth to slow somewhat because of a continued slack-off in construction, Laney said.
The slower growth trend is expected to continue for several years, with no new economic boom in sight, he said.
Median home prices across the islands continue to go up in most neighborhoods, although some sellers have been hit with long waits with fewer homes selling.
"The speculators expecting to flip a property in a year or so are gone, and those just wanting to buy a place to live in are shopping for price more carefully," Laney told the First Hawaiian Bank business Outlook Forum on Wednesday.
For 2008, Laney predicted continued high construction costs despite less residential construction. Planned military housing, however, will keep government contractors busy, he said.
Inflation will remain high, he said, with job growth dropping from 2 percent this year to 1 percent next year. That, in turn, will hold back personal income growth, and inflation should drop to 4 percent, he said.
The impact will also be felt on state tax revenue, he said, with the state already seeing a return to single-digit growth after the boom years of 2004 and 2005.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Friday, November 9, 2007
Dollar sinks to new low against euro
The dollar sank to a new low against the euro on Friday but recovered some ground against the British pound even as Wall Street ended a turbulent week down sharply.
The euro rose to a record high of $1.4752 in European trading before falling back to $1.4673 in the late afternoon, above the $1.4667 it bought Thursday. Its previous trading high was $1.4730 on Wednesday.
The dollar is down nearly 12 percent against the euro since the start of the year.
The dollar gained on the euro after the European Union, blaming oil prices and market turmoil, cut its economic forecasts for the next two years, with growth now expected to slow to 2.4 percent in 2008 and 2009.
Britain's pound went as high as $2.1161 before falling to $2.0909, below the $2.1087 it bought Thursday.
The dollar weakened against many of the European currencies and the yen on Thursday after Federal Reserve Chairman Ben Bernanke said economic growth would slow noticeably in the United States in the coming months while rising oil costs would increase inflation pressures.
The dollar also has been suffering from speculation that the Fed, which has cut its benchmark rate twice, may keep doing so even as its European counterparts hold their rates steady or raise them.
Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where they can earn higher returns.
"In periods of risk aversion, money managers tend to unwind risk and buy low-risk currencies back," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. This has sent the yen and the Swiss franc down sharply as investors moved away from the yen-carry trade.
The yen-carry trade is an investment strategy that involves selling off the low-yielding yen in favor of higher-yielding assets.
The dollar slid to an 18-month low against the yen, falling to 110.52 yen before rising slightly to 111.07 in late New York trading, below the 112.36 the Japanese currency was worth Thursday. The dollar also fell against the Swiss franc, falling to 1.1247 Swiss francs from 1.1268 Swiss francs Thursday, while rising to 94.15 Canadian cents Friday from 93.89 Canadian cents.
The Canadian dollar has risen almost 20 percent in value against the U.S. dollar this year, achieving one-to-one parity for the first time since 1976. On Wednesday, the Canadian dollar was worth $1.1039, its highest level in the post-1950 era of Canadian floating exchange rates.
The "loonie" has taken flight as prices of Canada's major exports, including oil and gold, have surged.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The euro rose to a record high of $1.4752 in European trading before falling back to $1.4673 in the late afternoon, above the $1.4667 it bought Thursday. Its previous trading high was $1.4730 on Wednesday.
The dollar is down nearly 12 percent against the euro since the start of the year.
The dollar gained on the euro after the European Union, blaming oil prices and market turmoil, cut its economic forecasts for the next two years, with growth now expected to slow to 2.4 percent in 2008 and 2009.
Britain's pound went as high as $2.1161 before falling to $2.0909, below the $2.1087 it bought Thursday.
The dollar weakened against many of the European currencies and the yen on Thursday after Federal Reserve Chairman Ben Bernanke said economic growth would slow noticeably in the United States in the coming months while rising oil costs would increase inflation pressures.
The dollar also has been suffering from speculation that the Fed, which has cut its benchmark rate twice, may keep doing so even as its European counterparts hold their rates steady or raise them.
Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where they can earn higher returns.
"In periods of risk aversion, money managers tend to unwind risk and buy low-risk currencies back," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. This has sent the yen and the Swiss franc down sharply as investors moved away from the yen-carry trade.
The yen-carry trade is an investment strategy that involves selling off the low-yielding yen in favor of higher-yielding assets.
The dollar slid to an 18-month low against the yen, falling to 110.52 yen before rising slightly to 111.07 in late New York trading, below the 112.36 the Japanese currency was worth Thursday. The dollar also fell against the Swiss franc, falling to 1.1247 Swiss francs from 1.1268 Swiss francs Thursday, while rising to 94.15 Canadian cents Friday from 93.89 Canadian cents.
The Canadian dollar has risen almost 20 percent in value against the U.S. dollar this year, achieving one-to-one parity for the first time since 1976. On Wednesday, the Canadian dollar was worth $1.1039, its highest level in the post-1950 era of Canadian floating exchange rates.
The "loonie" has taken flight as prices of Canada's major exports, including oil and gold, have surged.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.