Trading got off to a tentative start in the region following modest losses on Wall Street Wednesday. Attention, however, fell on Spain's auction of 10-year bonds later Thursday as markets continue to assess the country's ability to service its sizable debt burden. On Tuesday, fears about Spain's financial woes briefly subsided after it managed to attract decent demand for its short-dated debt offering.
There will be a lot of attention on tonight's Spanish 10-year bond auction and the result will give a good indication on how the market will perform in the next few days, There is potentially a good upside if yields are low. However if Spain's cost of debt breaches the 6% barrier," a selloff in equities and commodities is likely,
Treasury 10-year yields were less than 2 percent for a fifth day as concern that European borrowers are struggling to attract lenders and the prospect that demand will decline at Spanish and French bond sales fueled investor appetite for the safest assets.
The difference between the 10-year swap rate and the yield on similar-maturity U.S. debt has widened to 11 basis points from this year’s low of 5 basis points in March. The increase reflects greater demand for the relative safety of U.S. sovereign debt. The government plans to sell $16 billion of five-year Treasury Inflation Protected Securities today.
Benchmark 10-year notes yielded 1.99 percent as of 10:18 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2022 changed hands at 100 2/32.
The rate has risen from the record low of 1.67 percent set on Sept. 23, and compares with the average of 3.84 percent for the past decade. Spain and France plan to hold bond auctions today as Spanish Prime Minister Mariano Rajoy’s struggle to meet deficit targets and the French presidential elections drive up yields.
The story is being driven by uncertainty in Europe, and as such we are seeing risk-off that is benefiting Treasuries,The Spanish auction will give us short-term clarity. But, in the longer term, we are in the same boat -- and maybe worse, as Spain’s economy is bigger than Portugal’s, Greece’s and Ireland’s.
Asian Market today april 19 2012
The Australian dollar was recently fetching US$1.0373, from US$1.0355 just before the news report. Resources stocks in Sydney, which are highly correlated to China's growth-cycle, tacked on modest gains; BHP Billiton was up 0.7% and Rio Tinto added 0.3%
Exporters were mostly lower across the region. In Tokyo, Toyota Motor lost 0.2%, Sony fell 1.0%, while Hyundai Motor dropped 1.0% and LG Display lost 1.3% in Seoul.
Regional tech shares were largely down after losses for IBM and Intel in the U.S. session Wednesday as investors there homed-in on a few negatives in their quarterly results. LG Electronics fell 1.9% and Samsung Electronics was off 0.1% in Seoul, while Tokyo Electron eased 0.1% in Tokyo.
The euro traded in a tight range against the U.S. dollar as most traders were content to sit on the sidelines ahead of the outcome of the Spanish debt auction.
The single currency was at $1.3128 against the greenback from $1.3123 late Wednesday in New York, and at Y106.95 against the yen, from Y106.61. Meanwhile, the yen lost ground after Japan's trade balance swung to a deficit in March. The dollar was at Y81.47, from Y81.25.
Spot gold was at $1,641.50 per troy ounce, off 50 cents from its New York settlement on Wednesday. May Nymex crude oil futures were up 13 cents at $102.80 per barrel on Globex.
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