Wednesday, March 14, 2007

Slowdown fears feed rally

Slowdown fears feed rally
By Saskia Scholtes in New York, Rachel Morarjee in London and,David Turner in Tokyo
Copyright The Financial Times Limited 2007
Published: March 14 2007 02:00 | Last updated: March 14 2007 02:00


The flight to quality gathered pace yesterday, pushing global bond prices higher on the back of ongoing concerns that problems in the subprime mortgage market could spark a slowdown in the wider US economy.

US Treasury prices surged as investors sought the haven of government bonds amid fears that subprime mortgage lenders were nearing bankruptcy or struggling with bad debts.

The rally was aided by weaker-than-expected February retail sales, which rose 0.1 per cent against forecasts for a 0.3 per cent rise. Analysts said much of the buying was related to ongoing turmoil in the subprime market. Subprime lender New Century Financial said it was being investigated by the Securities and Exchange Commission and that the company had received a grand jury subpoena from the US Attorney's Office for the Central District of California. Another subprime lender, Accredited Home Lenders, said it may seek to raise additional capital and cut more jobs.

By late afternoon in New York, the yield on the two-year Treasury note was down 11.8 basis points at 4.522 per cent. The yield on the benchmark 10-year note was 7.1bp lower at 4.491 per cent.

Eurozone government bonds were driven higher as investors looked to exit US markets and sought out safe havens.

UK gilt prices rose sharply with the yield on the two-year paper down by 4.9bp to 5.230 per cent. The yield on the benchmark 10-year bond fell 5.4bp to 4.731 per cent.

The two-year Schatz slid 0.2bp to 3.903 per cent while the yield on the 10-year Bund sank 2.6bp to 3.897 per cent.

Japanese government bond prices rose mildly on Tuesday, taking their lead from the overnight US Treasuries market.

But investors were reluctant to make more than minor adjustments to their portfolios, since allocations for the fiscal year ending March 31 have already been made. The yield on the 5-year fell 1bp to 1.160 per cent.

0 Comments:

Post a Comment

<< Home