2010/08/05 21:14=DJ DATA SNAP: US Jobless Claims +19K To 479K In July 31 Week-2-
WASHINGTON -The number of idled U.S. workers making new claims for jobless benefits unexpectedly increased last week to the highest level in nearly four months, raising concerns about the labor market's recovery. Initial unemployment claims climbed by 19,000 to 479,000 in the week ended July 31, the Labor Department said in its weekly report Thursday. The last time claims were this high was the week of April 10. The increase defied the expectations of economists surveyed by Dow Jones Newswires, who had predicted filings would dip by 2,000 to 455,000. The four-week moving average, which aims to smooth volatility in the data, rose by 5,250 to 458,500. New claims for the previous week, ending July 24, were revised up, to 460,000 from the originally reported 457,000. While down significantly from a year ago, new jobless claims remain relatively high, reflecting continued strains in the job market. On Friday, the Labor Department will report on unemployment in July. Economists surveyed by Dow Jones Newswires forecast the data will show joblesness rose to 9.6%, from 9.5% in June. 'The July employment report should reinforce recent evidence of an anemic labor market recovery,' IHS Global Insight economists Brian Bethune and Nigel Gault said in a preview analysis of Friday's data. High unemployment is holding back the U.S. economy's recovery from its deep recession. Americans aren't buying like they once did. The saving rate rose in June and consumer spending was flat, government figures this week showed. In the Labor Department's claims report Thursday, the number of continuing claims - those drawn by workers for more than one week in the week ended July 24 - decreased by 34,000 to 4,537,000 from the preceding week's upwardly revised level of 4,571,000. Continuing claims are reported with a one-week lag. The unemployment rate for workers with unemployment insurance for the week ended July 24 was 3.6%, unchanged from the prior week. The report has a state-by-state breakdown of new claims, for the week ended July 24. The largest decrease in claims occurred in California, which saw a drop of 19,107 because of fewer service industry layoffs. There were no states with an increase of more than 1,000 new claims. The Labor Department report on jobless claims can be accessed at: http://www.dol.gov/opa/media/press/eta/ui/current.htm
2010/08/05 20:49=DJ WORLD FOREX: Euro Up Vs. Dollar; Focus On ECB Press Conference-2-
NEW YORK -The euro gained against the dollar on the heels of a strong Spanish bond auction and better-than-expected German manufacturing data, helping investor concern over the euro-zone sovereign debt crisis continue to ease. The common currency remained up on the day after the European Central Bank left key rates unchanged. Attention now turns to the 8:30 a.m. EDT press conference, where investors will focus on ECB President Jean-Claude Trichet's assessment of the euro-zone's recovery and listen for clues as to a path forward in terms of policy. 'The prospect of diverging policy expectations continues to pressure the greenback,' said Geoffrey Yu, currency strategist at UBS in London. The ECB could signal a path forward to eventual policy tightening, whereas discussion centering on the Fed has focused on plans to kickstart a slowing economy. Early Thursday, the euro was at $1.3202 from $1.3169 late Wednesday, according to EBS via CQG. The dollar was at Y86.12 from Y86.30, while the euro was at Y113.70 from Y113.65. The U.K. pound was at $1.5905 from $1.5901. The dollar was at CHF1.0465 from CHF1.0523. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.717 from 80.938. The U.K. pound was little-changed against the dollar in the wake of the Bank of England also leaving key rates unchanged, and not adding to its government bond-buying program, known as quantitative easing.
2010/08/05 20:36DJ ECB, EU, IMF: Greece Met Its Targets For 1H 2010
FRANKFURT -Greece has met all of its targets under the austerity plan laid out for it by the European Union and International Monetary Fund, and should receive its next tranche of financial aid as scheduled, pending final reviews, the EU, IMF and European Central Bank said in a joint statement Thursday. 'The staff-level agreement reached with the Greek authorities will pave the way for the conclusion of the first review under the loan facility agreement and stand
2010/08/05 20:17DJ Fed Call:No Liquidity Operation Due; Fed Funds At 0.2050%
NEW YORK -The Federal Reserve has no liquidity operations scheduled for Thursday. Fed funds were last quoted at 0.2050%, compared to the federal-fund target range of 0 to 0.25%, according to Tullett Prebon data.
2010/08/05 20:00DJ European Central Bank Leaves Key Interest Rate At 1.00%
FRANKFURT -The European Central Bank kept its benchmark interest rate unchanged at 1.00% Thursday, as widely expected, amid persisting concerns about economic growth and sluggish bank lending. All 40 economists polled by Dow Jones Newswires had correctly predicted the no-change verdict. ECB President Jean-Claude Trichet will comment on the rate decision at the press conference scheduled for 1230 GMT (1430 CET), the ECB said. Trichet is likely to be asked to comment on the disbursal of a EUR9 billion tranche in financial aid to Greece from the European Union and the International Monetary Fund. But the ECB chief is unlikely to provide much color after a joint ECB, EU and IMF press release earlier Thursday said the aid program is on track, while still subject to approval. A joint EU-IMF review mission to Athens, which also involved ECB experts, found that market worries about Greece's creditworthiness are subsiding and that its fiscal consolidation program is off to a strong start. 'The impact on growth...and its implication for employment and social cohesion remain the main risk factors over the next few quarters,' said BNP Paribas economist Luigi Speranza. 'On this front, however, the plan...is well structured as most of the pain is felt in the first year, allowing room for a confidence improvement later.' Trichet is also likely to be quizzed on whether the governing council discussed continuing its exit strategy, which was launched in December but came to a halt when the sovereign debt crisis surfaced. Economic activity in large parts of the monetary union picked up and with it inflation, dispelling fears of both a double-dip recession or deflation. The euro-zone's harmonized consumer price index rose to 1.7% in July, preliminary data showed, from 1.4 in June. It has been edging closer to the ECB's comfort zone of an annual rate just below 2%, but the rise is in part due to low oil prices seen a year ago. Analysts estimate that core inflation, which excludes volatile oil and food prices, is still at a relatively low 0.8%-1%. Sentiment indicators used to predict economic trends, such as Germany's ifo survey and the euro zone Purchasing Manager Index, have surprised with strong readings since the July ECB council meeting. However, the ECB's quarterly Bank Lending Survey, published last week, showed that credit conditions for the majority of businesses tightened in the spring as banks in some countries suffered from the crisis in government debt markets. Sluggish bank lending could dent the recovery, as roughly two thirds of the euro-zone economy relies on financing provided by the banking system. In the U.S., companies have easier access to capital markets. Nevertheless, stress tests for 91 banks, representing 65% of the European market in terms of total assets, conducted by the Committee of European Banking Supervisors in July would suggest that banks are relatively well capitalized. Only seven banks failed to reach the 6% benchmark requirement for Tier 1 capital, a common measure of banks' resilience to shocks and the results didn't give rise to new market tensions. Interests rates banks charge peers in the interbank market also remained calm after banks had to repay 12-month central bank funds worth a record EUR442 billion at the beginning of July. ECB Website: www.ecb.int
2010/08/05 19:29=DJ Bank Of England Keeps Bond-Buying Program, Interest Rates On Hold
LONDON -The Bank of England's Monetary Policy Committee kept its stock of bond purchases at GBP200 billion and its key interest rate at its all-time low of 0.5% Thursday, amid indications that the economic pickup is slowing, even as price pressures mount. The decision was in line with expectations: all 20 economists polled by Dow Jones Newswires had tipped the MPC to keep rates steady, and most also forecast it to leave its bond-buying program unchanged, although one economist had tipped an immediate expansion. The MPC suspended its quantitative easing policy of buying U.K. government bonds with freshly created central bank money in February, but has kept open the option of extending purchases if conditions deteriorate. Rates have been at their current level since March 2009. While the U.K. economy grew at its fastest pace in more than four years in the second quarter, many uncertainties remain: surveys suggest that the pickup in activity is slowing, and policymakers worry that euro-zone strains will crimp demand from the U.K.'s biggest trading partner, and lack of credit will slow recovery, against a backdrop of strict U.K. fiscal austerity. Complicating the dilemma faced by BOE officials is persistently high U.K. inflation which, as BOE Governor Mervyn King acknowledged last week, has been above the 2.0% target for much of the past four years, and which some analysts say could remain above that benchmark until 2012.
2010/08/05 15:59DJ Tokyo Shares End Higher As Exporters, Real Estate Stocks Rise -2-
TOKYO -Tokyo stocks rose Thursday as a weaker yen lifted major exporters, while real estate stocks like Mitsubishi Estate and Mitsui Fudosan gained sharply after data showed a fall in closely watched Tokyo office vacancy rates. The overall market opened stronger after U.S. data showed a bigger-than-expected increase in private-sector jobs last month. Investors are paying close attention to Friday's U.S. payroll data for clues on the future course of the nation's monetary policy. Depending on the data, speculation may grow that the Federal Reserve might take additional easing steps next week, which could cause the dollar to fall. 'Investors may not take large positions until the FOMC meeting on Tuesday as there is a risk that exporters may fall,' said Tsuyoshi Kawata, senior strategist at Nikko Cordial Securities, adding that the Nikkei may remain between 9300 and 9800 for the next few days. The Nikkei 225 Stock Average rose 164.58 points, or 1.7%, to 9653.92. The Topix index of all the Tokyo Stock Exchange First Section issues rose 11.16 points, or 1.3%, to 857.09, with all 33 Topix subindexes closing in positive territory. Exporters gained, as the dollar traded above Y86 today. Sony gained 2.6% to Y2,715 and Fanuc added 3.7% to Y10,380. Real estate stocks staged a rally on data showing a decline in office vacancy rates in central Tokyo for the first time in 2.5 years. Mitsui Fudosan gained 5.7% to Y1,340 while Mitsubishi Estate rose 5.5% to Y1,277. The Topix real estate subindex led the board with a gain of 4.9%. Toyota Motor, which released strong first-quarter results after market close Wednesday, rose to an intraday high of Y3,195 before ending up 0.5% at Y3,105. Analysts credited the good earnings figures as mainly due to substantial profits in the firm's finance business, however, noting that the operating profit margin stood at just 4.3%, fairly low compared with Toyota's rivals. By contrast, Isuzu Motors jumped 6.0% to Y264 after it swung to a net profit for the April-June quarter and doubled its full-year net profit outlook. Asahi Breweries gained 2.0% to Y1,597 and Kirin Holdings added 1.5% to Y1,181 on a Nikkei report that they are ramping up beverage production amid the summer heatwave. On the other hand, Renesas Electronics dropped 3.4% to Y704 after Goldman Sachs cut its rating to Neutral, saying fix cost reductions are expected to remain between Y20 billion to Y30 billion, short of the brokerage's expectation of between Y40 billion to Y50 billion. The brokerage said as the company's break-even point has blurred, it is difficult to draw a picture of profit recovery until sales growth is confirmed. September Nikkei 225 futures closed up 130 points, or 1.4%, at 9620 on the Osaka Securities Exchange.
2010/08/05 15:28DJ JGBs Fall On Profit-Taking; Solid 40-Year Sale Confirms Demand
TOKYO -Japanese government bonds finished lower Thursday due to a profit-taking selloff after the benchmark 10-year yield breached below the psychologically important 1% mark for the first time in seven years in the previous session. But many analysts believe potential demand for safe-haven assets will remain strong in the near term, as concerns grow over a global deflationary trend and the slowing economic recovery in Japan. 'The JGB market may correct if players start to see the need to take profits ahead of book-closing at the end of September. But with no major cues expected in August, JGBs are likely to keep a gradual uptrend,' said Akito Fukunaga, chief rates strategist at RBS Securities. Fukunaga tips the yield on benchmark 10-year cash JGBs to move in a 0.98%-1.05% range until results of the Federal Open Market Committee come out next Tuesday. The 10-year yield was up 3.5 basis points at 1.030% as of 0600 GMT. Market participants will be closely watching the Federal Reserve's policy decisions next week. Speculation that the Fed could renew bond purchases to support the nation's economy--which could put pressure on the Bank of Japan to ease policy further--contributed to the 10-year yield's fall below the 1% threshold Wednesday. Strong results of a 40-year sale earlier in the day also confirmed the popularity of safe-haven JGBs. 'Because the investor base and the supply are limited for 40-year sales, there is steady demand from investors,' such as life insurance firms, said Chotaro Morita, chief strategist at Barclays Capital. Japan's Ministry of Finance sold Y299.7 billion of 40-year JGBs at an issue price of 110.54, yielding 1.825%. The 40-year notes were sold in a Dutch-style auction in which all successful bidders pay the lowest accepted bid. The new issue carries a coupon of 2.2%, reopening the No. 3 issue sold in May. The MOF usually reopens the same 40-year issue several times to improve liquidity of the relatively immature zone.
2010/08/05 15:02DJ Forex Options: Dollar/Yen Options Fall As Spot Rises; US Data Eyed
TOKYO -Dollar/yen currency options fell in Asia Thursday as players sold dollar-downside hedges on the view that the U.S. currency will continue to rebound from its eight-month low against the yen.Investors sold the contracts because they think U.S. non-farm payrolls data due Friday may come in better than expected, which would likely push the dollar up against the yen, dealers said. A Dow Jones poll of economists forecasts the data to show a 60,000 decline in jobs in July from the previous month.A strong showing overnight from a separate report on U.S. employment conditions added weight to that view, they said.Benchmark one-month at-the-money implied volatilities fell to 10.65%/11.35% from 10.85%/11.55% in New York Wednesday. Options dealers in Tokyo said they may fall below 11.0% if the non-farm payrolls data come in stronger than expected.Some investors sold one-week dollar-call/yen-put options with Y86.30 strike price and $100 million face value at 11.2%, dealers said. The deal suggests investors think the dollar won't rise far above 86.30 in advance of the U.S. jobs data at 1230 GMT Friday.As of 0300 GMT, the greenback was at Y86.12.Some investors sold three-month ATM straddles at 11.7%, suggesting they are also not expecting the dollar to move sharply ahead of Friday's data.
2010/08/05 14:17=DJ WORLD FOREX: Dollar Down Vs Yen As Exporters Sell; US Jobs Data Eyed -3-
TOKYO -The dollar fell against the yen in Asia Thursday as Japan's exporters sold the currency after it rallied last night amid receding concern over the pace of the U.S. economic recovery.The greenback Wednesday received a boost from better-than-expected data on employment and from the service sector. But the upturn also provided a window of opportunity for Asian institutional investors to lock in profits, pushing the U.S. unit down versus its Japanese counterpart.Looking ahead, market participants are still paying close attention to U.S. economic indicators due out the rest of this week, in particular July jobs data on Friday, for clues on the future course of the nation's economy and monetary policy.'The outlook for the dollar will completely hinge on the results of the jobs data,' Tokyo Forex and Ueda Harlow senior dealer Yuzo Sakai said.If the outcome strengthens the view that the U.S. economic recovery is losing momentum, speculation will grow that the Federal Reserve might take additional easing steps next week, which could drive U.S. Treasury yields lower and further weigh on the greenback, he added.'The downward trend in the dollar is unlikely to end soon,' Sakai said.U.S. nonfarm payrolls for July are expected to show a drop of 60,000 private-sector jobs after a 125,000 fall the previous month, according to economists polled by Dow Jones Newswires.As of 0450 GMT, the U.S. unit fell to Y86.14, down from Y86.30 late Wednesday in New York. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 80.966, compared with 80.938.The euro also dropped to Y113.30 from Y113.65 due to selling by Japanese exporters. It fell slightly to $1.3151 from $1.3169 as excessive worries over the world's biggest economy fade somewhat.Later in the day, the European Central Bank and the Bank of England are slated to announce their rate decisions and release statements.Although they are expected to stand pat this month, investors are focused on remarks from ECB President Jean-Claude Trichet in the post-policy board meeting press conference. If he expresses cautiously optimistic views on the European economy, the euro may rally, traders say.Elsewhere, the New Zealand dollar fell sharply earlier in the day after data showed that the country's unemployment rate rose in the second quarter, adding to the view that the Reserve Bank may pause its current tightening cycle before the end of the year.The currency slid to Y62.87 as of 0450 GMT from a session high of Y63.55.But the decline could be limited as commodity prices have been rising globally recently and demand for so-called commodity currencies such as the New Zealand and Australian dollars remains firm, said Satoshi Tate, senior foreign exchange dealer at Mizuho Corporate Bank.
2010/08/05 13:44=DJ BIG PICTURE: Labor Market Improving, But Still Has Way To Go
NEW YORK -Two fresh looks into the July labor markets did little to change the outlook for the U.S. economy at large or Friday's crucial employment data.Instead the data confirm the economy and labor markets are improving, but the modest pace means unemployment is likely to remain stubbornly high.The ADP jobs report showed the private sector added 42,000 jobs in July, a smidgen better than the 39,000 expected.Later, the Institute for Supply Management released its survey of non-manufacturing companies. The overall purchasing managers' index came in better than expected, rising to 54.3 from 53.8 in June. More encouragingly, the ISM employment index rose to 50.9 in July -- back in expansionary territory -- from 49.7. That's only the second time since December 2007 that this subindex index had a reading above 50, the dividing mark between expansion and contraction.Wednesday's news brought some relief to financial markets concerned about the weak recovery, but the data didn't send forecasters running to alter their expectations for Friday's Bureau of Labor Statistics employment data that include government jobs.The median forecast remains that layoffs of temporary Census workers caused total nonfarm jobs to drop by 60,000 in July. Private-sector jobs, as measured by the BLS, are projected to post a 100,000 gain.The unemployment rate is expected to tick up to 9.6% from 9.5% in June.The private-sector forecast is more upbeat than the ADP tally, but forecasters caution that the ADP survey doesn't move in lock-step with the BLS numbers.'Over the past six months, ADP employment growth has averaged 82,000 per month less than the official private payroll gains,' economists at Barclays Capital wrote.And while the ISM employment index was a positive, Anthony Nieves, who oversees the non-manufacturing survey, is cautious in his assessment of the job outlook. He says employers that have slashed jobs will eventually find they can't maintain bottom line growth without hiring, but they could be very slow to add jobs.'Companies have become accustomed to doing more with less,' Nieves said. Productivity has surged over the past year, and businesses have maintained or improved profit margins by cutting costs, including labor.Joel Prakken, chairman of Macroeconomic Advisers, which compiles the job survey for ADP, said the U.S. needs to create about 130,000 jobs each month just to keep the unemployment rate stable. He said job growth has to strengthen to 150,000 to 200,000 to bring the rate down appreciably, but Prakken doesn't expect job growth to speed up to that level soon.Changes in the unemployment rate always lag overall economic growth, but the lack of significant progress will keep households on edge and complicate Federal Reserve policy decisions. The economy is sure to remain the main focus of the midterm elections.One long-run consequence of sub-par job growth is the damage done to households by prolonged unemployment. In June, almost 6.8 million people were out of work for at least 26 weeks. That's 45.5% of the 14.6 million total unemployed.July's job report probably won't show much improvement in those dreary numbers.
2010/08/05 10:00=DJ FOREX VIEW: Divergent ECB, Fed Policy Will Weigh On Dollar
NEW YORK -European Central Bank President Jean-Claude Trichet could put more pressure on the U.S. dollar Thursday if he hints of a divergence between euro-zone monetary policy and U.S. policy. The dollar, already under pressure from a recent spate of disappointing economic news compared to better-than-expected data from the euro zone, could fall further if Trichet signals a path forward to monetary-policy tightening at the bank's monthly rate-setting meeting. In contrast, the Federal Reserve is said to be mulling a kick-start to a sluggish U.S. economy. Though a still-nascent recovery in the euro--and a shaky global recovery in general--means it is unlikely Trichet would announce specific timing to normalize policy, he is 'likely to suggest that the ECB remains strongly committed to a gradual exit from the unconventional monetary stimulus, in sharp contrast with the message coming from the Federal Reserve,' said Luigi Speranza, head of inflation economics at BNP Paribas in London. The Wall Street Journal reported this week the Fed was considering whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds--effectively delaying the policy normalization--instead of allowing its portfolio to shrink gradually, as it had been expected to do in the months ahead. The big surprise, which has darkened the dollar's near-term prospects, is the 'apparently rapid shift in sentiment around the Fed,' said Jonathon Griggs, chief investment officer of currency management, with $20 billion in assets under management, at J.P. Morgan Asset Management in London. No longer are investors zeroing in on the timing of the Fed's first move to tighten ultraloose policy, Griggs said. Instead, they are wondering when the Fed will restart quantitative easing. 'The market has been running very short euros on the negative euro story,' Griggs said of bets against the common currency based on the now-easing crisis of sovereign debt. 'People have been severely tested on that view, and rightly so,' as the common currency has rebounded sharply from the four-year low of $1.1876 it hit in early June to trade Wednesday afternoon at $1.3135. A debt-backstop plan for stressed euro-zone nations, well-received euro-zone government-bond auctions and the release of regional bank stress tests all have helped ease concerns over the euro-zone debt crisis. Despite the improved sentiment toward the euro zone, 'you could almost say that 75% of this turnaround' in the euro is more a dollar story than a euro story, Griggs said, with U.S. economic data especially in the key consumer-spending, housing and labor sectors pointing to a pronounced slowdown. 'Too bad for the greenback,' said analysts at Commerzbank in Frankfurt. 'The Fed is increasingly focusing on supporting the real economy and therefore likely to continue or even intensify its ultra-expansionary policy for the foreseeable future.' Because the euro zone faces its own prospects of slowing economies in the longer term, as the effects of belt-tightening budgets choke some growth, Trichet isn't likely to announce major changes to its own government bond-buying program, and certainly won't change key rates, Griggs said. 'But at the very least they can feel a bit more emboldened about' having soothed investor nerves over the sovereign-debt crisis, giving the euro more room to gain against the dollar, possibly to $1.35 or $1.40 in the near term, Griggs said.
2010/08/05 08:51DJ US Rep Frank To Hold Hearing On SEC Transparency -Fox Business
U.S. Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, will conduct a hearing Sept. 23 on transparency issues related to a provision in the financial regulatory reform measure signed into law last month, Fox Business Network reports Wednesday. The section in question has been interpreted as giving the Securities and Exchange Commission the leeway to deny Freedom of Information Act requests regarding certain cases. SEC officials have said the provision wouldn't impede such requests and that it's meant to protect whistleblowers, according to previous Fox Business reports. Frank (D., Mass.) said the provision was inserted by Sens. Christopher Dodd (D., Conn.) and Richard Shelby (R., Ala.), according to Fox Business. Website: www.foxbusiness.com
2010/08/05 06:47DJ CREDIT MARKETS: No End In Sight For High-Grade-Debt Surge
NEW YORK -Nearly $2.5 billion in new high-grade supply was brought to market Wednesday, furthering a solid issuance pipeline that began last week and continued in earnest Monday and Tuesday. Meanwhile, Fannie Mae sold $7 billion of its $3 billion bond, and Vornado is in the market with a $660 million commercial mortgage-backed security. And a casino tapped the high-yield bond market for the first time since July 21.Investment-Grade CorporatesHigh-grade issuance so far this week totals $10.57 billion, already the highest total since the week of June 14.Daniel Sheppard, director of private wealth management and fixed income at Deutsche Bank, said he doesn't see anything ending the rush of supply. 'As long as yields are this low, CFOs are saying to themselves: 'How cheaply can I finance myself for the next three, five and 10 years?''A pair of financial institutions each brought $750 million. Aflac Inc. was in the market with a two-part offering, comprising $300 million in five-year bonds offered at 1.85 percentage points over Treasurys and $450 million in 30-year paper, offered at 2.40. Price guidance had been around 2 percentage points on the first tranche, and 2.50 on the second. Meanwhile, PNC Funding Corp. sold $750 million in 10-year bonds in a deal that was upsized from $500 million on demand. The bonds were offered at 1.50, tighter than guidance in the 1.55 area.Two energy companies also tapped the market, Magellan Midstream Partners for $300 million in 10.5-year bonds and Northern States Power Co. in Minnesota for $500 million in tranches of five- and 30-year bonds. Magellan's 4.25% bonds priced at a discount to yield 4.294% to maturity, or 1.35 percentage points over Treasurys, inside price talk of 1.40. Northern States priced its bonds at 0.38 over Treasurys on the initial tranche of $250 million in five-year notes and 0.80 on the $250 million tranche of 30s. Price talk had been 0.40 and 0.80 on the two tranches.Additionally, AMB Property Corp. sold $300 million in 4.5% seven-year bonds--upsized from a $250 million deal--at 98.921 of par to yield 4.682%, or 2.375 percentage points over Treasurys. That was at the tight end of price guidance at 2.375-2.50.In secondary, Metlife Inc. and BP bonds were some of the most active.The movement in BP was attributed to the company's ability to permanently close the well with a process it called 'static kill.' That involved pumping heavy drilling fluid into the well to oppose the pressure of the oil rising from the reservoir. Relief wells are also nearly ready. By early afternoon, BP's 4.75% notes due March 2019 were trading with a risk premium over Treasurys of 2.36 percentage points, 0.21 lower than Tuesday, according to MarketAxess. The yield on the notes fell to 5.299% from 5.468% Tuesday.Similarly, the company's 5.25% bonds due May 2013 had a spread over Treasurys of 3.56 percentage points, 0.24 better than the day before, for a yield of 4.433%. Yields move inversely to the price of the bond, so lower yields mean the bond rose in value.The cost to insure BP PLC (BP, BP.LN) bonds against non-payment also stabilized. The insurance, sold in the form of credit default swaps, now costs the same for one year of protection as it does for five. Since early July, CDS prices had been inverted--meaning it was more expensive to be insured over one year than over five because of the perceived short-term risks BP was facing.Meanwhile, the CDX North American Investment Grade Index series 14 zeroed in on the psychologically important 100BP level after ISM non-manufacturing data came in slightly better than forecast. In a bullish signal, the index was bid below 100BP at around 99.85BP shortly after the data, compared to 105BP before the data at 9.30 a.m. EDT, according to index administrator Markit. The index traded at 99.53 as of 3.30 p.m. EDT. It is down from a recent high of 131.28BP on June 9.Junk BondsMarina District, owner of the Atlantic City-based Borgata Hotel, Casino & Spa, sold $800 million in senior secured notes to refinance bank debt and pay a dividend to investors. The deal, led by six banks, was done in two tranches: $400 million in 5-year notes at 9.5% sold at 98.9 cents on the dollar to yield 9.75%, and another $400 million in 8-year notes at 9.875% sold at 99.3 cents to yield par, or 100 basis points.The issuance follows three sales Tuesday. Two other companies announced Wednesday they would sell debt. Ferro Corp. plans to sell $250 million in 8-year senior notes in a deal that's expected to price Thursday. And Gentiva Health Services said Wednesday it would sell $305 million of 8-year senior notes by Aug. 11. Those bonds, combined with a $925 million credit facility, will finance in part Gentiva's acquisition of hospice company Odyssey Healthcare.Gentiva in July launched a $600 million term loan B to fund that deal but pulled it from the market to come out with the bonds so investors could digest news the company may be part of a Securites and Exchange Commission investigation into whether health-care companies pushed patients into extra home-healthcare visits to secure more in reimbursements from a government program.Asset-BackedCNH Equipment Trust's $753.451 million bond has priced, according to a person familiar with the matter.The bond, dubbed CNH 2010-B, is led by Barclays Capital and BNP Paribas.The largest tranche of the bond, worth $268 million sold at 25 basis points over interpolated swaps, a benchmark, to yield 1.042%.Last week, Ford Motor Credit Co. sold its $1.387 billion asset-backed bond. Ford's bond was delayed by about a week because of uncertainty created by the financial markets' regulatory overhaul.Agency MortgagesAgency mortgages saw good two-way trades with the higher prices leading to some profit-taking in the higher coupons. The lower coupons saw some buying, and risk premiums tightened by 2 basis points to 130 basis points over comparable Treasury yields.Commercial MortgagesVornado is in the market with its $660 million commercial mortgage-backed security issue.The deal, backed by 40 retail properties, harkens back to the first few CMBS issues that were single-owner deals.Additionally, a $788.5 million commercial mortgage issue from Goldman is also in the market.The issue was launched with the top-rated nearly 10-year class at price of 135 basis points over swaps. This narrow price range will make it too expensive for some investors, but there are others who are willing to pay the price for higher yields and good quality.A report suggested that the dark days of commercial mortgage may be over. The number of loans transferred to special servicers for workouts or liquidations again grew only by a modest amount, of $0.12 billion, following a $0.8 billion increase in June, according to research firm Trepp. This follows an average monthly rate of $2.8 billion in distressed loans earlier in the year.Agency DebtFannie sold $7 billion of its 3-year bond at 23.5 basis points over comparable Treasury yields. The issue sold at a price of 99.825 and yield of 1.057%. While the mortgage finance companies have little need to raise more funds, they are tapping into the robust demand for agency debt and using the opportunity to improve their liquidity, said Jim Vogel, mortgage strategist with FTN.TreasurysTreasurys fell Wednesday after data that showed the U.S. services sector expanded at a better-than-expected pace in July, fueling hopes the economy will continue to slowly recover and not deteriorate again in the second half of the year.Losses came as equities rose and reversed Treasury market gains posted on Tuesday, when the two-year yield fell to another record low of 0.515%. Bond yields move inversely to bond prices.Wednesday's report on the U.S. services sector showed the non-manufacturing sector in the U.S. expanded at a faster-than-expected clip last month. The Institute for Supply Management's non-manufacturing purchasing managers' index rose to 54.3 in July from 53.8 in June. Forecasters surveyed by Dow Jones Newswires had expected the July index would slow to 53.1.Readings above 50 indicate expanding activity in the sector. The report's employment index rose into expansionary territory, to 50.9--the highest level since December 2007--from 49.7.The report was the second better-than-expected economic release in the last week--a survey Friday of Chicago area purchasing managers revealed the pace of U.S. business activity accelerated in July. The stronger economic reports suggest the nation's economy isn't trapped in a double-dip recession.In afternoon trading, the price of the two-year Treasury note was off 2/32 to a yield of 0.570%, while the 10-year was off by 11/32 to yield 2.955%, after earlier falling as low as 2.878%. The 30-year Treasury was off 17/32 to yield 4.076%.
2010/08/05 03:32DJ PRECIOUS METALS: Gold Up On Hopes Of Fed Shift, China Demand
NEW YORK -Speculation about further easing of U.S. monetary policy and the chance of an increase in Chinese demand Wednesday pushed gold futures to their highest levels in almost three weeks.The most actively traded contract, for December delivery, settled up $8.40, or 0.7%, at $1,195.90 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price since July 15. Gold has advanced for six consecutive sessions, lifted first by bargain buying, when prices dipped to three-month lows, and recently by the likelihood of increased refuge demand if the economic recovery remains unsteady.Gold was supported Wednesday by speculation that the Federal Reserve may lower interest rates or buy bonds to try to boost the economy, said Tom Pawlicki, precious-metals analyst with MF Global in Chicago. Even symbolic action by the Fed could send a signal that officials believe the economy is at risk of deflation or a renewed slowdown, enhancing the appeal of gold as an alternative asset.Gold is sometimes bought as a hedge against a loss of purchasing power during weakness in other markets.Futures also received continued support Wednesday from the news that China would take steps to expand its domestic gold market. The People's Bank of China Tuesday announced that the government would permit more banks to export and import gold. Analysts say the easing of restrictions shouldn't immediately lead to an increase in gold investment, but it represents an expansion that could make China a larger player in the international gold market.'I think the Chinese news is a longer-term underlying theme,' said Adam Klopfenstein, senior market strategist with Chicago-based Lind-Waldock. 'If they're going to get more aggressive in letting people buy and sell more gold, it's a precursor to more moves from the central bank' in the gold market.Gold futures trading was introduced to the Shanghai Futures Exchange in 2008.Comex silver futures fell for the first time in five sessions Wednesday. Most-active September silver settled down 14.4 cents, or 0.8%, at $18.278 an ounce.Nymex platinum and palladium futures fell for a second consecutive day, as disappointing auto sales from Japan's two largest auto manufacturers weighed on the market. The metals' main industrial use is in automotive catalytic converters. October platinum settled down 90 cents, at $1,586.20 an ounce. September palladium slid $6.30, or 1.2%, to $500.15 an ounce. Settlements (ranges include open-outcry and electronic trading): London PM Gold Fix: $1,199.50; previous PM $1,187.50 Dec gold $1,195.90, up $8.40; Range $1,187.00-$1,205.50 Sep silver $18.278, down 14.4 cents; Range $18.230-$18.700 Oct platinum $1,586.20, down 90 cents; Range $1,581.80-$1,598.40 Sep palladium $500.15, down $6.30; Range $496.00-$509.00
