Fixed IncomeStay updated with Business News, Pakistan news, Current world news and latest world news with Business Recorder..http://www.brecorder.com/markets/fixed-income.htmlThu, 18 Sep 2014 01:27:28 +0000SRA Framework 2.0en-gbPrices drop as Fed rate forecasts worry tradershttp://www.brecorder.com/markets/fixed-income/americas/195763-prices-drop-as-fed-rate-forecasts-worry-traders.htmlhttp://www.brecorder.com/markets/fixed-income/americas/195763-prices-drop-as-fed-rate-forecasts-worry-traders.htmlimageNEW YORK: US Treasury debt prices fell on Wednesday after the Federal Reserve kept in place near-zero interest rates and other ultra-loose US monetary policies meant to boost economic growth.

After surrendering early gains spurred by unexpectedly tame US inflation data, Treasury prices turned negative as Fed policymakers issued economic assessments and a policy statement after a two-day meeting in Washington.

The Fed pleased many investors by pledging to keep policies accommodative for a "considerable time" but spooked others by raising projections for interest rate levels in 2015 and later, according to Anthony Valeri, investment strategist at LPL Financial in San Diego.

"The market is reacting a little negative, and I think it is focusing on the 2015 median, which was raised from 1-1/8 to 1-3/8," Valeri said. "It implies the Fed will hike more than anticipated in 2015 and maybe hike more in 2016 than the market anticipated."

Yields on benchmark 10-year Treasury notes jumped to a session peak of 2.616 percent minutes after the Fed published its statement and were last at 2.607 percent, reflecting a 5/32 decline in price for the trading day.

Prices of 30-year Treasuries also fell, while shorter maturities were mixed in early New York trading. The long bond was off 11/32 and last yielding 3.372 percent.

"The market seems to be taking this a little bit more hawkish," said Sam Diedrich, portfolio manager at Pacific Alternative Asset Management Co in Irvine, California. Bond prices rose in early New York trading after government economists reported US consumer prices fell for the first time in nearly 1-1/2 years in August.

The Labor Department said its Consumer Price Index dropped 0.2 percent last month as a broad decline in energy prices offset increases in food and shelter costs.

It was the first decline since April 2013 and followed a 0.1 percent gain in July. Stripping out food and energy prices, the so-called core CPI was flat in August for the first time since October 2010 after nudging up 0.1 percent in July.

"The core was unchanged, and that's the first time the core's been unchanged month over month since October 2010," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.

"That's something people are taking notice of." Treasuries have also benefited from investor anxieties about Thursday's independence vote in Scotland that has the potential to rattle markets.

Copyright Reuters, 2014

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m.iqbal1967@yahoo.com (Muhammad Iqbal)AmericasWed, 17 Sep 2014 20:38:10 +0000
Spanish yields dip as polls show narrow lead for ‘No’ vote in Scotlandhttp://www.brecorder.com/markets/fixed-income/europe/195637-spanish-yields-dip-as-polls-show-narrow-lead-for-‘no’-vote-in-scotland.htmlhttp://www.brecorder.com/markets/fixed-income/europe/195637-spanish-yields-dip-as-polls-show-narrow-lead-for-‘no’-vote-in-scotland.htmlimageLONDON: Spanish bond yields edged down on Wednesday after new opinion polls on Scotland's independence referendum, closely watched in Catalonia, showed a narrow lead for those supporting staying in the United Kingdom.

Bond yields fell across the euro zone as investors expected some of the long-term loans the European Central Bank offers this week to be invested in government debt, at least for a time.

But the fact that Spain kept up with its peers despite investors having to make room on their books for a debt auction on Thursday was a sign of strength, traders said.

Investors have dumped Spanish bonds in the past 10 days on concern that success for the "Yes" to independence camp in Scotland may embolden a similar secessionist move in Catalonia, which accounts for a fifth of Spain's economic output.

A Survation poll for the Scottish Daily Mail showed supporters of staying in the UK were in the majority one day before the vote, swaying some investors to buy Spanish bonds, traders said, although support for independence rose 1 percentage point to 48 percent.

Gambling company Betfair said on Tuesday it was already paying out winnings to customers who had staked money on a "No" vote.

"With polls overnight showing the "No" vote with a narrow majority, the hope is...the clamour for separation in Catalonia will ease," said Nick Stamenkovic, bond strategist at RIA Capital Markets in Edinburgh.

Spanish 10-year bond yields fell 3 basis points to 2.33 percent, having hit record lows of just above 2 percent at the start of the month. Spain sells up to 3.5 billion euros in bonds on Thursday.

Traders expected the market to be volatile as uncertainty about Scotland's future remained high, with the Survation poll showing about 8 percent of voters were still undecided. The overnight cost of hedging against sharp swings in the British pound doubled on Wednesday.

EASY MONEY

Portuguese two-year bonds, the highest-yielding in the euro zone, outperformed their peers in a sign that investors were positioning for Thursday's ECB offering of four-year loans to banks (TLTROs).

It will be the first in a series that could result in banks getting up to 1 trillion euros in cheap loans.

The aim is to encourage banks to lend to the real economy, but they can return the money to the ECB with no penalty if they fail to increase their lending books after two years. Meanwhile, they can invest in government bonds.

Portuguese two-year bonds were yielding 0.66 percent, down 6 bps.

"Investors are pre-empting the carry trade," said Marco Brancolini, a fixed income analyst at RBS.

At the other end of the credit risk scale, Germany sold 3.34 billion euros in two-year bonds at an average yield of minus 0.07 percent, with demand 2.3 times the amount sold.

Any excess cash kept in overnight deposits at the ECB incurs a 20 bps penalty so many investors prefer to lose 7 bps and keep the money in short-term, highly-liquid German debt.

Across the Atlantic, monetary policy outlook may be taking a different path. The Federal Reserve's pledge to keep rates near zero for "a considerable time" may be tweaked after a policy meeting ending on Thursday so that the wording brings forward expectations for interest rate hikes.

"Whilst a hint of an earlier-than-expected interest rate rise could well introduce some volatility into the market I find it difficult to believe that the Fed will do anything other than make haste slowly. There is no overwhelming need to come across all hawkish yet," said Gary Jenkins, chief credit strategist at LNG Capital.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeWed, 17 Sep 2014 12:40:18 +0000
India bond yields end steady for 2nd straight day; Fed in focushttp://www.brecorder.com/markets/fixed-income/asia/195625-india-bond-yields-end-steady-for-2nd-straight-day;-fed-in-focus.htmlhttp://www.brecorder.com/markets/fixed-income/asia/195625-india-bond-yields-end-steady-for-2nd-straight-day;-fed-in-focus.htmlimageMUMBAI: Indian government bond yields ended steady for a second straight session on Wednesday, ahead of the outcome of the US Federal Reserve's policy meeting, which is expected to offer fresh clues on when it plans to begin lifting interest rates.

India, among other emerging markets, has benefited from the US Fed's loose monetary policies. Foreign institutional investors (FIIs) have bought a net $18.75 billion worth of debt so far this year.

However, FIIs have used up almost all of their existing $25 billion limit, raising caution. Reserve Bank of India Deputy Governor H.R. Khan said on Tuesday there was no proposal yet on raising the limits.

That could cap any significant gains in government bonds, analysts said, although debt markets could be hit should the Fed signal early rate hikes.

"Barring a sharp move in US treasury yields above 2.75 percent, we think Indian government bond yields should remain in current band or head a bit lower in the near term given improving macro and fiscal factors ," said Bekxy Kuriakose, head of fixed income trading at Principal PNB Asset Management.

The benchmark 10-year bond yield ended steady at its previous close of 8.50 percent.

Shorter-end bond yields, particularly 7.28 percent 2019 , ended down 3 basis points at 8.52 percent from Tuesday's close of 8.55 percent.

The market is also awaiting the next tranche of debt buyback, as indicated by the central bank deputy on Tuesday, after the RBI bought 127.6 billion rupees ($2.10 billion) in the last session.

Overnight cash rates remained comfortably near the repo rate as the central bank continued to inject liquidity through variable overnight repo auctions as well as through the daily liquidity adjustment facility.

Total volumes in the bond market fell to 184.25 billion rupees, lower than Tuesday's 198.9 billion rupees, as well as below the daily average in the last three months.

In the overnight indexed swap market, the benchmark 5-year swap rate and the one-year rate ended down 1 bp each at 7.94 percent and 8.43 percent.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)AsiaWed, 17 Sep 2014 12:24:17 +0000
JGBs rebound after 20-year auction draws solid bids http://www.brecorder.com/markets/fixed-income/asia/195582-jgbs-rebound-after-20-year-auction-draws-solid-bids.htmlhttp://www.brecorder.com/markets/fixed-income/asia/195582-jgbs-rebound-after-20-year-auction-draws-solid-bids.htmlimageTOKYO: Japanese government bond prices rebounded on Wednesday after an auction of 1.2 trillion yen ($11.2 billion) 20-year JGBs drew solid bids, pulling yields back from 3-month highs.

The 10-year JGB yield dropped 2.0 basis points to 0.555 percent, having reversed an earlier rise to a three month-high of 0.580 percent.

The 20-year JGB auction drew bids 3.89 times the offer, above the bid-to-cover ratio of 3.62 in the previous auction last month.

The strong auction results pointed to firm demand from life insurers and pension funds.

The price of 10-year JGB futures rose 0.24 point, the largest gain in more than five months.

At the shorter end of the curve, the one-year government discount bill yields fell to -0.005 percent, its first fall below zero percent, following shorter yields that have hit negative levels earlier this month.

Dealers snatched bills on anticipation that the Bank of Japan would buy the paper at even lower negative yields at its bill buying operation.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)AsiaWed, 17 Sep 2014 07:46:02 +0000
Thailand plans to sell 445bn baht of govt bonds in 2015 fiscal year http://www.brecorder.com/markets/fixed-income/asia/195535-thailand-plans-to-sell-445bn-baht-of-govt-bonds-in-2015-fiscal-year.htmlhttp://www.brecorder.com/markets/fixed-income/asia/195535-thailand-plans-to-sell-445bn-baht-of-govt-bonds-in-2015-fiscal-year.htmlimageBANGKOK: Thailand plans to sell 445 billion baht ($13.8 billion) of government bonds in the 2015 fiscal year, the Finance Ministry said in a statement on Wednesday.

It will issue 350 billion baht of five to 50-year bonds, 40 billion baht of inflation-linked bonds and 55 billion baht of amortised bonds.

The military government has planned a budget deficit of 250 billion baht for the next fiscal year starting Oct. 1.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)AsiaWed, 17 Sep 2014 04:47:16 +0000
India starts to develop yield curve as trading shifts from 10-year bondshttp://www.brecorder.com/markets/fixed-income/asia/195378-india-starts-to-develop-yield-curve-as-trading-shifts-from-10-year-bonds.htmlhttp://www.brecorder.com/markets/fixed-income/asia/195378-india-starts-to-develop-yield-curve-as-trading-shifts-from-10-year-bonds.htmlimageMUMBAI: Indian government bond markets are experiencing a rare sight: a yield curve driven by strong investor buying in maturities other than the traditional benchmark 10-year government bond.

Driving the buying in non-10-year Indian debt is the prospects of an economic recovery and a commitment by the governor of the central bank, Raghuram Rajan, to lower inflation.

But whether this trend continues will depend on the central bank - how it chooses to raise debt to fund the country's fiscal deficit, analysts say.

The central bank will have to nurture the market by issuing debt strategically to build liquidity outside of the 10-year bond.

Ten-year bonds have long been the easiest for the RBI to sell because they are popular with banks due to higher liquidity and their ease of trading.

Demand for Indian bonds has been strong this year among foreign investors, attracted by the higher returns on Indian bonds against other emerging market counterparts and U.S. bonds. A lower current account deficit and stabilising economic fundamentals have also underpinned interest in India's sovereign bonds.

Market conviction that Rajan will succeed in reducing consumer inflation to 6 percent by January 2016 from 7.8 percent in August has sparked a rally in 10-year government bonds , pushing yields down 35 basis points this year.

The rally in the benchmark, however, has made it too expensive for many investors who have shifted into other tenors.

Demand for longer-dated bonds maturing 2028 issued in May and shorter-dated 2020 bonds issued in June, has helped to create a yield curve.

Trade in 14-year bonds totalled 2.44 trillion rupees ($40.14 billion) as of the end of August, making it the third-most traded debt over the past few months, data from the Clearing Corp of India showed. In unusual activity, the 14-year bond saw more trading action than the 10-year bond on some days.

Rising expectations the central bank may cut interest rates next year as inflation wanes are supporting demand for bonds. Foreign financial institutions have bought a net $18.7 billion in debt compared with $14.2 billion in equities so far this calendar year, regulatory data shows.

Still, some analysts are sceptical the RBI will help develop the curve as it has seldom tried to do this even though it could deepen debt markets, lower funding costs and provide a useful pricing benchmark for Indian companies' own fund-raising.

"The yield curve surely needs to develop more; liquidity across securities needs to increase. It is going to be a medium-term process, but the RBI issuing more benchmark tenors is useful," said Kumar Rachapudi, senior rates strategist at ANZ in Singapore.

The Indian yield curve has more room to develop because, unlike curves in more developed economies, there is very little trading in debt longer than 15 years.

The government needs to raise a hefty 6 trillion Indian rupees ($98.2 billion) by March 2015, more than the 5.6 trillion rupees raised the previous year. The RBI, who acts on behalf of the government, might be tempted to fall back on its familiar strategy of issuing heavily in tenors up to 14 years.

"The RBI has to offer bonds that sell. They can choose to experiment in an attempt to develop the yield curve but they have to cover the government's borrowing needs," said Piyush Wadhwa, head of trading at IDFC Ltd in Mumbai.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)AsiaTue, 16 Sep 2014 12:43:04 +0000
Goldman Sachs launches $500mn, 5-year sukuk; pricing at tight endhttp://www.brecorder.com/markets/fixed-income/middle-east-a-africa/195352-goldman-sachs-launches-$500mn-5-year-sukuk;-pricing-at-tight-end.htmlhttp://www.brecorder.com/markets/fixed-income/middle-east-a-africa/195352-goldman-sachs-launches-$500mn-5-year-sukuk;-pricing-at-tight-end.htmlimageDUBAI: Goldman Sachs has launched a $500 million, five-year debut Islamic bond offer that will price later on Tuesday, with pricing at the tight end of guidance.

The investment bank set the transaction to price at a spread of 90 basis points over midswaps, a document from lead arrangers showed, at the lower end of its revised guidance of between 90 and 95 bps. Initial guidance was in the area of 95 bps.

Investor orders grew to $1.5 billion for the issue, the document showed.

The sukuk is being issued through a vehicle called JANY Sukuk Co and will be guaranteed by Goldman Sachs. The issue is expected to be rated A-minus by Standard & Poor's and A by Fitch Ratings, identical to the ratings of the investment bank. It will be listed on the Luxembourg Stock Exchange.

Goldman had picked itself, Abu Dhabi Islamic Bank, Emirates NBD, National Bank of Abu Dhabi, QInvest and the investment banking arm of Saudi Arabia's National Commercial Bank to arrange the issue.

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)Middle East & AfricaTue, 16 Sep 2014 12:01:15 +0000
German ZEW, OECD outlook tip Bund yields back below 1pchttp://www.brecorder.com/markets/fixed-income/europe/195345-german-zew-oecd-outlook-tip-bund-yields-back-below-1pc.htmlhttp://www.brecorder.com/markets/fixed-income/europe/195345-german-zew-oecd-outlook-tip-bund-yields-back-below-1pc.htmlimageLONDON: German 10-year yields fell back below 1 percent on Tuesday as data showed investor morale hit its lowest in nearly two years in September, suggesting tensions between Russia and the West had hit Europe's largest economy.

Adding to the grim growth outlook, the OECD on Monday revised downward its global growth forecasts for major developed economies, including the euro zone, and urged more aggressive European Central Bank stimulus to ward off deflation in the currency bloc.

Price moves in the bond market were, however, modest, with investors cautious before the U.S. Federal Reserve's policy decision on Wednesday and Scotland's independence referendum on Thursday. The vote may have ripple effects on separatist movements elsewhere in Europe, particularly in Spain.

Against that backdrop, the market impact of the German ZEW survey, which showed economic sentiment dropping for a ninth straight month in September, could be fleeting.

"The ZEW and the OECD lowering the GDP growth expectations for the euro zone as a whole is probably why we have this slight bullish bias in German bonds," said Cyril Regnat, a fixed income strategist at Natixis.

"The mood surrounding the euro zone recovery is far less optimistic than it was during the first half of this year so the market is maybe expecting more from the ECB."

German 10-year yields, the benchmark for euro zone borrowing costs, fell 3 basis points to 0.992 percent.

They rose back above 1 percent last week as speculation that the Fed could raise interest rates sooner and faster than previously expected rattled financial markets across the globe.

Yields on other top-rated euro zone bonds also dipped in modest volumes as investors kept a wary eye on the start of the Fed's Open Market Committee policy meeting later on Tuesday.

SCOTS, FED EYED

Investors will be scanning the outcome on Wednesday for clues on the timing of the first U.S. rate hike in more than eight years. The market does not expect the Fed to raise rates until 2015, but recently strong U.S. economic data has led central bank officials to acknowledge they may need to act sooner than they thought just a few months ago.

The outlook on the Fed contrasts with the ECB's ultra-loose monetary policy stance in the face of ultra-low inflation and a stuttering recovery in the currency bloc.

The ECB surprised markets by cutting interest rates a week ago and unveiled plans to buy asset-backed securities and covered bonds, but stopped short of a full-fledged money printing scheme that would include buying sovereign bonds.

Some in the market doubt the latest measures are enough to fend off deflation and stimulate growth threatened by tit-for-tat sanctions between the West and Russia over violence in Ukraine. They expect the central bank eventually to embark on money printing, known as quantitative easing.

Peripheral euro zone bonds underperformed their lower-yielding peers, with Spanish 10-year yields 2.3 bps higher at 2.37 percent.

The yields have bounced off record lows just above 2 percent, hit after the ECB cut, as some investors worry the Scottish vote will embolden separatists in wealthy Catalonia.

"Spreads have been widening for a few days now. Initially it was driven by a bit of supply, but also the Scottish vote and what that means for Catalonia," said Myles Bradshaw, Pimco's European strategist and portfolio manager.

"What you are seeing is investors just taking some profits and that has caused Spanish spreads to widen, and a repricing of the periphery more broadly."

Copyright Reuters, 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeTue, 16 Sep 2014 11:52:46 +0000
German yields dip back below 1 pct before German sentiment survey http://www.brecorder.com/markets/fixed-income/europe/195316-german-yields-dip-back-below-1-pct-before-german-sentiment-survey.htmlhttp://www.brecorder.com/markets/fixed-income/europe/195316-german-yields-dip-back-below-1-pct-before-german-sentiment-survey.htmlimageLONDON: German 10-year yields fell back below 1 percent on Tuesday ahead of a German survey expected to show investor confidence in the region's biggest economist remained downbeat, underlining the impact of ECB's ultra-easy policy stance.

Adding pressure on the European Central Bank, the OECD on Monday revised its global growth forecasts for major developed economies downward and urged more aggressive ECB stimulus to ward off deflation in the currency bloc.

Price moves were, however, expected to be modest on investor caution before the US Federal Reserve's policy decision on Wednesday and Scotland's independence referendum on Thursday, which may have ripple effects on similar separatists movements elsewhere in Europe, particularly Spain.

Against that backdrop, the market impact of the German ZEW indicator due at 0900 GMT was likely to be fleeting.

"The ZEW has been quite a disappointment in the past releases. The consensus is seeing a further downgrading of the current conditions and expectations component," said Christian Lenk, a strategist at DZ Bank.

"It's a sentiment indicator by financial analysts so it's usually quite fickle. I doubt that it will have a major market impact as there are other major events looming in the near-term."

German 10-year yields, the benchmark for euro zone borrowing costs, were 2.4 basis points down at 0.996 percent. They had risen back above 1 percent over the past week as speculation that the Fed could raise interest rates sooner and faster than previously expected rattled financial markets across the globe.

Yields on other top-rated euro zone bonds were 2-3 bps lower in modest volumes as investors kept a wary eye on the start of the Fed's Open Market Committee policy meeting later on Tuesday.

Investors will be scanning the outcome on Wednesday for clues on the timing of the first US rate hike in more than eight years.

They have said they do not expect to raise rates until 2015, but recently strong US economic data has led Fed officials to acknowledge they may need to act sooner than they thought just a few months ago.

Peripheral euro zone bonds underperformed their lower-yielding peers, with Spanish 10-year yields 3 bps higher at 2.38 percent with investors remaining skittish ahead of the Scottish vote that some fear could embolden separatists in wealthy Catalonia.

"I expect Spanish bonds will remain under pressure until after the Scottish referendum.

The FOMC is also adding to the uncertainty in the market," a trader said.

Copyright Reuters, 2014

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s.rs96@yahoo.com (Shoaib-ur-Rehman Siddiqui)EuropeTue, 16 Sep 2014 08:16:46 +0000
China issues yuan bonds in Paris for first time http://www.brecorder.com/markets/fixed-income/europe/195123-china-issues-yuan-bonds-in-paris-for-first-time.htmlhttp://www.brecorder.com/markets/fixed-income/europe/195123-china-issues-yuan-bonds-in-paris-for-first-time.htmlimagePARIS: China took a new step towards international use of its currency, the yuan, on Monday when it successfully launched yuan-based bonds in Paris for the first time.

The bonds, intended to raise 2.0 billion yuan (240 million euros, $310 million) were issued by the state-owned Bank of China.

The issue attracted a strong level of interest, and demand amounted to 3.65 times the amount offered, the president of the central bank Tian Guoli said at a ceremony at the premises of the Paris Euronext market.

"Investor demand has been very strong and this shows that the process of the internationalisation of the yuan is maturing," he said.

In June, China and France signed an agreement for yuan clearing arrangements, one of a number of such accords Beijing has sought with foreign countries to help boost use of its currency overseas.

Yuan clearing allows companies and financial institutions to use the currency for cross-border transactions, and promotes liberalisation of trade and investment.

Britain said last week that it would be the first country outside China to issue yuan-denominated bonds, as London seeks to become a Western hub for trading in the Chinese currency.

Copyright AFP (Agence France-Presse), 2014

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imad_kueconomist@yahoo.com (Imaduddin)EuropeMon, 15 Sep 2014 13:50:09 +0000