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The New York Stock Exchange
The New York Stock Exchange

Bond Market Selloff Resumes

European government bonds are somewhat weaker as the market realizes that central banks won’t add stimulus

Bond Market Selloff Resumes

A worldwide slump in government bonds resumed after an unexpected pickup in Chinese manufacturing fueled optimism about the global economy. Futures on the S&P 500 Index advanced and copper reached a one-month high.
Prospects for faster inflation pushed the yield on treasury 10-year notes to the highest since May relative to those on two-year securities. Australia’s currency strengthened after the central bank refrained from cutting interest rates, Bloomberg reported.
Fresh from a decline in October that was the biggest in two years, bonds slid again Tuesday as investors came to terms with increasing evidence that economies are improving enough for major central banks to start stepping back from ultra-loose policies.
 “European government bonds are somewhat weaker as the market realizes that central banks won’t add stimulus,” said Christoph Kutt, head of rates strategy and sovereign credit at DZ Bank AG in Frankfurt.
Factory activity in China expanded last month at its fastest pace in more than two years, official and private figures showed on Tuesday, boding well for the world’s second-largest economy.

 Bonds
Treasury 10-year note yields increased two basis points to 1.85% in New York. The yield difference with two-year notes climbed above one percentage point for the first time since May. The longer-dated bonds are driven more by the outlook for consumer-price growth while those with shorter maturities tend to respond more to changes in interest rates.
Yields on benchmark German bunds increased one basis point to 0.17%, while those on Spanish bonds with a similar due date rose five basis points to 1.24%.
The yield on Australia’s 10-year bonds increased four basis points to 2.39%.

  Commodities
The Bloomberg Commodity Index rose 0.4%, after ending the last session at its lowest level since Sept. 27.
Copper headed for the highest close in almost three months in London, while aluminum held near its best close since June 2015 following the upbeat manufacturing figures for China, the world’s biggest user of industrial metals. Zinc was near a fresh five-year high as steel gained in Shanghai.
Gold advanced 0.7% to $1,285.99 an ounce, having reached the strongest level since Oct. 4.
  Stocks
The Stoxx Europe 600 Index was 0.2% lower, after earlier advancing as much as 0.5%. Standard Chartered slid 5.2% after third-quarter profit fell short of estimates as revenue shrank at all four of its divisions.
The Stoxx 600 fell 1.2% in October, posting its first back-to-back monthly declines since the start of the year, as a late-month slide in energy stocks exacerbated the woes of an uninspiring earnings season, uncertainty over monetary-policy tightening and the efficacy of European Central Bank stimulus amid mixed economic data.
S&P 500 Index futures advanced 0.2%, after US equities ended Monday little changed to cap a third straight monthly decline.
The Hang Seng China Enterprises Index of mainland shares jumped 1.5% and the Shanghai Composite Index gained 0.7%.
  Currencies
The Aussie strengthened 0.9% versus the greenback. Twenty-two of 28 economists surveyed by Bloomberg forecast the Reserve Bank of Australia would keep its benchmark interest rate at a record-low 1.5%, while the other six forecast a quarter-point reduction.
The yen weakened 0.1% after the BoJ kept its monetary policy stance unchanged, as forecast by the vast majority of economists in a Bloomberg survey, and pushed back the projected timing for reaching its 2% inflation goal to the fiscal year starting April 2018.  Sweden’s krona climbed 0.6% against the euro and was 0.8% higher versus the dollar after an index of manufacturing activity jumped in October to its highest level since April 2011.
South Africa’s rand weakened 0.4%, following 2.7% rally on Monday on the withdrawal of fraud charges against Finance Minister Pravin Gordhan. Turkey’s lira fell for the first time in three days, losing 0.3%.

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