Tuesday, 19 June 2012

Spain's 10-year yield hits record high

The market rally following the Greek election result was kept in check on Monday by worries over Spain. Bloomberg reports:

Oil and the euro fell while Spain’s 10-year yield rose to a record as an increase in bad Spanish loans fueled concern the debt crisis is deepening, overshadowing wins by pro-bailout parties in Greece. Most U.S. stocks rose.

Oil lost 0.9 percent to pace a retreat in commodities. Natural gas rallied on speculation hotter weather will boost demand at power plants. The euro weakened 0.5 percent to $1.2572 at 4 p.m. New York time after strengthening for four straight days. The 10-year Spanish yield jumped as much as 41 basis points to 7.29 percent and ended at 7.16 percent. The Standard & Poor’s 500 Index added 0.1 percent as 11 stocks gained for every 10 that fell on U.S. exchanges. Treasury 10-year yields were little changed at 1.58 percent.

The yield on Germany’s 10-year bund fell three basis points to 1.41 percent but Bill Gross thinks that Germany is also at risk. From Bloomberg:

Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., said Germany is in a bond market bubble as the country is saddled with rising liabilities from Europe’s debt crisis.

“I would be leery of German bunds simply because there are only a few scenarios in which they can do well,” Gross said today in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “Germany for me is a credit risk. It’s not an attractive market.”

While Europe remains the main threat for the global economy, China also is a risk as its housing market continues to cool. 43 out of 70 cities tracked by the government registered month-on-month falls in home prices in May, the same number as in April. Reuters estimates that home prices fell 0.1 percent in May, the eighth straight decline.

Recent housing data from the UK and US have been better though.

Rightmove reported that asking prices for homes in England and Wales rose 1.0 percent to a record high in June.

In the US, the NAHB/Wells Fargo Housing Market index rose to 29 in June, its highest level in five years, from 28 in May.

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