Treasuries Retreat as Dollar Gains, U.S. Stocks Fluctuate

Are the Bull's slowing !!


REF : BLOOMBERG.com

"March 14 (Bloomberg) -- Treasuries slid, sending 10-year yields to a four-month high, while the dollar rose and gold tumbled as the Federal Reserve’s improved economic assessment caused investors to reduce bets on more monetary easing. Most U.S. stocks fell a day after the best rally of 2012.


The U.S. 10-year yield increased nine basis points to 2.22 percent as of 11:33 a.m. in New York and the dollar strengthened versus all 16 major peers. The Standard & Poor’s 500 Index slipped less than 0.2 percent after yesterday closing at its highest level since June 2008. The cost of insuring European company debt declined to the lowest in more than seven months. Gold extended its three-day drop to almost 4 percent.

The Fed said yesterday that strains in global financial markets have eased and the labor market is gathering strength. In a separate statement, the central bank said 15 of the nation’s largest 19 banks may keep adequate capital levels even in a recession. European industrial output rose 0.2 percent in January from the previous month. Chinese Premier Wen Jiabao said relaxing property curbs could cause “chaos” in the market.

“Some worry that with the Fed’s upgrade of the economic environment, they may not do a bond purchase program on the long end,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that are required to bid at the auctions.

The yield on the 30-year U.S. Treasury climbed nine basis points to 3.36 percent before the government sells $13 billion of the securities, the last of three auctions this week totaling $66 billion. Two-year yields increased two basis points to 0.37 percent.

U.S. Equities

About five stocks retreated for every two that rose on U.S. exchanges. Banks and transportation companies led losses among 24 industry groups in the S&P 500. Apple Inc. climbed for a sixth straight day, rising 2.5 percent to a record $582.55. Ford Motor Co. rallied as much as 1.6 percent.

The Dow Jones Industrial Average closed at the highest level since 2007 yesterday and financial shares in the S&P 500 rallied 3.9 percent, the biggest gain of the year, to close at the highest level since July. The Fed said that it expects “moderate economic growth” and predicted the unemployment rate “will decline gradually.”

JPMorgan Chase & Co. and Wells Fargo joined banks raising dividends and authorizing share repurchases after passing the stress tests. The results of the Fed’s tests showed that almost three years of economic expansion have helped U.S. banks raise profits, rebuild capital and increase liquidity after the collapse of Lehman Brothers Holdings Inc. in 2008.

Stress Tests
Citigroup Inc., the lender that took the most government aid during the financial crisis, said it will resubmit its capital plan to regulators after failing to meet some minimum standards in the tests. Citigroup has repaid $45 billion in TARP money. Chief Executive Officer Vikram Pandit said in a memo to employees today that the bank still plans a “meaningful” payout to shareholders.

“I was expecting all of the banks to pass, but when you look at the terms, the stress tests were so onerous that a modest miss really isn’t all that discouraging,” said William Fitzpatrick, a Milwaukee-based financial-services analyst at Manulife Asset Management, whose team oversees $800 million.

The Stoxx 600 advanced for a second day as three shares gained for every one that declined. Barclays Plc and Credit Suisse Group AG climbed more than 4 percent to lead a rally in bank stocks. EON AG, Germany’s largest utility, jumped 6.2 percent as earnings exceeded analysts’ estimates. Legal & General Group Plc surged 5.6 percent after the fourth-biggest U.K. insurer by market value boosted its dividend as full-year profit rose.

Default Swaps
The Markit iTraxx Europe Index of credit-default swaps on 12 companies with investment-grade ratings fell 4 basis points to 125.75 basis points, the lowest since Aug. 2.

The dollar advanced 0.2 percent against the euro and 0.9 percent versus the yen. The Dollar Index, a gauge of the currency against six major peers, increased 0.3 percent.

The pound strengthened versus 13 of 16 major peers and the yield on the 10-year gilt jumped 15 basis points to 2.32 percent. Britain is proposing to revive “perpetual gilts,” first used in the wake of the 1720 South Sea Bubble crisis, to allow the government to borrow for as long as possible at record-low rates, according to two people familiar with budget discussions. Chancellor of the Exchequer George Osborne will use his March 21 budget to announce a consultation on introducing bonds of up to 100 years and reviving debt with no fixed maturity.

The two-year Italian yield slipped four basis points to 2.00 percent as the government sold 6 billion euros ($7.8 billion) of bonds today, with borrowing costs on its three-year debt falling to the lowest since October 2010.

Emerging Markets

The MSCI Emerging Markets Index advanced 0.1 percent, set for the highest close since March 2. Benchmark indexes in Turkey, Poland, Hungary and South Korea gained at least 1 percent. Russia’s Micex Index added 1.2 percent. The FTSE/JSE Africa All Shares Index rose 1 percent in Johannesburg.

China’s Shanghai Composite Index sank 2.6 percent, the biggest drop since Nov. 30. A gauge tracking Chinese property stocks in Shanghai slid 3.7 percent. Anhui Conch Cement Co., the nation’s biggest maker of the building material, fell 3.3 percent, and Poly Real Estate Group Co., China’s second-largest developer by market value, slumped 3 percent.

Copper lost 1.1 percent. Gold for immediate delivery declined 1.5 percent to $1,648.70 an ounce after falling 1.6 percent yesterday. Oil retreated 0.3 percent to $106.39 a barrel.

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net
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Steven Morris CA (SA)

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