Bonds slump as dollar boosted by Trump tax pledge: Markets wrap

Bloomberg.- Bonds fell and the dollar rose against most of its peers as reflation trades came back into focus after a promise by U.S. President Donald Trump to overhaul business taxes. Banking stocks led European equities lower as political risk plagued the region.

The greenback headed for its first weekly gain of the year while Treasuries and gold retreated. Crude extended a rally as output cuts from OPEC and other producing nations are seen clearing a global inventory glut. European stocks erased an earlier advance, while S&P 500 futures were little changed after the gauge closed at a record Thursday.

The tax pledge rekindled optimism that Trump will focus early on in his presidency on the pro-growth policies he promised during his election campaign. So-called reflation bets have ebbed since the beginning of the year as the new administration focused its attention on immigration and trade policies instead. Trump said a “phenomenal” plan to overhaul business taxes may be released within the next “two or three weeks.”

“The obvious implication is that bond yields go higher,” Michael Bell, a global market strategist at JPMorgan Asset Management, said in a Bloomberg Television interview on Friday. “We don’t really buy the rally in government bonds that you’ve seen in recent weeks. Bond yields in the U.S. Will head to about 3 percent.”

What’s coming up in the markets:

– Moody’s Investors Service is due to weigh in on the creditworthiness of France and Italy.
– Greece’s creditors may present the government as soon as today with a framework of fiscal measures equal to as much as 2% of GDP in a bid to revive the country’s stalled bailout, people familiar said.
– The International Energy Agency and OPEC monthly reports are due on Friday and Monday, respectively, providing the first full month of production data since the oil cartel’s supply deal.
– Attention turns to Shinzo Abe’s visit to Washington, as investors parse reports Japan’s prime minister is prepared to offer infrastructure investment, with the U.S. administration still sitting on details of its own policy proposal.
– Trump appears set to go to the Supreme Court over his ban on immigration after a San Francisco-based appeals court upheld a suspension of the order.

Here are the main market moves:


– Treasuries fell, with 10-year yields rising two basis points to 2.42 percent as of 8:30 a.m. in New York. The benchmark yield increased six basis points on Thursday, halting the longest rally in eight months.
– German 10-year bond yields increased two basis points to 0.33 percent while French yields increased five basis points 1.024 percent
– The yield on Greece’s two-year notes retreated 121 basis points to 8.6 percent. The debt topped 10% yesterday on the impasse between the country, its creditors and the IMF.


– The Stoxx Europe 600 index was little changed.
– Contracts on the S&P 500 increased 0.1 percent after the underlying index rose 0.6 percent to a record 2,307.87 on Thursday.


– The Bloomberg Dollar Spot Index added 0.1 percent after Thursday’s 0.3 percent advance, and is poised to snap a six-week losing streak.
– The euro and pound both lost 0.3 percent against the dollar.
– Citigroup Inc., the world’s largest foreign-exchange trading firm, sees the dollar rising this year even as the president talks the greenback down.


– Oil climbed 1.6 percent to $53.81 a barrel Friday, erasing its decline over the week.
– Gold fell 0.1 percent to $1,226.73 an ounce, after dropping 1.1 percent on Thursday. The metal, which is considered a haven asset, was at a three-month high earlier in the week.
– Iron ore futures jumped 3.8 percent in a fourth consecutive day of gains exceeding 1 percent.

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