Asian stocks muted on Fed tapering outlook
Portuguese yields fall after Moody"s raises ratings outlook
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* Moody’s changes Portuguese rating outlook to stable
* Portuguese debt outperforms broader euro zone debt rebound
* Bunds rise after biggest one-day loss since September
By Emelia Sithole-Matarise and Ana Nicolaci da Costa
LONDON, Nov 11 (Reuters) – Portuguese bond yields fell near five-month lows on Monday, outperforming other euro zone debt after Moody’s raised its outlook on the country’s ratings to stable from negative.
The agency’s move after European markets closed on Friday was the latest in a series of news that has helped improve the market’s view on Lisbon since a government crisis sent 10-year yields back above an unsustainable 8 percent in July.
Portuguese 10-year government bond yields fell as much as 14 basis points to 5.86 percent, near troughs seen in early June. The yield gap between 10-year and two-year Portuguese bonds is near its widest since July – reflecting reduced concerns about the possibility of a debt restructuring.
“The Moody’s move on Friday evening does build on a fair degree of other positive moves that the Portuguese market has enjoyed over recent weeks … and the other thing helping has been positive newsflow on growth,” said Philip Shaw, chief economist at Investec.
Other lower-rated debt also rose, with Spanish and Italian 10-year yields falling 2 basis points to 4.11 percent and 4.13 percent respectively.
Portugal has started to recover from its worst recession since the 1970s and the International Monetary Fund said on Friday it was on track with its bailout and gave the indebted euro zone country another 1.9 billion euros.
“We live in a world where there’s a lot of hunger for yield and consequently against the backdrop of falling volatility and quiet newsflow it’s no surprise to us to see Portuguese bond spreads moving tighter,” said Mark Dowding, co-head of investment grade team at Bluebay Asset Management.
“That’s clearly been benefiting our investment performance where we have adopted an overweight stance,” said Dowding, whose team has $ 24.5 of assets under management and is overweight Portugal in its government bond portfolio. Bluebay is also overweight on Italy and Spain.
“BUY-DIPS” MENTALITY
Euro zone bonds mostly rallied after a sell-off on Friday when higher-than-expected U.S. jobs numbers brought forward bets of a cut in U.S. monetary stimulus.
Last week’s shock move by the European Central Bank to cut interest rates – and the stronger commitment to stimulate the economy that implies – is still supporting European debt markets. Most traders expect the ECB to pump more cheap long-term money into markets, according to a Reuters poll on Monday.
But investors are also returning to bets on the Federal Reserve scaling back its programme of bond-buying before March, after U.S. job growth unexpectedly accelerated in October. A Reuters poll after Friday’s numbers showed more primary dealers were leaning toward an earlier cut in stimulus.
That is broadly bad news for top-rated government bonds. German Bund futures settled 1 tick lower on Monday at 141.01, having seen their biggest one-day loss since September on Friday. German 10-year yields were steady at 1.76 percent .
A Greek flag flutters on the top of the parliament as the moon rises in Athens May 23, 2013..
Credit: Reuters/John Kolesidis
BRUSSELS |
BRUSSELS (Reuters) – The outlook for Greece’s bailout program remains uncertain, with differences still to be worked out between the Greek government and its creditors, the European Union and International Monetary Fun said on Monday.
“While important progress continues to be made, policy implementation is behind in some areas,” the so-called “troika” of creditors said in an update on Greece’s bailout program, which will be discussed later by euro zone finance ministers.
“The authorities have committed to take corrective actions to ensure delivery of the fiscal targets for 2013-14 and achieve primary balance this year,” it said, but added:
“The mission and the authorities agreed that the macroeconomic outlook remains broadly in line with program projections, with prospects for a gradual return to growth in 2014. The outlook remains uncertain, however.”
(Reporting by Foo Yun Chee; editing by Luke Baker)
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U.S. Federal Reserve Chairman Ben Bernanke attends the G20 finance ministers meeting during the Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013.
Credit: Reuters/Yuri Gripas
WASHINGTON |
WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke painted an upbeat picture on Saturday for the potential of innovation to lift living standards, delivering a sweeping look at the last 100 years that included memories of his 1963 South Carolina home.
Bernanke made no reference to monetary policy or the immediate outlook for the U.S. economy in prepared remarks to graduates of Bard College at Simon’s Rock, Massachusetts.
But the die-hard baseball fan did manage to work in a reference to one of the sport’s greats.
“Is it true, then, as baseball player Yogi Berra said, that the future ain’t what it used to be?,” the chairman said, noting the existence of serious skepticism that leaps in computers and other information technology would yield the same dramatic boost to growth and living standards as previous episodes of industrial revolution.
“Nobody really knows; as Berra also astutely observed, it’s tough to make predictions, especially about the future. But there are some good arguments on the other side of this debate.”
Bernanke delivers testimony on the U.S. economy on Wednesday before the congressional Joint Economic Committee.
His words will be parsed for any hint that he favors tapering Fed bond purchases, currently running at an $ 85 billion monthly pace. But recent U.S. economic data has been mixed, and economists polled by Reuters continue to expect the bond buying to continue until later this year, if not into early 2014.
Bernanke did not tip his hand during his comments to graduates, but he did offer some rare insights into his childhood home in Dillon, South Carolina to illustrate how life has not changed all that much in the last 50 years.
“We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines,” he recalled.
There was no internet, but there was a color television “although, I must acknowledge, the colors were garish and there were many fewer channels to choose from.”
After pointing out that the so-called IT revolution had not been as transformative as all that, Bernanke then went on to outline several areas where technology may only have scratched the surface in exploiting the potential for change.
He argued that IT and biotechnology have tremendous scope to improve healthcare – which absorbs a considerable amount of U.S. household income and where costs are projected to rise – as well as the potential for the development of cleaner energy.
“As trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly,” he said. “In short, both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”
(Reporting by Alister Bull; Editing by Tim Dobbyn)
