Treasuries slid, sending the 10-year yield to a six-month high, while the Standard & Poor’s 500 Index closed at the highest level since 2008 amid speculation the potential extension of U.S. tax cuts will spur growth. Copper rose to a record on signs the global recovery will stoke demand.
Treasury 10-year yields climbed 15 basis points to 3.27 percent after jumping 21 points yesterday, the most in 18 months. The Dollar Index added 0.2 percent for a third straight increase. The Standard & Poor’s 500 Index rose 0.4 percent, extending gains after American International Group Inc. struck a deal to repay its Federal Reserve credit line. Oil slid from a 26-month high. After the U.S. close, S&P 500 futures rose 0.3 percent at 6:45 p.m. in New York and New Zealand’s dollar weakened.
Global bond markets extended a three-month decline after President Barack Obama agreed to extend Bush-era tax cuts, spurring speculation the U.S. will have to fund a larger deficit. The compromise may add as much as half a percentage point to economic growth next year, according to JPMorgan Chase & Co. China said it will post consumer-price data on Dec. 11, two days earlier than planned, fanning speculation interest rates may be increased.
“The tax-cut extension is a positive for the economy,” said Peter Jankovskis, who helps manage $2.2 billion as co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois. “Investors will be focused on Obama’s battle for his own party to push through that compromise,” he said. “There’s concern about China raising rates further. However, the fact that has been advertised for months got investors used to that idea.”
Ten Year Auction
The two-year Treasury yield increased ten basis points to 0.63 percent, the highest since July. The 30-year yield increased nine basis points to 4.46 percent.
At today’s 10-year note auction, the securities drew a yield of 3.340 percent, compared with the average forecast of 3.307 percent in a Bloomberg News survey of 7 primary dealers. The sale was a reopening of the Nov. 9 auction, which produced a yield of 2.636 percent.
The Fed bought $1.63 billion of inflation-protected securities maturing from July 2012 to February 2040 today as part of the asset-purchase program known as quantitative easing, aimed at lowering borrowing costs and stimulating the economy.
Costs to protect against a U.S. corporate default fell for a sixth day. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 1.6 basis points to a mid-price of 88.3 basis points, according to index administrator Markit Group Ltd.
The extra yield investors demand to hold Irish 10-year bonds instead of benchmark German bunds narrowed six basis points to 502 basis points. Irish Finance Minister Brian Lenihan won parliamentary backing in the first votes on his 6 billion- euro ($8 billion) austerity budget.
The Dollar Index, which tracks the currencies of six U.S. trading partners, rose to 80.024 as it climbed for a third day. The New Zealand dollar declined against 15 of its 16 most-traded counterparts and extended a three-day slump against the U.S. currency after Reserve Bank Governor Alan Bollard kept the benchmark rate unchanged at 3 percent and said it was “prudent” to keep the official rates low until the recovery strengthens and price pressures increase.
Financial stocks led gains in the 10 main S&P 500 industry groups, rising 1.8 percent collectively. Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. climbed at least 2.6 percent. Regions Financial Corp., Zions Bancorp and Fifth Third Bancorp rose at least 5.3 percent to help lead regional lenders higher.
The rising yields on U.S. Treasury securities maturing in 10 years or more indicated that lending will become more profitable, Brian Klock, an analyst at Keefe Bruyette & Woods Inc. in New York, said in an e-mail.
Trading in AIG was halted as the insurer announced plans to use proceeds from the sales of two non-U.S. life insurance units to repay the Fed, the New York-based company said today in a regulatory filing announcing the agreement with regulators including the U.S. Treasury Department. AIG owed about $21 billion last week on the line, which was created in 2008 to save
Youku.com Inc. surged 161 percent in the biggest gain for a U.S. initial public offering in five years and E-Commerce China Dangdang Inc. almost doubled in its debut, the latest sign of booming demand for Chinese Internet companies.
Europe, Asian Shares
The Stoxx Europe 600 Index advanced for a third day, rising 0.4 percent to close at its highest since September 2008. Smith & Nephew Plc, Europe’s largest maker of shoulder and knee implants, rose 9.1 percent after Goldman Sachs recommended buying the stock.
The MSCI Asia Pacific Index fell 1 percent, the most in almost two weeks. Cnooc Ltd., China’s biggest offshore oil producer, declined 2.4 percent in Hong Kong. Sumco Corp., a Japanese maker of silicon wafers for semiconductors, slumped 9.6 percent in Tokyo after forecasting a wider full-year net loss.
The MSCI Emerging Markets Index fell 1.4 percent, its biggest decline since Nov. 26. The measure climbed 5.1 percent in the previous five days. The Shanghai Composite Index dropped 1 percent. China’s statistics bureau is bringing forward the release of economic data including retail sales figures by two days as investors speculated the central bank is preparing to raise borrowing costs.
South Korea’s Kospi Index retreated 0.4 percent after North Korea fired artillery shells into its own waters near the disputed western border with South Korea today, according to a government official in Seoul. The won dropped against 15 of 16 major counterparts, with the Mexican peso and British pound strengthening at least 1.6 percent.
Copper futures for delivery in March rose 5.1 cents, or 1.3 percent, to settle at $4.1005 a pound on the Comex in New York, the highest ever. Crude oil decreased 0.5 percent to settle at $88.28 a barrel on the New York Mercantile Exchange.
The decline in oil came after the U.S. Energy Department said gasoline supplies rose 3.81 million barrels to 214 million last week. They were forecast to fall 300,000 barrels, a Bloomberg News survey showed. Supplies of distillate fuels, including heating oil and diesel, climbed 2.15 million barrels.
Gold and silver futures tumbled the most in three weeks as the dollar climbed, eroding the appeal of precious metals as an alternative asset. Gold had touched a record yesterday and silver had climbed to the highest since 1980.
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