Ten-year Treasury (USGG10YR) yields reached the highest level in more than two years on speculation the Federal Reserve will keep reducing stimulus as the economy recovers. The euro rallied and oil topped $100 a barrel for the first time since October, while U.S. stocks were little changed.
The Treasury 10-year yield rose 1 basis point to 2.99 percent as of 4 p.m. in New York, after reaching 3 percent for the first time in three months. The Stoxx Europe 600 Index climbed 1.1 percent for a sixth day of gains while the Standard & Poor’s 500 Index fell less than 0.1 percent. The euro climbed to the highest since 2011 against the dollar and touched a five-year high against the yen. Crude increased to $100.32 as U.S. supplies fell to the lowest since September. Turkish stocks slid for a third day as the lira slumped to a record.
Investors added $3.2 trillion to the value of global stock markets since the start of the quarter amid mounting confidence global economic growth is accelerating. The Fed announced last week it would start slowing stimulus known as quantitative easing. China’s benchmark repo rate posted its biggest weekly drop since 2011, easing concern that a cash crunch will trigger corporate defaults.
The Fed is “gradually pulling back, which means the market will pull back from its distorted levels,” said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 21 primary dealers that trade directly with the U.S. central bank. “I expect a slow drift to 3.25 percent by the end of the first quarter.”
Ten-year Treasury note yields climbed as signs of a quickening recovery boosted speculation the Fed will keep reducing debt purchases. The rate reached 3.01 percent, the highest since July 26, 2011. The yield on 10-year gilts rose 10 basis points to 3.07 percent, also advancing above 3 percent, for the first time since September. The rate on similar-maturity German bunds jumped seven basis points to 1.95 percent.
U.K. government bonds lost 4.2 percent this year, according to Bloomberg World Bond Indexes. German securities fell 1.8 percent and U.S. Treasuries declined 3.3 percent.
The S&P 500 was little changed after the index (SHCOMP) jumped 0.5 percent yesterday to an all-time high. The gauge has climbed 29 percent this year and is on track to post its biggest annual increase since 1997.
Energy and consumer-staples companies had the biggest gains among groups in the S&P 500 today, while consumer-discretionary shares dropped the most. Textron Inc. rose 1.1 percent after the manufacturer of Cessna aircraft said it will buy Beechcraft Corp. for $1.4 billion.
“A year-end rally like this is not usual, but we have to keep in mind trading volumes are light and corporate news is certainly sparse this week,” Robert Landry, the San Antonio-based executive director and money manager at USAA Investments, said by telephone. His firm oversees about $59 billion. “You can’t read too much into the market’s move. It’s somewhat of a Santa Claus rally and perhaps that’s attributed to some portfolios managers in the office making some year-end moves.”
The MSCI All-Country World Index has rallied 1.5 percent this week to the highest level since 2007. The gauge is up 20 percent for the year, heading for its best performance since 2009.
Today’s Stoxx 600 gain brings its six-day increase to 5.3 percent, the biggest jump since July 2012. European exchanges were closed yesterday and on Dec. 25 for the Christmas holiday. The gauge is at the highest level since 2008. It has rallied 17 percent this year and is heading for its largest annual increase since 2009.
Vestas Wind Systems A/S (VWS) climbed 1.8 percent after the wind turbine maker said it won an order from the U.S. International Personal Finance Plc lost 16 percent, extending its Dec. 24 slump after the lender of small, unsecured cash loans said the Polish Office of Consumer Protection and Competition fined its local unit 2.4 million pounds ($3.9 million) for infringing consumers’ interests.
The euro jumped after European Central Bank Governing Council member Jens Weidmann said keeping interest low may endanger political reforms. The common currency advanced versus all except one of its 16 major counterparts as Weidmann was cited by Germany’s Bild newspaper as saying low inflation shouldn’t be used to justify loose monetary policy.
The euro advanced 0.4 percent to $1.3741 after rallying as much as 1.5 percent to $1.3893, the highest level since Oct. 31, 2011. The single currency gained 0.7 percent to 144.51 yen after reaching 145.69, the strongest since October 2008. The dollar rose 0.4 percent to 105.18 yen.
The euro and the Danish krone have risen the most of 16 major counterparts against the dollar this year, advancing more than 4 percent. The yen tumbled 18 percent and the rand had the biggest decline with a drop of 19 percent.
“The Fed did decide to taper, but the amount was minimal and we have yet to see what the policy outlook will be going forward,” said Marito Ueda, a senior managing director at currency-margin company FX Prime Corp. in Tokyo. “Some bets on dollar gains are being unwound into year-end.”
Turkish shares slumped 1 percent to more than a 16-month low as the lira fell as much as 2.2 percent to a record 2.1764 per dollar amid concern a showdown between the government of Prime Minister Recep Tayyip Erdogan and the judiciary will worsen.
Turkish markets are being roiled by a corruption probe that ensnared Erdogan’s cabinet and led to three ministerial resignations and the dismissal of some 500 police chiefs. Istanbul Prosecutor Muammer Akkas wrote in a written statement yesterday that he’d been pulled off an investigation into businessmen and officials for involvement in bribery, rigging tenders and fraud.
China’s stocks rose the most in five weeks, led by financial and technology companies. The Shanghai Composite Index rallied 1.4 percent and the Hang Seng Index was 0.3 percent higher. China’s money-market rate posted its biggest weekly drop since 2011, while the yuan climbed to a 20-year high.
The FTSE/JSEJapan’s Topix index climbed 0.8 percent, closing at its highest level since July 2008, as a weaker yen bolstered the outlook for exporter earnings.
WTI oil rose 0.8 percent to $100.32 a barrel, increasing for a third day. The U.S. Energy Information Administration said stockpiles decreased 4.73 million barrels to 367.6 million last week. Inventories were forecast to slip 2.65 million barrels, according to the median of 10 analyst estimates in a Bloomberg survey.