Corn surged to a record and soybeans and wheat prices jumped on mounting signs the U.S. drought will erode production. Treasuries pared earlier losses after the U.S. sold $16 billion of 30-year bonds, while the Standard & Poor’s 500 Index advanced a fifth day and the euro weakened.
Corn for December delivery settled up 0.9 percent at $8.2375 a bushel and touched an all-time high of $8.2975 while soybeans and wheat climbed more than 1 percent to lead the S&P GSCI Index of commodities to a fifth straight gain. Thirty-year rates added less than one basis point to 2.76 percent after climbing as high as 2.80 percent. The S&P 500 rose less than 0.1 percent, extending its longest rally since March. The euro lost 0.5 percent to $1.2298.
Corn prices have jumped 63 percent since mid-June and soybeans have rallied 24 percent, while the government rated the condition of the U.S. crop on Aug. 3 as the worst since 1988. Goldman Sachs Group Inc. is among the banks forecasting prices will keep rising, and the United Nations reported today the biggest gain in global food costs since 2009.
“This year’s crops are a disaster,” Dale Schultz, the buyer-relations manager for AgWest Commodities LLC in Holdrege, Nebraska, said in a telephone interview. “We have to raise prices and reduce demand immediately to prevent a real shortage developing in January or February. There is so much competition for every bushel of grain this year.”
Soybean futures for November delivery rose 3.2 percent to $16.3125 a bushel, the biggest gain since July 5. The most-active contract touched a record $16.915 on July 23. Wheat futures for December delivery advanced 1.5 percent to $9.27 a bushel on the CBOT, the third increase this week.
The 10-year note’s yield erased earlier gains to trade little changed at 1.69 percent. The rate is up from a record low of 1.379 percent reached on July 25.
Treasury prices have tumbled since the government reported on Aug. 3 that employers added 163,000 jobs in July, topping economists’ estimates. The Labor Department today showed first-time jobless claims unexpectedly dropped by 6,000 to 361,000 last week, adding to signs the labor market may keep improving and diminishing expectations for more quantitative easing from the Federal Reserve. Today’s auction was the last of three offerings that raised $72 billion this week.
“Supply is finished and buybacks are coming,” said John Briggs, a U.S. government bond strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, one of 21 primary dealers required to bid at government debt auctions.
The Fed bought $1.3 billion of inflation-protected Treasuries as part of its program to swap shorter-term debt for longer-dated securities.
The long bonds sold today yielded 2.825 percent, compared with a forecast of 2.813 percent in a Bloomberg News survey of six of the Fed’s 21 primary dealers. Last month’s sale produced a record-low auction yield of 2.58 percent on July 12. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.41, compared with the 2.68 average at the past 10 sales.
Investors should be wary of a steepening yield curve in the Treasury market, according to Pacific Investment Management Co.’s Mohamed El-Erian. While yields on government securities due in eight years and less are anchored by Fed monetary policy, bond buyers should be wary of longer-maturity debt, said El-Erian, the chief executive officer of the world’s largest manager of bond funds
“What we would caution is rather the level of the rates, the shape of the curve,” El-Erian said in a “Bloomberg Surveillance” radio interview with Tom Keene and Ken Prewitt. “The long end is exposed to a lot more risk.”
The difference in yields between two- and 10-year Treasuries widened to as much as 1.45 percentage points, or 145 basis points, the in about two months. Investors often demand a bigger yield premium on longer-maturity debt to guard against the risk that inflation will erode the value of fixed payments from the securities over time.
Among U.S. stocks, E*Trade Financial Corp. rallied 6.9 percent as Chief Executive Officer Steven J. Freiberg was ousted from the company and its board began seeking a new leader. Cisco Systems Inc. advanced 3.2 percent after the biggest maker of computer-networking equipment was added to the “Conviction Buy” list at Goldman Sachs Group Inc. Monster Beverage Corp. declined 9.7 percent after profit and sales missed analysts’ projections.
The euro weakened against 15 of 16 major counterparts, with the South Korean, Mexican, Brazilian and Canadian currencies rising at least 0.8 percent to lead gains.
The shared currency and U.S. stocks fell to their low of the session and after a report that former European Central Bank official Otmar Issing said it was wrong to expect the ECB to buy bonds to ease the region’s debt crisis. The Wall Street Journal reported that Issing, who has advised Germany since leaving the ECB in 2006, said Germany’s guilt over World War II doesn’t mean it needs to write blank checks to other European nations.
“Who knows what influence Issing still has but the timing of his comments were similar to the further weakness in the euro,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, said in a note to clients. “The stock market started to roll over, albeit modestly, coincident with the euro going to the low of the day.”
The euro-area’s economy will shrink 0.3 percent this year, down from a 0.2 percent contraction predicted earlier, according to a European Central Bank survey of professional forecasters.
“The situation in Europe remains uncertain and the data has been weaker,” said Bernd Berg, a currency strategist at Credit Suisse Group AG’s private banking unit in Zurich. “The euro should go lower.”
New Zealand’s dollar weakened against 12 of 16 major peers after the nation’s jobless rate climbed to a two-year high last quarter.
The Stoxx Europe 600 Index advanced for a fifth day, rising to the highest level since March 19. Nestle SA, the world’s largest food company and the biggest stock in the Stoxx 600, climbed 2.4 percent after posting first-half sales growth that exceeded analysts’ projections. Subsea 7 SA, a Norwegian provider of offshore oilfield services, climbed 5.1 percent in Oslo as increased margins and improved vessel utilization countered a lower-than-expected order intake in the second quarter.
The MSCI Emerging Markets Index rose 0.9 percent, reaching the highest level since May 10. The Hang Seng China Enterprises Index of mainland companies rose 1 percent. China’s consumer prices rose 1.8 percent last month, compared with a 2.2 percent gain in June. South Korea’s Kospi Index jumped 2 percent. The Bank of Korea said growth momentum is “slackening,” fueling speculation for rates cut borrowing after keeping its interest rate unchanged today.