Yen, euro jump as Europe bonds slide while U.S. stocks advance

Jobless Claims

The euro reached the highest since February versus the dollar and strengthened against all 16 major peers except the yen, pound and Swiss franc, rallying more than 1% against the currencies of Brazil, South Korea and Mexico. The pound gained against all 16, surging 1.3% to an almost four- month high of $1.5607, as the Bank of England kept its asset- purchase target and benchmark rate unchanged.

Italy’s 10-year note yield surged 23 basis points to 4.36% while Spain’s added 25 points to 4.69%, widening their premiums to benchmark German securities as the rate on bunds of similar maturity increased one basis point to 1.52%.

Thirty-year U.S. bonds reversed earlier losses, sending yields down one basis point to 3.23% while two-year rates were flat at 0.29%.

Treasuries rose yesterday by the most in almost two months after a report showed U.S. private employers added fewer jobs than forecast in May. The rally marked a reversal from last week, when 10-year yields climbed to a 14-month high as investors weighed whether the U.S. economy is strong enough to withstand a tapering of bond purchases by the Fed.

Investors shouldn’t turn positive on Treasuries just yet, according to Luca Jellinek at Credit Agricole Corporate & Investment Bank.

‘Tidy Correction’

“It is difficult to get too bullish on rates markets on the back of a tidy correction in yields,” Jellinek, who is based in London and is the head of European interest-rate strategy, wrote in a note to clients today. “Fixed-income investors are likely to remain obsessed with the Fed ‘taper.’”

Utility, health-care, financial and telephone companies led gains among the 10 main groups in the S&P 500, while consumer- staples and technology shares performed the worst.

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