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.
“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.