Yields on 10-year Treasury notes climbed today amid speculation the Fed is moving closer to winding down its asset- purchase program. The U.S. central bank will begin tapering its $85 billion in monthly bond purchases in September, according to 50% of economists surveyed by Bloomberg.
Treasuries remained lower after the U.S. sale of $35 billion in two-year notes was met with weaker-than-average demand. The notes drew a yield of 0.336%, compared with a forecast of 0.338% in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The government will sell $35 billion in five-year debt tomorrow and $29 billion in seven-year securities on July 25.
U.S. equities fell earlier in the day after the Fed bank of Richmond’s factory index slid to minus 11 for July. Readings greater than zero signal expansion in the region that includes the Carolinas, the District of Columbia, Maryland, Virginia and West Virginia. The median projection in a Bloomberg survey of economists called for a reading of 9.
The Chicago Board Options Exchange Volatility Index, or VIX, jumped 3.6% today to 12.73, snapping a streak of four straight declines. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80% of the time, reached a high for the year on June 20 and tumbled 40% through yesterday.
The Stoxx 600 dropped 0.3%, reversing an earlier advance of at least 0.5% after reaching a seven-week high.
Royal KPN NV soared 2.8%, extending yesterday’s 13% rally, after saying it will sell its German mobile-phone business to Telefonica SA. Swatch Group AG climbed 1.7% as the maker of Swiss watches reported first-half profit that exceeded analyst predictions. Sulzer AG sank 14%, the most since October 2008, as the Swiss pump maker cut its forecasts.
The VStoxx Index, which gauges the price of options on the Euro Stoxx 50 Index, fell 0.8% to 17.34 after touching the lowest level since May 22 earlier in the trading day.
Emerging-market stocks rose as benchmark gauges in South Korea, Taiwan, the Philippines, Thailand and Indonesia climbed at least 0.9%. The Beijing News reported Chinese premier Li Keqiang said 7% growth is the minimum policy makers will tolerate, signaling the nation will act to support the economy if needed.
The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong jumped 3.9%, the most in more than six months, and the Shanghai Composite Index gained 2%.
The Bloomberg Dollar Index slipped 0.2%, dropping for a third straight day. The rupiah lost 1.2% as Bank Indonesia allowed a more rapid slide toward levels quoted in the offshore market. Hungary’s forint fell versus 16 major counterparts after the central bank cut its main interest rate for a 12th consecutive month and President Gyorgy Matolcsy said he expects to extend monetary easing.