Global Bond Selloff Continues; Dollar Weakens

 
Snapshot: 

        -Dollar eases; 10-year Treasury yield at 2.31%; U.S. stock futures slide; Nymex crude at $59.58; gold at $1184.97
        -Watch for: no major data scheduled; speech by Fed's Williams
        News: FDIC Chief Martin Gruenberg: Big Bank Failure Won't Imperil System; Fed's Dudley: No Surprise When Fed Hikes Rates; European Bonds, Stocks Hit Again
        The 10-year Treasury yield hit a fresh 6-month high Monday but that wasn't enough to stop the dollar slipping back as bund yields ramped up and Greece paid the IMF one day early, both of which supported the euro.
        Sterling continued its post-election rally, printing a fresh 2015 high above $1.56 and stayed bid in Asia despite a downbeat BRC April retail sales report.
        The recent sell-off in the U.S. Treasury market continued in Europe, with the yield on the 10-year touching a 6-month high of 2.31%.
        Receding deflation concerns, upcoming supply issues and worries over trading liquidity are cited as reasons behind the recent sell-off. At 4.33am ET, the June Treasury contract was 6/32 lower at 126-225.
        European government bonds were hit with a renewed selloff on Tuesday, as recent signs of a return to stability in the market proved short-lived.
        The fresh selling means a global bond rout is entering its second week, after a brief pause at the end of last week. Investors are still puzzling over what first triggered the selloff, but traders say markets have tumbled as investors rushed to exit bets that bonds would rise further after a strong rally at the start of 2015.
        The yield on Germany's 10-year benchmark bond climbed by 0.08 percentage point to 0.66%. Bonds across the euro area weakened by similar amounts.
        "The dust has not settled yet," said interest-rate strategists at BNP Paribas. "Markets are and will remain nervous near term, and the return of a significant bullish tone is premature."
        U.S. stocks look set for further losses Tuesday with futures pointing to modest declines following the previous session's weakness.
        With the first-quarter earnings season winding down, traders and investors say stocks could be in for a quieter spell in the weeks ahead.
        "There's really a lack of catalysts right now," said Michael Antonelli, equity sales trader at Robert W. Baird.
        Many of the trends that eroded corporate earnings in the first quarter, including the stronger dollar and the swoon in oil prices, have since abated, which means companies could see better fortunes in the quarters ahead, said Margie Patel, portfolio manager who oversees about $3.4 billion in stock and bond investments at Wells Fargo Asset Management.
        "You got most of the bad news out of the way," Ms. Patel said. "The second, third and fourth quarter might not be as bad as people were thinking." Ms. Patel continues to favor technology and health-care stocks in her portfolio, and has scant holdings of energy stocks.
        Oil prices rose in a volatile session as the dollar weakened, but analysts questioned the strength of the recent rally amid the continuing global oil glut.
        Brent crude for delivery in June rose 0.5% to $65.27 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, June-dated light, sweet crude futures traded at $59.58 a barrel, up 0.5% from Monday's settlement.
        Gold prices were higher on the London spot market, as bargain-hunters chased cheaper prices following the losses sustained in the previous session. Spot gold was up 0.1% at $1,184.97 a troy ounce in morning European trade, but the yellow metal kept to a narrow $5 range.
        FDIC Chief Martin Gruenberg: Big Bank Failure Won't Imperil System
        Nearly seven years after the financial crisis, Federal Deposit Insurance Corp. Chairman Martin Gruenberg said U.S. regulators can safely guide a major financial firm to failure without taxpayer bailouts or catastrophic consequences for the financial system.
        Dudley: No Surprise When Fed Hikes Rates
        The Fed's William Dudley said markets shouldn't be surprised when the U.S. central bank gets around to raising short-term interest rates.
        European Bonds, Stocks Hit Again
        European government bonds and stocks suffered a renewed selloff at the open as recent signs of a return to stability in the market proved short-lived.
        Kerry Arrives in Russia for Talks With Putin
        The secretary of State, the first top-level U.S. official to visit there in two years, hopes to carve out areas of common interest with Russian President Vladimir Putin.
        China Reports Balanced International Payments
        China's current account surplus was balanced out by a deficit under its capital and financial account in the first quarter, initial estimates by the country's foreign exchange regulator showed.
        Allianz: EUR68 billion outflows from Pimco in 1Q
        Germany's Allianz said Tuesday positive currency translation effects and rising stock markets lifted first-quarter profits, offsetting weaker operating profit contributions from bond-fund manager Pacific Investment Management Co. and the property and casualty insurance operations.
        Beijing to Honor Tax Breaks for Contracts with Cities, Provinces
        Following pressure from foreign trade groups, Beijing has said it would honor tax breaks and other incentives granted to companies in existing contracts with Chinese cities and provinces.
        U.S. Defends MetLife Decision, Seeks Dismissal of Insurer's Suit
        Federal regulators defended their heightened oversight of giant insurer MetLife Inc. in an unsealed filing Monday, saying the company could pose a threat to U.S. financial stability because of its complex financial transactions and capital-markets activities.
        Write to paul.larkins@wsj.com
        (END) Dow Jones Newswires

        May 12, 2015 05:38 ET (09:38 GMT)

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