Treasury Yields Rally on Greek Deal

 
Snapshot: 

        -EUR/USD at 1.1060-63; 10-year Treasury yield at 2.458%; U.S. stock futures gain; Nymex crude at $51.66; gold at $1155.47
        -Watch for: no major data or earnings scheduled
        News: Eurozone Reaches Deal on Greece; China Exports Grow, but Remain Weak; Europeans Press for Iran Deal
        The euro traded mixed against its major rivals after news broke that Greece had reached a long-awaited bailout deal.
        Eurozone leaders said Monday that they would give Greece up to $96 billion in fresh bailout loans as long as the government of Prime Minister Alexis Tsipras manages to implement a round of punishing austerity measures in the coming days.
        The rescue deal requires the Greek left-wing government's near-total surrender to its creditors' demands, but it gives the country at least a fighting chance to hold on to the euro as its currency.
        The euro hit a day's high of $1.1197 against the dollar but later fell sharply and was recently 0.7% lower at $1.1073.
        For the currency market, "so long as the deal proves to be sustainable in the short-term, it naturally makes for a better backdrop for the single currency and will certainly reduce volatility," said Simon Smith at FxPro.
        U.S. Treasury yields rallied in European hours after the Greek deal. Ongoing stabilization in the Chinese stock market also removed the need for safe-haven bond buying.
        At 5.11am ET, the 10-year U.S. Treasury yielded 2.458% according to CQG data, the highest since July 2.
        Up ahead, the release of the U.S. monthly budget statement for June is the only economic highlight.
        Bonds in Italy, Spain and Portugal-countries considered most vulnerable to shocks from Greece-initially rallied on the Greek news but later pared most of those gains.
        German government bonds, considered safest during times of volatility, sold off, sending the yield to 0.94%.
        Wall Street was set for an upbeat start to the week, with U.S. stock futures pushing higher after the Greek deal.
        Futures for the Dow climbed 119 points, or 0.7%, and those for the S&P picked up 14 points, also 0.7%. Futures for the Nasdaq added 37.25 points, or 0.8%.
        The advances came on the back of a rally in European equity markets. By midmorning, the Stoxx Europe 600 was up 1.5%. Markets "are taking the glass-half-full view," said Viktor Szabo at Aberdeen Asset Management.
        Still, "Even if a deal can eventually be reached to keep Greece in the euro area, the ramifications of this weekend's incredible bloodletting will have long-term consequences," said analysts at Oxford Economics in a research note.
        "The damage done to relations between France and Germany may prove irredeemable, while the German suggestion that Greece be granted a short-term euro area surely shatters the principle that membership of the euro area is irrevocable."
        Oil prices fell in Europe as Greek fears eased and amid worries about Iranian nuclear negotiations. Nymex crude was last at $51.72.
        Negotiations between Iran and six world powers have reached a make-or-break point, European officials said according to The Wall Street Journal, raising concerns that there will be no final agreement.
        Markets were also waiting for production data from OPEC due at 6.30am ET. "Traders are keeping a close eye on this [to see] how much its members are pumping and if they are respecting each other's limit," said Naeem Aslam at Avatrade. "Saudi Arabia is clearly taking the lead in violating these limits and pumping more oil which is upsetting other members."
        Gold fell 0.6% to $1155.47. Gold failed to attract much safe-haven buying during the Greek debt crisis, so the deal is unlikely to place significant pressure on prices, analysts said.
        Looking ahead, the strength of the greenback is likely to weigh on the yellow metal. "$1,150/oz may well be tested again this week, especially if [U.S.] retail sales data works in the favor of the dollar," said Howie Lee at Phillip Futures.
        Eurozone Reaches Deal on Greece
        Eurozone leaders said they would give Greece another bailout as long as the government of Prime Minister Alexis Tsipras manages to implement a round of punishing austerity measures in the coming days.
        China Exports Grow, but Remain Weak
        China's exports in June were up 2.8% from a year earlier, reversing May's decline but continuing to struggle with weak demand from the U.S. and Europe.
        Europeans Press for Iran Deal Monday
        Nuclear negotiations between Iran and six world powers have reached the make-or-break point, European officials said, warning the diplomacy could fail if there is no final agreement by Monday night.
        U.S. Wants Drones in North Africa
        The U.S. is in talks with North African countries about positioning drones at a base on their soil to ramp up surveillance of Islamic State in Libya.
        Concern About Trading of U.S. Treasurys Prompts Review by Regulators
        U.S. regulators have become increasingly concerned in recent months about unstable trading in the $12.6 trillion U.S. Treasury market, where investors turn for safe-haven securities and set interest rates that are a benchmark for much of the rest of the global financial system.
        Write to Riva Gold at riva.gold@wsj.com @GoldRiva
        (END) Dow Jones Newswires

        July 13, 2015 06:16 ET (10:16 GMT)

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