Financial Stress: Record Yields in U.S., Switzerland, UK and Germany

Bikram Pandey
30 May, 2012
New York City

World markets extended losses and the euro fell to a 2-year low as investors prefer bonds of U.S., Germany, UK, Switzerland and Japan. Swiss bond yields turned negative at the latest auction and the U.S. bond yields fell to record low as Spanish yields jumped to a record since joining the euro.

[R]5:25 PM New York – World financial markets extended losses and the euro fell to a 2-year low against the dollar as investors prefer sovereign bonds of U.S., Germany, UK, Switzerland and Japan. Swiss bond yields turned negative at the latest auction and the U.S. Treasury bond yields fell to a record low and Spanish yields jumped to a record high since joining the euro.[/R]

Financial markets on both sides of the Atlantic traded lower as fears of financial contagion spread to Spain and Greek economy screeches to a halt as the election approaches in two weeks.

The stress in bond markets was palpable after Switzerland sold bonds at a negative interest rate of 0.62% yesterday and the U.S. Treasury yields dropped near record low today. German and Japanese bond yields also declined to near lows as investors sought the safety of principal.

The currency markets are also roiled as the euro falls to a 2-year low against the dollar and the yen and the dollar strengthened after a European Union report painted a weak economic outlook for the region including Germany.

In New York trading, indexes fell more than 1.2% and pending home sales fell in April.

The battle for market raged between smartphone makers and Research in Motion plunged 10% after it estimated operating loss in the current quarter and hired bankers for a strategic review. Separately, Apple Inc the current leader in the smartphone market confirmed the interest in building television set or a device but stopped of short of indicating launch time.

In earnings news, Booz Allen fourth quarter net surged nearly three-fold to $50.6 million. Copart third quarter net increased 11% to $55.5 million. Jos. A. Bank Clothiers first quarter net declined 17% and RBC Bearings fourth quarter net soared 57.4%. The gourmet food retailer said Fresh Market first quarter net surged 43%.

Monsanto Co gained after the agriculture seeds maker estimated higher than expected third quarter earnings per share between $1.57 and $1.62 and full year cash flow at the high end of the previous range between $1.7 billion and $1.8 billion. The company also said that the expanded acreage planted to corn and soybeans in the U.S., Brazil and Eastern Europe are driving the results.

The European indexes extended losses as Spanish bond yield rose to a record high since joining the euro. Italy raised €5.73 billion as yields rise and investor participation falters. UK mortgage approvals rose more-than-estimated in April.

Stocks in Tokyo recovered from the early decline of 1% in the Nikkei index but Spain and the euro zone worries dragged market sentiment. Olympus soared 5% on the speculation that it may seek capital from Panasonic or Sony and Renesas Electronics rebounded 27% after losing half its value this month.

Australian stocks closed lower on international worries after a Chinese press agency confirmed that the government is not planning additional stimulus. The dollar fell after April retail sales declined. Resource and banking sector stocks were volatile after weak commodities prices as the euro fell to a two-year low.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond decreased to multi-decade low of 1.63% and 30-year U.S. bond edged lower to 2.73%.

The U.S. dollar edged up to $1.239 to one euro and gained against the Japanese yen to 78.93 in New York trading.

Immediate delivery futures of Texas crude oil decreased $2.80 to $87.94 a barrel and Brent crude futures fell $3.13 to $103.55. Futures of natural gas decreased 0.03 cents to $2.45 per mbtu and gasoline price decreased 5.4 cents to 285.29 cents a gallon.

In metals trading, copper decreased 7.25 cents to $3.38 per pound, gold increased $14.90 to $1,565.90 per ounce and silver added 15 cents to $27.96.