Record Low Bond Yields Around the World after ECB Stimulus

Nichole Harper
23 Jan, 2015
New York City

Bond yields took another dive and dropped to record low in the euro zone after the latest monetary stimulus in the euro zone. Bond prices rose across the euro zone including Greece, Portugal and Italy and yields fell near record lows in Germany, U.K., U.S. and Canada.

[R]12:55 PM New York – Bond yields took another dive and dropped to record low in the euro zone after the latest monetary stimulus in the euro zone. Bond prices rose across the euro zone including Greece, Portugal and Italy and yields fell near record lows in Germany, U.K., U.S. and Canada.[/R]

Stocks on Wall Street traded sideways and indexes in Europe surged for the second day in row after yields drop to record low around the globe.

On Wall Street trading, Tollbooth Strategy Index increased 0.6% or 63.89 to 10,166.88.

S&P 500 index fell 4.68 or 0.2% to 2,058.56 and the Nasdaq Composite Index rose 9.12 or 0.2% to 4,758.86.

World Bond Yields Drop

The latest ECB bond program announcement continue send ripples around bonds markets of the world for the second day in a row.

Yields of bonds continue to fall in the euro zone, U.K., U.S., Canada and Australia after the unprecedented monetary stimulus announced by the European Central Bank.

10-year bond yields of Italy dropped below 1.5% and U.S. 10-year Treasury note yields declined to 1.82%. Portugal debt yield of similar maturity dropped to 2.45%.

10-year German bund yields declined to a record 0.375% while rates on 30-year bond fell to 1%.

Even Greek bond yields closed down 70 basis points to 9.64% as the nation prepares for election on Sunday that may lead to a new coalition government.

Euro dropped to a new 10-year low to $1.111 and to 74.28 U.K. pence, the weakest in six years ahead of Greek election.

Smooth Power Transfer in Saudi Arabia

Commodities declined and copper declined for the sixth week in a row since early October and fell 1.6% on London Metal Exchange to $5,567 a ton. For the week, copper fell 2.6%.

Oil briefly rallied and closed nearly unchanged in London at $49.06 and in New York dropped 25 cents to $45.06 after the death of 91 year old King Abdullah of Saudi Arabia. King Abdullah was the sixth king of Saudi Arabia.

The newly appointed 79 year old King Salman Bin Abdulaziz Al Saud of the largest economy in the Middle East said the current oil policy will continue and retained the Oil Minister Ali Al-Naimi and appointed his son Mohammed bin Salman as defence minister, according to Saudi State Television today.

U.S. Home Sales Drop 3.1%

The National Association of Realtors reported seasonally adjusted annual rate for existing home sales in December rose 2.4% to 5.04 million from downwardly-revised 4.92 million in November but rose from 3.5% in December 2013.

For the year 2014, home sales fell 3.1% to 4.93 million from 5.09 million in 2013 and median existing-home price was $208,500, the highest since 2007.

U.S. Movers

General Electric Company ((GE)) gained 1.5% or 36 cents to $24.65 after the diversified technology and financial service provider reported total revenues in the fourth-quarter ending in December climbed 4% to $40 billion from a year ago period.

Net income in the quarter surged 61% to $5.15 billion or 51 cents a diluted share compared to $3.21 billion or 32 cents from the same quarter last year.

McDonald''s Corporation ((MCD)) slid 53 cents to $90.39 after the quick service restaurant operator said revenues in the fourth-quarter ending in December dropped 7% to $6.57 billion from a year ago period.

U.S. fourth quarter comparable sales decreased 1.7% and global comparable sales fell 0.9%.

Net income in the quarter tumbled 21% to $1.10 billion or $1.13 a diluted share compared to $1.40 billion or $1.40 from the same quarter last year.

Starbucks Corporation ((SBUX)) jumped 6.2% or $5.09 to $87.83 after the specialty coffee chain reported net revenues in the first-quarter ending in December soared 13% to $4.80 billion from a year ago period.

Comparable store sales in the quarter jumped 5% and traffic increased 2%. Comparable store sales in Americas climbed 5% and customer transactions increased about 9 million in the U.S. and approx 12 million worldwide from a year ago.

Net earnings in the quarter soared 81.8% to $983.1 million or $1.30 a diluted share compared to $540.7 million or 71 cents from the same quarter last year.

European Markets

European market indexes surged for the second day after the European Central Bank announced larger-than-expected bond purchase program.

The money printing plan is expected to offer more liquidity in the financial system and encourage banks to lend more and drive unemployment lower.

In London trading, FTSE 100 index rose 0.2% or 16.08 to 6,812.71 and in Frankfurt the DAX index climbed 1.9% or 204.26 to 10,639.88.

In Paris, CAC 40 index jumped 1.9% or 85.44 to 4,638.24.

Greece heads for snap election scheduled this Sunday and neither party is expected to win majority.

Of the 22 contesting parties in Greek election, seven are expected to win minimum required 3% to win seats in the next parliament. Syriza party is expected to lead tally in 300 member parliament but the party may be forced to build a coalition to form the next government.

adidas AG climbed 3.9% to €60.52 after the Germany-based sports goods maker reported sales in the year ending in December jumped 2% to €14.8 billion from €14.5 billion a year ago period.

The company forecasted net income for the year of about €650 million excluding goodwill impairment losses and the impact of the Rockport divestiture.

Separately, the adidas announced today that it has signed an agreement to sell its Rockport business to a new entity formed by Berkshire Partners and New Balance for about $280 million in cash.

Carillion Plc rose 0.8% to 351.10 pence after the U.K.-based engineering construction service provider signed two contracts with the UK Ministry of Justice to provide facilities management services for public sector prisons worth about £200 million.

Hutchison Whampoa Limited jumped 3% to HK$101.30 after the diversified investment company offered about £10 billion or $15 billion for the O2 UK owned by Spain based Telefonica SA.

Asian Markets

Japan market indexes extended weekly surge after the ECB announced historic bond buying program. The yen weakened and insurance and shipping companies led the gainers. Aeon Co reported net income surged 47% in nine-month period.

Market indexes in Tokyo advanced and extended weekly gains following the larger than expected stimulus from the European Central Bank.

The Nikkei 225 Stock Average jumped 182.73 or 1.1% to 17,511.75 and the broader Topix index gained 13.79 or 1% to 1,403.22. For the week, Nikkei 225 climbed 3.8%.

The yen slipped 0.3% to close at 118.35 against one dollar.

In Mumbai trading, Sensex Index climbed 272.82 or 0.9% to close at 29,278.84. The CNX Nifty rose 74.20 or 0.9% to 8,835.60.

For the week, Sensex soared 4.1% and CNX Nifty climbed 3.6%.

Stocks in Mumbai extended advances and rupee firmed after European Central Bank announced larger than expected plan to print money and support inflationary forces in the euro zone.

The large stimulus in the euro zone is expected to jolt the stagnating economy, spur investments and create more jobs. However, the diverging economies in the euro zone are struggling with structural forces that the central bank may not be able to solve with printing additional money.

Indian rupee closed at 61.42 against one dollar.

Cairn India Limited jumped 3.8% to ₹247.70 after the domestic crude oil producer reported net in the third-quarter plunged 53.2% to ₹1,359.64 crore.

Net sales declined 19.76% to ₹4,020.57 crore.

Colgate-Palmolive (India) Limited fell 0.6% to ₹1,911.20 after the personal care products maker said net in the third-quarter jumped 16% to ₹130.90 crore.

Net revenues advanced 12% to ₹988.60 crore.

HCL Infosystems Limited slumped 10.5% to ₹44.35 after the software services provider reported net loss in the third-quarter widened to ₹50.82 crore compared to ₹44.52 crore in the same period last year.

Total revenues plunged 25% to ₹1,468.81 crore.