U.S. Investors Focus on Bond Auction; Banks Up

123jump.com Staff
18 Jun, 2009
New York City

U.S investors focused on the upcoming government bond auction next week. The U.S. is expected to raise $104 billion in bonds that mature between two and seven years. Most bonds sold by the government are short term maturities that will probably rolled over at a higher cost in less than five years.

[R]4:00 PM New York, 9:00 PM London, 6:00 AM Sydney – U.S investors focused on the upcoming government bond auction next week. The U.S. is expected to raise $104 billion in bonds that mature between two and seven years. Most bonds sold by the government are short term maturities that will probably rolled over at a higher interest cost in less than five years.[/R]

The focus of investors was on the bonds markets and the direction of yields between the short and long term debts. The U.S. Treasury is expected to raise $104 billion in debt next week with maturities spread between 2 and 7 years. The investors are concerned that most of this debt will be rolled over again in less than five years probably at a higher cost.

The U.S. is expected to auction $40 billion in 2-year notes, $37 billion in 5-year notes and $27 billion in 7-year bonds next week. The yields on 10-year and 30-year bonds increased but and spread between 2-year and 10-year bonds are now at 2.55%. For many investors there is not enough compensation in the bond market and yields may rise substantially if government need for funds continue to rise.

In economic news, the initial claims of unemployment last week decreased. Weekly initial claims of unemployment in the last week increased 3,000 to 608,000 and continuing claims decreased 148,000 to 6.7 million.

The dollar rose against euro and yen as the bond auction is expected to run smooth next week.

The decline in unemployment claims and rise in dollar lifted stocks of healthcare and financials. Bank of America and JP Morgan Chase closed up. Health insurers have been rising for a week and today Humana, UnitedHealth Group and Cigna closed up between 6% and 8%.

Fertilizer stocks declined for the second day in a row on weak sales and pricing outlook. The J.M. Smucker surged after it offered positive outlook and reported better than expected sales and earnings. Clarcor Inc fell after earnings declined.

The Japan Iron and Steel Federation reported another monthly decline in domestic steel production in May. For the year steel production is 45% lower from a year ago. Steelmakers, autos and trading companies declined in Tokyo trading. Kawasaki Kisen led decliners among shippers.

Energy, mining and financials were among the most active stocks in Shanghai and Hong Kong. World Bank revised its China economic growth projection to 7.2% and estimated foreign exchange reserves to increase by $218 billion. Coal miners and electric utility companies surged.

The benchmark index in India dropped lower on the worries that some of the recent tax reliefs may be withdrawn by the government. Stocks declined as the fourteen week old rally falters, global markets are directionless and uncertainty on the national budget expected in three weeks.

North American Markets

Dow Jones Industrial Average decreased 7.49 or 0.1% to a close of 8,497.18, S&P 500 Index decreased 1.26 or 0.1% to 910.71, and Nasdaq Composite Index edged higher 11.88 or 0.7% to close at 1,808.06. Toronto TSX Composite Index closed down 241.29 or 2.4% to 10,066.11.

Of the stocks in S&P 500 index, 303 increased, 195 declined and 2 were unchanged.

SanDisk Corporation led the decliners in the S&P 500 index with a loss of 6.1% followed by losses in Advanced Micro Devices of 5.6%, in Macy’s, Inc of 5.4%, in Harman International of 5.1% and in Best Buy of 5%.

The J.M. Smucker Company led gainers in the S&P 500 index with a rise of 9.7% followed by gains in Coventry Health 1.5%, in Cigna Corp of 8.3% and in Humana Inc of 8.1%.

South American Markets Indexes

Mexico Bolsa Index decreased 73.89 or 0.3% to 24,150.94. Brazil Bovespa Stock Index dropped 159.94 or 0.3% to 51,045.84.

Argentina Merval Index decreased 3.3%, Chile Stock Market Select index lost 2.7%, Peru Lima General Index declined 2.4% and Colombia IGBC General Index increased 0.3%.

Europe Markets Review

In London FTSE 100 Index closed higher 2.40 or 0.06% to 4,280.86, in Paris CAC 40 Index increased 32.92 or 1.04% to close at 3,194.06 and in Frankfurt DAX index higher 37.50 or 0.78% to close at 4,837.48. In Zurich trading SMI increased 74.55 or 1.41% to close at 5,376.84.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 137.13 or 1.39% to 9,703.72, Hang Seng index in Hong Kong decreased 307.94 or 1.70% to 17,776.66, CSI 300 index in China higher 46.84 or 1.56% to 3,057.43. ASX 200 index in Australia decreased 12.00 or 0.31% to 3,892.10. The KL Composite index in Malaysia closed lower 16.49 or 1.54% to 1,054.41.

The Kospi Index in South Korea decreased 15.41 or 1.11% to close at 1,375.76.SET index in Thailand closed lower 15.71 or 2.68% to 570.43 and JSE Index in Indonesia decreased 73.98 or 3.65% closed to 1,950.99. The Sensex index in India decreased 257.31 or 1.77% closed to 14,265.53.

Commodities, Metals, and Currencies

Crude oil increased $0.20 to close at $71.23 a barrel for a front month contract, natural gas decreased 18 cent to $4.07 per mBtu and gasoline decreased 1.76 cents to 201.50 cents.

Wheat futures closed down 5.75 cents in Chicago trading to $5.61 a bushel. Sugar decreased 0.11 cent in trading at 15.95 cents a pound. Soybean future closed down 6.50 cents to $10.435 a bushel.

Gold decreased $2.50 in New York trading to close at $933.50 per ounce, silver closed down $0.04 to $14.24 per ounce and copper for the front month delivery decreased 1.20 cents to $2.25 per pound.

Dollar edged higher against euro to $1.3900 and closed up against the Japanese yen to 96.47.

Yields on 10-year U.S. bonds increased to 3.83% and with 30-year maturities closed up at 4.60%.