Gross calls a bond bear market after treasury yield surges

Gross calls a bond bear market after treasury yield surges

ING Bank Greater China economist Iris Pang said it would be no surprise if China wanted to revise its foreign reserves portfolio when global investors started to walk away from US Treasuries whose issuance cost could increase after the tax cut in the US.

With the euro zone seeing its best growth in a decade, the European Central Bank should gradually shift its stance to avoid a more disruptive move later and look at a broader revision of its policy guidance to reduce the focus on bond purchases and raise the emphasis on interest rates, accounts of the ECB's December meeting showed.

Wen's comments in March 2009 came weeks after Secretary of State Hillary Clinton had urged China to keep buying Treasuries while on a visit to Beijing.

In order for bond yields to move higher, bond prices would have to fall as the "coupon" interest payment is fixed at the point when new bonds are issued and can not be changed to compensate for higher (better) base rates.

Ivascyn said shorter-dated U.S. Treasuries are "looking more interesting at these levels" and that Pimco "prefers (the) front end" of the U.S. Treasury yield curve.

There may be bond market tremors right now but no quake.

The strategists question the reliability of the report because, if China really were about to stop buying US Treasuries and chose to telegraph it beforehand, then it would hurt itself by driving down the value of the bonds already held on the PBOC's balance sheet.

In the currency market, the yen rose to its highest in over a month, extending the previous day's gains after the Bank of Japan trimmed the amount of long-dated bonds it is buying.

"We are far more inclined to see a move by SAFE, if confirmed, as a conventional investment decision", Eurasia Group said.

"Market reaction to dollar-buying factors has been subdued, while market reactions to dollar-selling, and yen-buying factors, have been more vivid", Murata said. Japan's Nikkei finished 0.3 percent lower.

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Australian markets closed lower, with most sectors except gold producers edging lower on the day.

The MSCI world equity index, which tracks shares in 47 countries, was flat.

Indirect bidders were awarded 71.42 percent, the biggest share of 10-year supply since the record high set in August 2016.

The pan-European FTSEurofirst 300 index .FTEU3 lost 0.26 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.38 percent.

GBPUSD - slipped below the 1.3500 area yesterday raising the prospect of a decline back though the 1.3450 level towards support at the 1.3300 area. The tech company's profit guidance disappointed investors and raised worries the memory chip boom may be coming to an end.

"The rally has been a bit too fast".

"China's showing that they have power in the relationship, as anyone who's a buyer of U.S. Treasuries does", said Eric Stein, co-director of global fixed income at Eaton Vance in Boston.

But the euro zone ERP of around 4.5 percent is running around its 30-year average, suggesting stocks aren't overvalued relative to bonds, and the Japanese ERP of 4 percent shows stocks are still cheap, SocGen says.

Washington welcomed what it said was a first step to solving the North Korean nuclear weapons crisis, even though Pyongyang said those were aimed only at the United States and not up for discussion with Seoul.

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