Bonds Rise From Italy to Spain as Dollar Gains, Oil Rises

Frankfurt (Mar 6)  Gains in Italian and Spanish bonds sent yields to record lows, while the dollar headed for its biggest weekly advance since January before data on the U.S. jobs market. Oil rose, driving the ruble to the highest this year, and emerging-market stocks rebounded from a three-week low.

Italy’s 10-year note yield fell three basis points to 1.28 percent at 7:35 a.m. in New York. Spain’s rate dropped to 1.24 percent. The Bloomberg Dollar Spot Index is up 1.2 percent this week, with the currency climbing to an 11-year high to the euro. The Stoxx Europe 600 Index added 0.3 percent and Standard & Poor’s 500 Index futures were little changed. Russia’s currency jumped 2 percent to 59.58 per dollar, this year’s high on a closing basis. Brent crude rose 1 percent to $61.11 a barrel.

Yields are collapsing from German 30-year bunds to Portugal’s two-year notes before the European Central Bank begins its 1.1 trillion euros ($1.2 trillion) quantitative-easing plan next week. Friday’s payrolls report may offer clues to the timing of U.S. rate increases, after new claims for jobless benefits rose to a nine-month high last week. Diverging outlooks of the U.S. and other countries have seen the dollar rise against most global peers this year.

The details “underline our view that there is going to be scarcity value that is bound to rise further in core markets,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG. “In turn peripheral markets will outperform.”

Wiggle Room

Germany’s 30-year bond yield fell as much as seven basis points to an all-time low of 0.87 percent. Yields on equivalent-maturity Portuguese debt tumbled as low as 2.51 percent. Irish, Italian and Spanish 10-year yields also fell to the least on record.

From Monday and for the next 19 months, both the ECB and the euro area’s 19 national central banks will seek to buy debt from counterparties in the secondary market.

The Frankfurt-based ECB will grant national central banks wiggle room as they carry out purchases within their home markets, allowing them some choice between government and agency debt. Buying will be done roughly in proportion to the capital that each member central bank has contributed to the ECB, though that guideline doesn’t have to be strictly followed every month.

The dollar climbed 0.7 percent to $1.0950 per euro, after $1.0930, the strongest since September 2003. Europe’s common currency slid versus all but one of its 16 major peers, while Norway’s currency depreciated 0.4 percent to 8.5481 per euro after manufacturing production tumbled in January.

U.S. Payrolls

U.S. employers probably added 235,000 jobs in February, opped 200,000 for a 12th time, and the unemployment rate fell to 5.6 percent, economists said before a Labor Department report. Average hourly earnings increased 0.2 percent, based on the responses, after January’s 0.5 percent advance that was also the best since 2008. Data releases may be delayed as federal government agencies in Washington open late due to bad weather.

European stocks are heading for a fifth weekly gain, the longest streak since June. The Stoxx 600 has added 0.7 percent this week and closed at its highest level since July 2007 on Thursday.

Thomas Cook Group Plc jumped 19 percent after saying holding company Fosun International Ltd. will buy a stake in the tour operator.

PSA Peugeot Citroen climbed 2.7 percent after Euronext NV said the French carmaker will replace Gemalto NV on the benchmark CAC 40 Index from March 23. Gemalto was little changed.

Rejecting Bid

Banco BPI SA advanced 4.9 percent after its board advised shareholders to reject a bid by CaixaBank SA because the offer is too low. Banco Comercial Portugues SA, which said this week it’s prepared to study the potential for a merger with BPI, added 1.9 percent. CaixaBank rose 3.4 percent.

Portugal’s benchmark PSI 20 Index climbed 0.7 percent, the most among 18 western-European markets.

The MSCI Emerging Markets Index added 0.4 percent, trimming this week’s decline week to 1.2 percent, the biggest drop since the period ended Jan. 30.

The ruble headed for its fifth weekly gain in the longest rally since February 2013 as Brent crude, used to price Russia’s main export blend, stayed above $60 a barrel and a cease-fire in Ukraine appeared to be taking hold. The RTS Index of stocks rose 1.2 percent and is up 3 percent in the week.

The hryvnia was set for its best week on record after the central bank raised its benchmark interest rate to 30 percent, the world’s highest.

The Shanghai Composite Index fell 0.2 percent, taking this week’s loss to 2.1 percent, its first weekly decline in a month, amid concern that new share offerings next week will divert funds from existing stocks.

China lowered its 2015 growth target this week to 7 percent, the slowest pace since 1990, after the People’s Bank of China cut interest rates for the second time in three months.

Oil rose 0.4 percent to $50.94 a barrel in New York, heading for the first weekly gain in three weeks. Swelling U.S. inventories contributed to an oversupply that drove prices almost 50 percent lower in 2014.

Source: Bloomberg