EUR/USD
Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said by e-mail. “If the strongest nation in Europe has this kind of difficulty raising capital, one shudders concerning the upcoming auctions in other European nations.”Turmoil that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain has closed in on France and now risks engulfing Germany, the region’s biggest economy. Political leaders are struggling to find a fix for the crisis, with German Chancellor Angela Merkel rejecting proposals for common currency-area bonds, while the European Central Bank resists calls to boost sovereign-debt purchases. The yield on Germany’s 2.25 percent securities maturing in September 2021 climbed 15 basis points to 2.06 percent at 4:46 p.m. London time. The price of the bonds slid 1.370 or 13.70 Euros per 1,000-euro ($1,335) face amount, to 101.550. The cost of credit default swaps on German debt rose seven basis points to 108, according to CMA prices. The euro weakened as much as 1.3 percent to $1.3327.
GBP/USD
Barclays Plc will spin off its capital arbitrage team, led by Philip Rosenstrach, as a hedge fund on Jan. 1, with the London-based bank and other investors providing about $150 million in funding, according to two people familiar with the matter. The fund will be called Pomelo Capital and be based in New York, said the people, who asked not to be identified because the information is private. Rosenstrach, 40, and his five team members will run the relative value credit and equity strategy, which will trade fixed-income derivatives and try to profit from price inefficiencies. The fund seeks to raise about $500 million by the end of next year, the people said. The move is prompted by the Volcker rule, the people said, and a provision of last year’s Dodd-Frank law that would ban deposit-taking banks from engaging in proprietary trading. Barclays is Britain’s second-largest bank, with 390 billion pounds ($605.5 billion) in risk-weighted assets.Rosenstrach, a Barclays director, was formerly a portfolio manager at Talek Investments LLC, a Greenwich, Connecticut-based hedge fund. He has run the capital structure arbitrage portfolio at Barclays in New York for five years, posting positive returns every year, including a 20 percent gain in 2008. The portfolio climbed 7 percent this year, the people said. Mark Lane, a spokesman for Barclays, declined to comment on the spin off.
USD/JPY
Japanese investors are buying more bonds in the U.K. than in any other nation overseas this year as Europe’s struggle to control its debt crisis spurs a flight out of the region’s bonds. Money managers in Japan scooped up 1.53 trillion yen ($19.9 billion) of U.K. gilts in 2011 through Sept. 30, set for the biggest annual purchase since 2008, Ministry of Finance data showed on Nov. 9 in Tokyo. Japanese investors unloaded the most debt in Germany, totaling almost 1.46 trillion yen, followed by sales in Italy and France, the figures show. From 2008 through 2010, the U.S. drew the largest amounts. Demand for gilts has pushed 10-year yields on the debt to the least in three months relative to German bunds and to levels unseen in two decades against Japanese government debt last week. Nissay Asset Management Corp., Mitsubishi UFJ Asset Management Co. and Mizuho Asset Management Co., which manage a combined $192 billion, are all bullish on U.K. bonds after investors pulling money out of Europe sent Italian and Spanish yields euro-era highs. “We prefer U.K. gilts as a safe haven,” said Shinji Kunibe, Tokyo-based the chief portfolio manager for fixed income at Nissay, which manages the equivalent of $71 billion. “The flight to quality looks quite rushed. If this kind of movement continues, Germany will not be immune.”Nissay, part of Nippon Life Insurance Co., Japan’s largest life insurer, is swapping euro-denominated bonds for U.K. gilts, Kunibe said in a telephone call Nov. 16.
USD/CAD
Canada’s dollar slid to the lowest level in seven weeks versus its U.S. counterpart after Germany’s failure to get the full amount of bids in a debt auction sparked a selloff in higher-yielding assets. The currency has fallen 4.5 percent against the greenback this month as crude oil, Canada’s largest export, failed to sustain a rally above $100 a barrel and stocks retreated. Raw materials such as gold and copper that account for about half the nation’s export revenue declined after manufacturing in China slowed. “The momentum is certainly for a weaker Canadian dollar, “Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a telephone interview. “The current market mood is very pessimistic.” Canada’s currency, also known as the loonie, dropped 1 percent to C$1.0486 per U.S. dollar at 5 p.m. in Toronto after falling to C$1.0498, its weakest level since Oct. 5. One Canadian dollar buys 95.37 U.S. cents. There’s “potential” for the loonie to depreciate toward C$1.06 by the end of this week, Bennenbroek said. Canada auctioned C$3.5 billion ($3.3 billion) of 1.5 percent notes maturing in March 2017 today, fetching an average yield of 1.441 percent and a ratio of bids to the amount on offer of 2.225 times. Yields on Oct. 12, the last time the government sold five-year bonds, averaged 1.73 percent, and demand exceeded supply by 2.32 times.
Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said by e-mail. “If the strongest nation in Europe has this kind of difficulty raising capital, one shudders concerning the upcoming auctions in other European nations.”Turmoil that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain has closed in on France and now risks engulfing Germany, the region’s biggest economy. Political leaders are struggling to find a fix for the crisis, with German Chancellor Angela Merkel rejecting proposals for common currency-area bonds, while the European Central Bank resists calls to boost sovereign-debt purchases. The yield on Germany’s 2.25 percent securities maturing in September 2021 climbed 15 basis points to 2.06 percent at 4:46 p.m. London time. The price of the bonds slid 1.370 or 13.70 Euros per 1,000-euro ($1,335) face amount, to 101.550. The cost of credit default swaps on German debt rose seven basis points to 108, according to CMA prices. The euro weakened as much as 1.3 percent to $1.3327.
GBP/USD
Barclays Plc will spin off its capital arbitrage team, led by Philip Rosenstrach, as a hedge fund on Jan. 1, with the London-based bank and other investors providing about $150 million in funding, according to two people familiar with the matter. The fund will be called Pomelo Capital and be based in New York, said the people, who asked not to be identified because the information is private. Rosenstrach, 40, and his five team members will run the relative value credit and equity strategy, which will trade fixed-income derivatives and try to profit from price inefficiencies. The fund seeks to raise about $500 million by the end of next year, the people said. The move is prompted by the Volcker rule, the people said, and a provision of last year’s Dodd-Frank law that would ban deposit-taking banks from engaging in proprietary trading. Barclays is Britain’s second-largest bank, with 390 billion pounds ($605.5 billion) in risk-weighted assets.Rosenstrach, a Barclays director, was formerly a portfolio manager at Talek Investments LLC, a Greenwich, Connecticut-based hedge fund. He has run the capital structure arbitrage portfolio at Barclays in New York for five years, posting positive returns every year, including a 20 percent gain in 2008. The portfolio climbed 7 percent this year, the people said. Mark Lane, a spokesman for Barclays, declined to comment on the spin off.
USD/JPY
Japanese investors are buying more bonds in the U.K. than in any other nation overseas this year as Europe’s struggle to control its debt crisis spurs a flight out of the region’s bonds. Money managers in Japan scooped up 1.53 trillion yen ($19.9 billion) of U.K. gilts in 2011 through Sept. 30, set for the biggest annual purchase since 2008, Ministry of Finance data showed on Nov. 9 in Tokyo. Japanese investors unloaded the most debt in Germany, totaling almost 1.46 trillion yen, followed by sales in Italy and France, the figures show. From 2008 through 2010, the U.S. drew the largest amounts. Demand for gilts has pushed 10-year yields on the debt to the least in three months relative to German bunds and to levels unseen in two decades against Japanese government debt last week. Nissay Asset Management Corp., Mitsubishi UFJ Asset Management Co. and Mizuho Asset Management Co., which manage a combined $192 billion, are all bullish on U.K. bonds after investors pulling money out of Europe sent Italian and Spanish yields euro-era highs. “We prefer U.K. gilts as a safe haven,” said Shinji Kunibe, Tokyo-based the chief portfolio manager for fixed income at Nissay, which manages the equivalent of $71 billion. “The flight to quality looks quite rushed. If this kind of movement continues, Germany will not be immune.”Nissay, part of Nippon Life Insurance Co., Japan’s largest life insurer, is swapping euro-denominated bonds for U.K. gilts, Kunibe said in a telephone call Nov. 16.
USD/CAD
Canada’s dollar slid to the lowest level in seven weeks versus its U.S. counterpart after Germany’s failure to get the full amount of bids in a debt auction sparked a selloff in higher-yielding assets. The currency has fallen 4.5 percent against the greenback this month as crude oil, Canada’s largest export, failed to sustain a rally above $100 a barrel and stocks retreated. Raw materials such as gold and copper that account for about half the nation’s export revenue declined after manufacturing in China slowed. “The momentum is certainly for a weaker Canadian dollar, “Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a telephone interview. “The current market mood is very pessimistic.” Canada’s currency, also known as the loonie, dropped 1 percent to C$1.0486 per U.S. dollar at 5 p.m. in Toronto after falling to C$1.0498, its weakest level since Oct. 5. One Canadian dollar buys 95.37 U.S. cents. There’s “potential” for the loonie to depreciate toward C$1.06 by the end of this week, Bennenbroek said. Canada auctioned C$3.5 billion ($3.3 billion) of 1.5 percent notes maturing in March 2017 today, fetching an average yield of 1.441 percent and a ratio of bids to the amount on offer of 2.225 times. Yields on Oct. 12, the last time the government sold five-year bonds, averaged 1.73 percent, and demand exceeded supply by 2.32 times.