Treasuries recorded a fall when the U.S. data was published, and showing that retail sales had increased. The treasuries’ drop is also attributed to Nikkei reporting that former U.S. Treasury Secretary Lawrence Summers is set to be named as Federal Reserve chairman. According to market players Summers is someone who will be less dovish on monetary policy.
Reports say that if nominated, Lawrence Summers would likely face stiff opposition from Republicans and some Democrats as well. Regarding yields, these are going to rise gradually as the national economy of the U.S. is picking up. Currently, the yield premium that investors demand to hold 10-year Treasury notes instead of 2-year debt has reached to a two-year high.
The increase according to market specialists is due to speculation that the central bank will strengthen its commitment to record-low interest rates next week despite the fact that the U.S. economy is doing better than expected. Experts also admit that the Fed in all probabilities will not mess with short-term rates even when it tapers quantitative easing.
The Fed is soon going to decide on its bond purchase amidst the news that the demand for U.S. government debt increased at all of the three auctions this week. In fact, compared to 2.11 last month, the $13 billion of 30-year debt sold yesterday attracted bids 2.4 times the amount.
Dollar Fares Better Versus its Peers
Amidst the news that the U.S. retail sales increased, the U.S. dollar halted declines from earlier this week versus most major peers. The currency rose 0.3 percent to 99.81 yen at 7:15 a.m. in London and is all set for a 0.7 percent weekly gain. It also did well by 0.2 percent to $1.3267 per euro from $1.3299 yesterday.
Dollar’s appreciation also meant that currencies from India, Indonesia, Malaysia, Peru, the Philippines and Thailand fell to a great extent. Most of these economies have higher current-account deficits and fear the complications that the U.S. Federal Reserve’s decision to taper its stimulus will bring along.
Indian Rupee fared well; the government of India and its central bank faced a lot of flak from industry on the falling value of the national currency and according to reports the Reserve Bank of India (RBI) is understood to have sold dollars at 63.95 levels as Rupee closed at 63.38 on Wednesday; however, it fell today after seven sessions and breached the key 64 per dollar.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org