Global Fixed Income News

SNAPSHOT:

-Dollar lower against the yen, euro and sterling; Treasurys futures lower; stocks seen lower; Brent up at $123.29, Nymex higher at $107.30; Gold up at $1,717.00.

-Watch for: Fed Chairman Bernanke presents Monetary Policy Report; U.S. ISM Manufacturing Report; U.S. Unemployment Weekly Claims; Japan CPI.

-News: Panel Holds Fate Of Greek Credit-Default Swaps; Asian Manufacturing Shows Resilience To Global Strains; Euro-Zone Manufacturing Activity Continues To Fall


MARKETS OUTLOOK:

FOREX:

In foreign exchange markets Thursday, successful bond auctions by Spain and France helped the euro pare its overnight losses. The euro had earlier inched toward session's highs of $1.3350, but euro-zone jobless numbers showing the rate at its highest since Oct. 1997 reined in the positive mood. Although the euro has climbed of earlier lows against the yen and Swiss franc, the single currency was faring less well against the Norwegian krone, which printed a new nine-year high earlier in the session.

At 0520 ET, the euro was up at $1.3340, the dollar was lower at Y81.09 and the pound was higher at $1.5948.


BONDS:

Treasurys continued to be caught in a range of 1.90%-2.10%, said Nomura, with Wednesday's Long Term Refinancing Operation and Federal Reserve Chairman Bernanke's less dovish than expected speech unable to engineer a breakout. Treasurys closed the U.S. session 2-4bps higher, with 7- and 10-years the main movers. The March Treasury future was 4.5/32 lower at 131.04/32 and the 10-year cash yields 1.99%.

At around 0745 GMT, the SovX Western Europe index, which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrowers, was at 345/350 basis points, three basis points wider from Wednesday's close, according to data provider Markit.

Credit default swaps are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers.

The iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was two basis points wider at 130/131 basis points. The Crossover index of 40 mostly sub-investment-grade European corporate borrowers was eight basis points wider at 574/577 basis points.


EQUITIES:

U.S. stocks are expected to open slightly lower, with sentiment being hit after Fed Chairman Bernanke failed to give a clear signal that further quantitative easing may be on its way in his speech Wednesday. "The Dow continues to struggle to hold above 13,000, while 1370 is still acting as a barrier for the S&P," Fawad Razaqzada, market strategist at GFT. "If [these levels] continue to act as areas of resistance, then we can expect profit-taking to emerge together with short-selling as traders look for a more significant downside correction," he added.


COMMODITIES:

Both Brent and Nymex crude futures may fall as market participants turn attention to the broader market at the end of the week and "the all-important U.S. February ISM Manufacturing PMIs on Friday," said VTB Capital's Andrey Kryuchenkov. "We still do not expect sustained losses here, with some consolidation to be expected once the market bottoms out," he noted. "In London, a sustained retreat below $121.5/$120 [a barrel] and then $119 could well see losses to our key short-term support at $117/$116.5," Kryuchenkov added.

Gold rebounded from a fund-driven selloff in Wednesday's session. Gold dropped 4.9% in the spot market Wednesday after Fed Chairman Bernanke's Senate testimony dampened investor hopes for imminent monetary easing. A London-based analyst said Wednesday's selloff was overdue but he remained bullish in the longer term, due to sustained accomodative monetary policy in the U.S. and Europe. "I would buy anywhere around $1,550/oz-$1,650/oz," he said.