- US 10-year yields leap 24 bp to 3.74%
- Russia; No discussion of changing USD-EUR composition of reserve basket
- US existing home sales rise 2.9%, prices fall
- Pimco’s El Erian: US must trim public balance sheet , private sector must lead recovery
- FDIC: 305 troubled US banks in Q1 versus 252 at end of 2008
- German preliminary HICP -0.2% in April, -0.1% y/y
- ECB source: Open to spending more than EUR 60 bln on bonds: Reuters
- Moody’s affirms US’s AAA rating
- ECB’s Papademos: Financial cost of crisis has been “staggering “, likely to rise; inflation profile to be U-shaped, turning higher later this year; recovery in 2010.
- US tax revenues down 44% from year ago levels
- S&P 500 closes down 1.9%
Very choppy trade in the US today with a tidal wave of news flow vying with a substantial back-up in US interest rates to make for difficult trading conditions.
Sterling was the main mover early in the day, breaking through 1.6050 barriers and triggering stops as high as 1.6085 in stop-loss driven trade. EUR/GBP slumped through key support at 0.8720 and the 200-day avg at 0.8677 on the way to 0.8654 lows. Profit-taking on the pound set in late in the US session as risk aversion rose as US bond yields soared and stocks fell. Cable dipped to 1.60 late
EUR/USD was very choppy, slipping to 1.3872 in morning trade after ECB officials told Reuters the ECB may buy more than EUR 60 bln in bonds if need be. It soon soared as high as 1.3990 amid rumors that Secretary Geithner has said the dollar will fall as the US economy recovers. Rising yields and falling stocks helped send EUR/USD back down, ending the session on its lows despite talk of buying from China and the Mid-East on dips.
Commodity currencies say a late bout of long-liquidation driven by rising risk aversion. Soaring US yields and geopolitcal jitters with North Korea prompted many to square books and wait for smoother waters. Large stops are rumored in the 0.7710 area, dealers say.
The US Treasury sold $35 bln in 5-year notes today without incident, finding strong demand from foreign institutions again as in yeaterday’s 2-year sale. Despite the good auctions, looming supply and weak tax receipts have deficit fears running rampant.
