IMM-Speculators decrease bets against U.S. dollar-CFTC

Reuters: [2008-05-16 21:43:00]

    NEW YORK, May 16 (Reuters) - Currency speculators decreased 
bets against the U.S. dollar in the latest period, weekly data 
from the Commodity Futures Trading Commission showed on 
Friday. 
    The value of the net short U.S. dollar position fell to 
$5.47 billion in the week to May 13, down from $8.58 billion in 
the previous week. 
    The aggregate U.S. dollar position is derived from the net 
positions of International Monetary Market speculators in yen, 
euro, British pound, Swiss franc, Canadian and Australian 
dollars. 
    
   JAPANESE YEN (Contracts of 12,500,000 yen) 
             5/13/08 week         5/06/08 week 
   Long          62,209               69,355 
   Short         28,393               20,620 
   Net           33,816               48,735 
 
   EURO (Contracts of 125,000 euros) 
             5/13/08 week         5/06/08 week 
   Long          55,409               54,383 
   Short         64,908               66,895 
   Net           -9,499              -12,512 
 
   POUND STERLING (Contracts of 62,000 pounds sterling) 
             5/13/08 week         5/06/08 week 
   Long          25,873               13,874 
   Short         50,677               44,311 
   Net          -24,804              -30,437 
 
   SWISS FRANC (Contracts of 125,000 Swiss francs) 
             5/13/08 week         5/06/08 week 
   Long          13,758               19,125 
   Short         31,194               23,262 
   Net          -17,436               -4,137 
 
   CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars) 
             5/13/08 week          week 
   Long          46,246               48,104 
   Short         16,837               16,392 
   Net           29,409               31,712 
 
   AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars) 
             5/13/08 week         5/06/08 week 
   Long          69,793               75,627 
   Short         12,339               10,206 
   Net           57,454               65,421 
 
   MEXICAN PESO (Contracts of 500,000 pesos) 
             5/13/08 week         5/06/08 week 
   Long         104,833              108,564 
   Short          5,805                7,053 
   Net           99,028              101,511 
 
   NEW ZEALAND DOLLAR (Contracts of 100,000 New Zealand 
dollars) 
             5/13/08 week         5/06/08 week 
   Long          11,193               11,449 
   Short          7,749                5,112 
   Net            3,444                6,337 
    
 (Reporting by Nick Olivari) 
 ((nick.olivari@thomsonreuters.com; +1 646 223 6151; Reuters 
Messaging: nick.olivari.reuters.com@reuters.net)) 
Keywords: MARKETS FOREX IMM 
    

EURO GOVT-Bonds gain as US sentiment data fuel growth fears

Reuters: [2008-05-16 18:02:00]

(Recasts with US data, strategists' comments, background)

By Emelia Sithole-Matarise

LONDON, May 16 (Reuters) - Euro zone government bonds rallied on Friday after a key U.S. consumer sentiment index tumbled to its lowest in 28 years, reigniting fears weak consumer spending may erode growth, boosting bids for quality fixed income.

Bunds gained despite competition from European stocks for investors' cash as buyers picked up paper at cheaper levels after a three-day sell-off, pushing two-year yields back below the psychologically key 4.00 percent level.

Sentiment was further bolstered after the Reuters/University of Michigan Survey of Consumers said its preliminary index of confidence fell to 59.5 in May, its lowest since June 1980. In April it was 62.6 and economists' median forecasts in a Reuters poll were for a May reading of 62.0.

This helped offset data showing a surprisingly strong rise in U.S. housing starts in April, which had eroded gains in government debt markets earlier in the session.

"The market turned around triggered apparently by the Michigan sentiment figure but I think most likely it's stopping the trend of the last couple of days," said Kornelius Purps, fixed income strategist at UniCredit.

"We had an extremely bearish week which is behind us and the tide is turning a little bit to close out the week," he said.

At 1640 GMT, June Bund futures <FGBLM8> were 43 ticks up at 113.61.

Two-year bond yields <EU2YT=RR> dipped back below 4.0 percent and were last at 3.988 percent, while 10-year yields <EU10YT=RR> were 3.2 basis points lower at 4.174 percent, flattening the yield curve.

Bunds had sold off this week as concerns over rising inflation, particularly in the UK, caused markets to scale back rate cut expectations, while a larger-than-expected increase in German first quarter GDP accelerated the slide on Thursday.

However, signs of softness in U.S. manufacturing and the job market reminded investors the economy there remained weak, giving a boost to Treasuries overnight which in turn pulled Bunds higher early in Friday's session.

"We remain of the belief that the lows for the market in the near term have already been seen and the building blocks are in place for a move higher," said Sean Maloney, a strategist at Nomura in London.

"This may take some time to gain traction however, with sensitivity to the central bank talk we have been seeing still high after the latest inflation run."

Purps at UniCredit however said the bearish trend in fixed income markets was likely to resume as the earnings season draws to a closer without any hard knocks for stock markets and as investor attention turns to a stream of euro zone data due next week, key among them Germany's Ifo business sentiment index.

"There is a risk of further yield increases in the euro area. Certainly the IFO index is key, whether we'll see an increase or another big drop, both are possible and might have a remarkable impact on ECB expectations and the direction of the curve," Purps said.

Euribor rate futures <0#FEI:> showed some signs of stabilising across the 2009 strip, which was the hardest hit by recent selling as investors pushed out rate cut expectations with some even seeing an outside risk of the ECB hiking interest rates this year in the face of rising global pricing pressures.

The central bank faces a tough task as inflation in the single currency bloc is only just below March's 3.6 percent, while growth is expected to slow in response to credit market turmoil, U.S. weakness, high oil and commodity prices and a strong euro.

ECB President Jean-Claude Trichet said on Friday a surplus of capital chasing too few investment opportunities in past years was now partly to blame for the record oil and commodity prices bedevilling the ECB's efforts to control inflation.

His colleague, Governing Council member Axel Weber said in a newspaper interview released late on Thursday that raising interest rates remains an option for the bank. He said updated ECB staff economic projections, to be released at the June rate meeting, would provide a good basis to discuss medium-term interest rate options. [ID:nL15738852].

In the swaps market, the 2/10 year swap curve remained inverted with 2-year swap rates <EURAB6E2Y=> at 4.66 percent and 10-year rates <EURAB6E10Y=> at 4.605 percent. (Editing by David Christian-Edwards)

((Reuters Messaging: emelia.sithole.reuters.com@reuters.net, Email: emelia.sithole@reuters.com; +44 20 7542 6752))

Keywords: MARKETS BONDS EURO

--------------MARKET SNAPSHOT AT 1547 GMT ------------------     
Futures continuous contract basis     
                   FUTURES          CASH YIELD   
THREE MONTH EURO 95.175 (+0.025)    3.955 (-0.018)  
TWO-YEAR SCHATZ 103.43 (+0.05)      3.982 (-0.022)  
10-YEAR BUND 113.62 (+0.44)         4.174 (-0.032)  
30-YEAR BUND                        4.655 (-0.032)  
 Current levels versus prior European close 
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UK economic malaise weighs on sterling

Reuters: [2008-05-16 16:21:00]

LONDON, May 16 (Reuters) - The pound fell versus the euro on Friday as investors were worried by the combination of high inflation and slowing growth in the U.K. economy.

Sterling has been on the back foot this week after the Bank of England delivered a bearish prognosis on British economic prospects in its quarterly inflation report on Wednesday.

The report showed that inflation is set to remain stubbornly high in the coming months, limiting the central bank's ability to act to bolster an ailing economy with interest rate cuts.

"It's surprising that the waning expectations of rate cuts have not supported the currency more forcefully," said Philip Shaw, chief economist at Investec.

"It reflects the downside risks...and the general sense of malaise that pervades the (UK) economy."

By 1350 GMT the euro was up 0.35 percent at 79.54 pence <EURGBP=>. The pound was steady at $1.9467 <GBP=>.

Before the inflation report the Bank of England was widely seen as cutting rates by 25 basis points to 4.75 percent in June, but a Reuters poll conducted after the report found a majority predicting it would hold off from reducing them until the third quarter [BOE/INT].

Investors will look to minutes from the Bank of England on Wednesday for more insight into the next move on UK interest rates. A Reuters poll of economists forecast that eight members of the committee voted to keep rates on hold at 5 percent, while one backed a cut.

(Reporting by Simon Falush)

(Editing by Ian Jones) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))

Keywords: MARKETS STERLING/CLOSE

EURO GOVT-Bunds add to gains after US sentiment data

Reuters: [2008-05-16 16:06:00]

LONDON, May 16 (Reuters) - Euro zone government bond futures extended gains on Friday after a report showing that U.S. consumer confidence tumbled to its lowest in 28 years in May.

The Reuters/University of Michigan Survey of Consumers said its preliminary index of confidence fell to 59.5 in May, its lowest since June 1980. In April it was 62.6 and economists' median forecasts in a Reuters poll were for a May reading of 62.0.

The June Bund future <FGBLM8> rose to 113.50 from 113.40 before release of the data. Two-year yields were little changed at 4.005 percent <EU2YT=RR>.

(Reporting by Emelia Sithole-Matarise) ((Reuters Messaging: emelia.sithole.reuters.com@reuters.net, Email: emelia.sithole@reuters.com; +44 20 7542 6752))

Keywords: MARKETS BONDS EURO

EURO GOVT-Bunds trim gains after US housing data

Reuters: [2008-05-16 14:45:00]

LONDON, May 16 (Reuters) - Euro zone government bond futures pared gains on Friday after a surprisingly strong rise in U.S. housing starts in April hinted that the U.S. housing market slowdown may not be as severe as previously thought.

U.S. housing starts in April ran at a 1.032 million-unit annual rate, up from a revised 954,000-unit rate in March, while permits rose 4.9 percent to 978,000 a year from a revised 932,000 in March. Economists surveyed by Reuters had forecast April starts at a 940,000-unit rate and permits at 920,000 a year.

June Bund futures <FGBLM8> briefly fell to a session low of 113.14 from 113.30 before release of the data. They then recovered to 113.31.

(Reporting by Emelia Sithole-Matarise) ((Reuters Messaging: emelia.sithole.reuters.com@reuters.net, Email: emelia.sithole@reuters.com; +44 20 7542 6752))

Keywords: MARKETS BONDS EURO