· U.S. Treasury two-year note yields climbed to a nine-year peak on Tuesday while those on long-dated debt fell as the yield curve flattened for a second straight day and investors braced for the next tightening by the Federal Reserve in December.
A flat yield curve typically suggests the Fed is on track to raise U.S. interest rates, pushing yields on the short end higher, while low inflation is seen limiting longer-dated yields.
In mid-morning trading on Tuesday, the 10-year Treasury yield was at 2.378 percent, down from 2.4 percent late on Monday. Earlier in the global session, U.S. 10-year yields hit 2.414, the highest since late October.
The U.S. two-year yield hit a nine-year peak just shy of 1.7 percent, up from Monday's 1.687 percent.
U.S. 30-year bond yields, on the other hand, fell to 2.841 percent, from 2.869 percent on Monday.
· The euro rose to a 2-1/2 week high against the U.S. dollar on Tuesday and was on track for its largest percentage gain in more than four months, after data showed Germany’s economy shifted into a higher gear in the third quarter.
· Germany’s seasonally adjusted gross domestic product (GDP) rose by 0.8 percent on the quarter, compared with a Reuters poll forecast of 0.6 percent.
· In a further positive sign for Europe’s biggest economy, the ZEW institute said investor morale improved in November and prospects for the economy remained “encouragingly positive.”
· The euro was up 1.11 percent at $1.1794, set for its largest one-day percentage gain against the greenback since June 27.
The dollar index .DXY, which tracks the greenback against six major currencies, was down 0.7 percent at 93.828. The index was little changed after data showed U.S. producer prices rose more than expected in October.
The Fed is expected to raise interest rates next month. Investors will now turn their focus to U.S. consumer prices data due on Wednesday.
· U.S. producer prices rose more than expected in October, driven by a surge in the cost of services, leading to the biggest annual increase in wholesale inflation in more than 5-1/2 years.
Tuesday’s report from the Labor Department also showed steady gains in underlying producer prices, which supported expectations of a gradual increase in inflation and keep the Federal Reserve on track to raise interest rates in December.
The producer price index for final demand increased 0.4 percent last month after a similar gain in September. That lifted the year-on-year increase in the PPI to 2.8 percent, the largest rise since February 2012, from 2.6 percent in September.
· Four of the world’s top central bankers promised on Tuesday to keep openly guiding investors about future policy moves as they slowly withdraw the huge monetary stimulus rolled out during the financial crisis.
“Forward guidance has become a full-fledged monetary policy instrument,” ECB President Mario Draghi said.
After pumping some $10 trillion into financial markets since the 2008 crisis -- driving them many markets to record highs -- the Federal Reserve, European Central Bank, Bank of England and Bank of Japan are now trying to wean investors off easy money without causing an upset.
Draghi and his three counterparts are at very different stages in roll-back process.
The Fed is looking at its fifth rate increase and the BOE raised its own rate this month for the first time in 10 years. But the ECB is merely reducing the pace of its bond purchases, and the BOJ is still printing money at full speed, although it has signaled that no additional stimulus is likely.
· U.S. Senate Republicans on Tuesday linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.
In comments that infuriated Democrats and left some senior Republicans unsure what comes next, Senate Republican leader Mitch McConnell told reporters: “We’re optimistic that inserting the individual mandate repeal would be helpful and that’s obviously the view of the Senate Finance Committee Republicans as well.”
· U.S. Senate Majority Leader Mitch McConnell said on Tuesday that he wanted to work with the White House to explore ways to keep embattled Republican Senate candidate Roy Moore from taking office if he wins a special election in Alabama.
Speaking to reporters at the U.S. Capitol, McConnell said he had been in contact with President Donald Trump and others about sexual misconduct allegations against Moore.
Five women have accused Moore of sexual misconduct stemming from when he was in his 30s and they were teenagers. Moore, now 70, has denied the allegations.
· Japan's economy shrugged off a consumer spending dip in the third quarter to post the longest period of uninterrupted growth in more than a decade, showing strong fundamentals.
The economy expanded at a 1.4 percent annualized rate in July-September on strong exports and slightly above the median estimate for annualized growth of 1.3 percent. That followed revised annualized growth of 2.6 percent in April-June.
Weakness in consumer spending is expected to be temporary because the economy is near near full employment, which should bolster domestic consumption in the future.
· Oil prices fell 2 percent on Tuesday, headed for a third straight daily decline, on forecasts for rising U.S. crude output and a gloomier outlook for global demand growth in a report from the International Energy Agency (IEA).
Brent futures LCOc1 were down $1.24, or 2 percent, at $61.92 a barrel by 11:53 a.m. EST (1653 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 was down $1.16, or 2 percent, at $55.60 per barrel.
Reference: Reuters, CNBC
Thai
Eng