Daily Agenda: Negative Yields Spread in Global Bond Markets
Global bond markets move to tax savers; Trump, Sanders victorious in New Hampshire; U.S. food services giant files for IPO; Deutsche said to be buying back debt.
Ten-year Japanese government bond yields have reached negative territory this week after the Bank of Japan joined the central banks of the euro zone, Sweden and other nations in adopting a monetary policy that taxes savings. A Treasury auction for 10-year notes in the U.S. later today is expected to draw multiyear high bids after pre-auction trading on Tuesday resulted in the lowest yield since 2012 at 1.76 percent. The impact of this yield compression is clearly being felt by markets as evidenced by a three-year U.S. Treasury auction held Tuesday that resulted in the lowest demand levels since 2009. For fixed-income investors, the challenge of finding returns in an environment in which low-risk bonds cost money to hold has become reality.
Trump and Sanders win New Hampshire. The New Hampshire primary concluded with a victory for Democratic candidate Senator Bernie Sanders and Republican hopeful, real-estate maven and reality TV star Donald Trump. Significantly, the Republican primary results also left Ohio Governor John Kasich in second place after months of near-invisibility in opinion polls.
Food-services company files for IPO. On Tuesday, U.S. Foods Holding Corp. filed for an initial public offering despite the slump in new offerings in equity markets so far this year. A federal court blocked Sysco’s acquisition of the firm in 2013 for more than $3 billion over antitrust concerns. KKR and Clayton Dubilier & Rice are the company’s primary private-equity owners.
European brewers turn a profit despite global slowdown. On Wednesday, Dutch beer producer Heineken reported a year-over-year profit increase and Danish rival Carlsberg’s earnings beat consensus estimates for the final three months of 2015. Heineken announced an 18 percent hike in its dividend in conjunction with the release of financial results.
HSBC sued over drug cartel links. A group of families has launched a civil suit against a division of London bank HSBC under a statute created by a U.S. law allowing victims of terrorist acts to seek compensation from third parties aiding terror groups. The families lost members to assassinations by Mexican drug cartels. In 2012, HSBC paid fines totaling nearly $2 billion to settle with U.S. regulators over accusations that its Mexican division had engaged in laundering drug money.
Deutsche Bank Shares Rise. Deutsche Bank shares rose after the big Frankfurt, Bermany-based bank was reportedly considering buying back several billions of dollars worth of its debt. European indexes traded higher than over the past seven days amid fears over the bank’s debt and Germany’s DAX rose 1.8 percent. Deutsche’s chief executive John Cryan declared that the bank was “rock solid.”