Global Forex and Fixed Income Roundup: Market Talk

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1701 ET – The benchmark IPC stock index rises 1.8% to 44693, its highest close since February and 2.6% above its end-2019 level, looking to end 2020 in the black. Televisa rises 3.5% as private investment firms closed the purchase of a majority stake in US Hispanic television network Univision. Televisa will keep its 36% stake in Univision and said it will convert its warrants into common stock, while maintaining its program licensing agreement with Univision. The peso firmed to 19.91 against the US dollar from 20.02 Monday. ([email protected])

1633 ET – The US dollar weakens broadly, including 0.3% against the euro and yen, and the WSJ Dollar Index falls 0.3%. US stocks set intraday highs early in the session but pulled back a bit and closed lower. Ten-year Treasury yields rise to 0.935%. Rabobank sees the dollar struggling to retain its footing in 2021, with forex investors entering next year with the largest bearish bets on the dollar since early 2011. ([email protected]; @jonvuocolo)

1621 ET – Treasurys end the day flat, which Spartan’s Peter Cardillo says was surprising given the growing expectations around more generous fiscal stimulus. “As we do get movement on the stimulus checks, the 10-year probably will spike up to 1%,” he tells WSJ, adding “it could put a little bit of a dent on equities in the short term, but I don’t think it will have a major negative impact.” Cardillo says markets are likely to turn their attention to public deficits at some point, fueling long-term yields and likely prompting the Fed to do something “symbolic in nature” to flatten the curve. ([email protected]; @ptrevisani)

1228 ET – Treasury yields are likely to expand their rise in 2021, with the 10-year potentially reaching 1.5% a year from now, up from 0.95% today, Newfleet’s David Albrycht tells WSJ. He expects the Fed to intervene at some point by buying long-term bonds as a way to flatten the curve. Albrycht sees inflation rising only slowly, mostly as the year-ago comparisons begin to include 2020’s unusual lows, but without triggering a monetary tightening. The 10-year yield was as high as 1.9% a year ago, before reaching 0.5% in early March. It’s now above the 0.73% 200-day moving average, according to FactSet. ([email protected]; @ptrevisani)

1222 ET – The expanded stimulus package discussed in Washington is a potential boost for the economy that doesn’t stoke much fiscal fear, Newfleet’s David Albrycht tells WSJ. “I’m not thinking about the deficit,” he says. Albrycht expects the economy to rebound in 2H provided mass vaccination goes without major hiccups. “We think growth will be stronger than most anticipated due to the fact that there’s pent up demand,” based on data indicating excess savings in households and businesses, he says. “The big catalyst could be business investment, as (companies) begin expanding.” That growth, in turn, would offset the fiscal effect, he says. ([email protected]; @ptrevisani)

Bill Miller is a portfolio manager at Miller Value Partners. “Treasurys Fall Amid Hopes Of Stronger Stimulus — Market Talk,” published at 10:10 am ET, incorrectly said he was chief investment officer.

1034 ET – Investors continue to move money out of equities and into fixed income funds, says Bank of America, citing fund flow data from EPFR. “The lack of inflation and a slow [economic] recovery are favouring bonds over stocks,” a team of credit strategists at the bank says. Over the past couple of months inflows have been stronger in safer government bond funds as well as in riskier high-yield and emerging-market debt funds, which has come at the expense of high-grade bond funds, they say. ([email protected])

1018 ET – Lockdown restrictions in response to the threat of a highly infectious mutant Covid-19 variant in Europe could reduce the pace of a bounce-back in activity and prompt the EUR/USD to fall to 1.20 in the first quarter of 2021, says Jane Foley, Rabobank’s G10 senior strategist. “Bullish bets on the euro have reached the highest level since early October despite the fact that strict measures imposed across Europe to flatten the coronavirus curve will slow down the pace of economic recovery in the coming months,” she says. Foley sees risks of EUR/USD falling to 1.20 in 1Q 2021 before the currency pair edges up to 1.23 in the next twelve months. EUR/USD is last up 0.4% at 1.2265. ([email protected])

1010 ET – President-elect Joe Biden says climate change threatens the planet’s “very existence” and urges a global effort to fight it. “The US accounts for less than 15% of global carbon emissions,” he says in remarks from Delaware. “But without a clear, coordinated and committed approach from the other 85% of carbon emitters, the world will continue to warm, storms will continue to worsen, climate change will continue to threaten … literally the very existence of our planet.” Ryan Maue, an NOAA meteorologist and advisor in the current White House, says he’s confident the planet’s existence is “literally not at stake,” and suggests Biden “dial back the rhetoric.” ([email protected])

1010 ET – Treasury prices fall amid hopes Congress will substantially increase the value of stimulus checks to Americans, sending the 10-year yield up to 0.945% from 0.932%. Many investors see the potential fiscal impact as irrelevant. “I am not worried about more expansionary fiscal policy; it is helpful to offset the pandemic’s effects,” Bill Miller, portfolio manager at Miller Value Partners, tells WSJ. By selling off low-risk Treasurys, he says, “the market continues to tell us that deflation would present a much bigger issue than inflation. The Fed is likely on hold for years.” ([email protected]; @ptrevisani) Corrections & Amplifications

This item was corrected at 11:10 ET to reflect that Bill Miller is a portfolio manager at Miller Value Partners. The original version incorrectly said he was chief investment officer.

0951 ET – Fears over the possible imposition of stringent, U.K.-wide restrictions in the wake of fast-spreading Covid-19 variant in country are preventing further gains on sterling on the back of a U.K.-EU free trade agreement on goods, says Rabobank’s G10 senior strategist Jane Foley. Despite both sides reaching an accord, sterling has been struggling to extend its gains, which can be attributed to “market concerns that the U.K. government may have to impose even harsher restrictions than the November lockdown due to reports that the healthcare system is on the brink of collapsing,” she says. GBP/USD is last up 0.4% on the day at 1.3507, but has been unable to break a high of $1.3625 on Dec. 17, FactSet data shows. ([email protected])

0938 ET – The U.S. dollar will struggle to regain its footing in 2021, says Rabobank’s G10 senior strategist Jane Foley. Foreign-exchange investors are heading into next year with the largest bearish bets on the dollar since early 2011, Foley says, citing CFTC data showing an increase in short dollar positions in the week ending Dec. 22. “The bearish sentiment towards the dollar is underpinned by market expectations that the Fed will maintain ultra-accommodative monetary policy for an extended period of time and positive news regarding coronavirus vaccines, which continues to fuel demand for risky assets outside the U.S. at the expense of the dollar,” Foley says. The DXY dollar index is last down 0.4% at 89.9770. ([email protected])

(END) Dow Jones Newswires