Top Interest Rate Headlines 11-9-11: Futures Plummet Amid Italian Debt Worries

US Futures: Futures Plummet Amid Italian Debt Worries
US Business News - CNBC
Published: Wednesday, 9 Nov 2011
Futures declined sharply Wednesday as a spike in Italian bond yields to a euro era record spooked
investors and amid uncertainty whether a new government in Italy can tackle the nation's debt crisis.
Italian borrowing costs reached a breaking point, hitting 7.5 percent, a level that previously drove other euro zone nations such as Greece and Portugal out of credit markets and forced those countries to seek bailouts from external assistance from the EU and IMF. However, most strategists worry that Italy is too large to bail out.
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Italy 5-Year Yield Tops 7.5% on LCH Charge as Berlusconi Quits 
Businessweek November 09, 2011
By Paul Dobson
Nov. 9 (Bloomberg) -- Italian bonds slumped, driving two-, five-, 10- and 30-year yields to euro-era
records, after LCH Clearnet increased the deposit it demands for trading the nation’s securities.
Five-year yields climbed above 7.5 percent as Prime Minister Silvio Berlusconi’s offer to resign left his weakened government struggling to implement austerity measures to reduce borrowing costs. German 10-year bunds outperformed all their regional peers as the drop in Italian bonds boosted demand for the safest fixed-income assets. The euro sank and U.S. Treasuries jumped.
http://jlne.ws/trUFb0

Why Italy's Yield Spike May Spread
By JACK HOUGH, SmartMoney.com
World stocks plunged Wednesday after Italy's 10-year government bond yield jumped to 7.4%. Ordinary savers might wonder what one has to do with the other.
Heavily indebted countries depend mightily on fresh sources of cheap loans to tap as old debts come due. A sudden rise in rates does more than reflect a drop in creditworthiness; it helps cause it. Greek 10-year yields have soared to more than 30% from 11% a year ago as investors who once viewed a bond default there as likely have come to see it as certain. But that crisis was set off by a spike in rates from less than 5% to 11% during the prior year.
http://jlne.ws/rOySdk

Brazil Rate Future Yields Fall on Inflation; Real Strengthens
By Josue Leonel and Gabrielle Coppola, Businessweek
Nov. 8 (Bloomberg) -- Yields on most Brazilian interest- rate futures contracts fell as traders bet the central bank will step up rate cuts after inflation slowed more than analysts forecast and factories cut capacity usage. Yields on the futures contract due in January 2013 declined four basis points, or 0.04 percentage point, to 10.12 percent today. The real gained 0.9 percent to 1.7326 per dollar, from 1.7477 yesterday.
http://jlne.ws/tkuGN8

RATE FUTURES REPORT: Anxiety Lingers Even As Governments Fall - WSJ.com
--One-year Eurodollar calendar spread at or near zero for five straight days
--Compressed Eurodollar spread points to lethargic economy
--Fed-funds futures see 28% chance for initial rate hike in late 2013
By Howard Packowitz Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Prices fell Tuesday for U.S. interest rate futures contracts as the market priced in higher rates on hopes that changes of government in Greece and Italy will help get Europe's fiscal house in order.  Despite the latest developments, short-dated Eurodollar and federal-funds futures contracts continued to reflect anxiety about sluggish-at-best economic growth.  For five straight days including Tuesday, a closely watched one-year calendar spread was at or near zero. That means traders believe short-term rates won't budge from their very low levels for a 12-month period ending in March 2013.
Only about two weeks ago, March 2013 Eurodollars priced in a rate 13 basis points higher than the rate priced into the March 2012 Eurodollar contract.
http://jlne.ws/rDiPxZ

Mortgage applications jump 10.3% as interest rates decline 
by KERRI PANCHUK, HousingWire
Wednesday, November 9th, 2011
Mortgage applications increased 10.3% this past week as more homeowners refinanced existing mortgages or took advantage of lower interest rates to buy homes.
The Mortgage Bankers Association said its market composite index – a measure of loan application volume – increased 10.3% on a seasonally adjusted basis from a week earlier.
http://jlne.ws/tYgn7e


Rate cut fuels boost to consumer confidence
November 9, 2011
Australian consumer confidence jumped in November as the central bank's first interest-rate cut in 31 months lowered payments for mortgage holders, a private survey showed.The sentiment index climbed 6.3 percent to 103.4, the third straight monthly gain and the highest level since May, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers taken Oct. 31-Nov. 6 and released today in Sydney.
http://jlne.ws/uuIIVN

Aussie & NZ dlrs soften, market lacks conviction
On Wednesday 9 November 2011
By Gyles Beckford and Cecile Lefort
WELLINGTON/SYDNEY, Nov 9 (Reuters) - The Australian and New Zealand dollars struggled to extend gains on Wednesday after data from China showed inflation cooled in October as expected, but was still too high to spur a cut in Chinese interest rates. The fortunes of both Australia and New Zealand are closely tied to China, making their currencies vulnerable to news from the world's second biggest economy.
http://jlne.ws/s4vbL6


Resilient euro faces test as crisis worsens
By Alice Ross, FT.com
As the eurozone debt crisis enters a new and more dangerous phase, the central question baffling analysts

and investors is: why is the euro so strong?
The single currency has held up through the unfolding Greek crisis, successive sovereign downgrades and amid worsening economic data from Germany. Now it faces another, possibly tougher test: a precipitous sell-off in Italian debt.
On Wednesday, after Italian 10-year government bond yields spiked above the 7 per cent mark, moving towards levels that have led to bail-outs for other eurozone countries, the euro fell 2 per cent against the dollar to fall below $1.36.
http://jlne.ws/unZvXu

Poland keeps interest rates unchanged
The Associated Press
WARSAW, Poland -- The central bank kept its main interest rate unchanged at 4.5 percent on Wednesday, an expected move as it watches what impact the eurozone debt crisis will have on the Polish economy.
The decision comes as the country's strong economic growth - at about 4 percent this year - is projected to slow to between 2 and 4 percent next year due to the spillover effect from the crisis.
A rate cut now would be expected to stimulate growth, but would also add to inflationary pressure and further weaken the country's currency, the zloty, which has already depreciated significantly in recent months.
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