pimco's bill gross frantically dumping treasuries thinks u.s. interest rates will soar: Tech Ticker, Yahoo! Finance

pimco's bill gross frantically dumping treasuries thinks u.s. interest rates will soar: Tech Ticker, Yahoo! Finance

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Canadian Dollar Strengthens Amid Rally in Commodity Currencies

May 23 (Bloomberg) -- Canada’s dollar posted the biggest weekly gain since October as crude oil climbed and investors bought the currencies most likely to benefit from a rebound in global economic growth, shunning the U.S. greenback.

The Canadian dollar rose 5.2 percent as currencies of countries that produce raw materials surged. The ICE’s U.S. Dollar Index dropped to the lowest in five months on speculation the creditworthiness of the world’s largest economy is deteriorating. Crude rose above $62 a barrel.

“The Canadian dollar’s had a nice move,” said Michael Leavitt, a Montreal-based institutional-derivatives broker at MF Global Canada Co. “This breakout has moved some people off the sidelines. Crude has had a lot to do with it.” He predicted the currency may strengthen to C$1.0825.

Canada’s dollar, known as the loonie, ended the week at C$1.1195, from C$1.1776 on May 15. It touched C$1.1188 yesterday, the strongest since Oct. 9. One Canadian dollar buys 89.33 U.S. cents.

Crude oil for July delivery rose 9.5 percent to $61.67 a barrel on the New York Mercantile Exchange after touching $62.26. Prices are up 38 percent this year. Crude, natural gas and other energy products accounted for 25 percent of Canada’s export revenue last year.

The loonie climbed the most over the past five days since the week ended Oct. 31, when it gained 5.4 percent. After reaching a four-year low on March 9, it advanced 16 percent as investors stepped out of havens to seek higher-yielding assets such as stocks and commodity-linked currencies amid signs the global economic slump is moderating.

‘Far-Reaching Implications’

The U.S. dollar was the worst performer this week among the 16 most-traded currencies tracked by Bloomberg.

“The extent of the rally is quite astonishing,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. “If U.S. dollar weakness continues, it could have far-reaching implications not only for the Canadian dollar, but for currencies across the world.”

The dollars of New Zealand and Australia, which like the Canadian currency tend to track fluctuations in commodity prices and stocks, gained 6 percent and 4.5 percent, respectively, over the past five days against the greenback.

Canadian government bonds lost investors 1.9 percent this year, according to a Merrill Lynch & Co. index. The yield on the 10-year bond rose 16 basis points on the week, or 0.16 percentage point, to 3.26 percent. It touched the highest since Dec. 1 yesterday, 3.29 percent. The price of the 3.75 percent security due in June 2019 fell C$1.40 to C$104.19.

‘Serious Downside’

U.S. Treasuries dropped yesterday, pushing 10-year notes to their biggest weekly loss since June 2008, as investors prepared for the government to resume debt sales after a two-week hiatus.

“If these auctions don’t go well, we could see some serious downside” in 10-year government note prices on both sides of the border, said MF Global’s Leavitt. “We can’t consider ourselves immune from what’s happening in the U.S.”

The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, touched 79.805 yesterday, the lowest since Dec. 29.

Pacific Investment Management Co.’s Bill Gross said on May 21 in an interview on Bloomberg Television the U.S. will “eventually” lose its AAA credit rating. President Barack Obama’s administration will sell a record $3.25 trillion of debt in the fiscal year ending Sept. 30 to fund a growing budget deficit, according to an estimate by Goldman Sachs Group Inc.

Mortgages Over 5% Mean Fed Purchases as Bonds Slump

Big question...are interest rates going to continue up or will the government be able to reverse this trend and lower long term market rates?

May 11 (Bloomberg) -- The world’s biggest investors are increasing bets that Federal Reserve Chairman Ben S. Bernanke will boost purchases of Treasuries as the steepest losses on government debt since 1994 send mortgage rates above 5 percent.

The slump in Treasuries the past seven weeks pushed yields on longer-maturity bonds up by more than half a percentage point and sent average rates on 30-year mortgages to the highest since the start of April, according to North Palm Beach, Florida-based Bankrate.com.

“The Fed needs to consider increasing its purchases of Treasuries,” said Stuart Spodek, co-head of U.S. bonds in New York at BlackRock, which manages $483 billion in debt. Spodek said he resumed buying Treasuries. “We are still in a recession. It’s quite bad. They need to stabilize long-term rates.”

Treasuries lost 3.93 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index, after gaining 14 percent in 2008

Gross Reduces U.S. Debt for First Time Since January

May 11 (Bloomberg) -- Bill Gross, manager of Pacific Investment Management Co.’s $150 billion Total Return Fund, reduced his holdings of U.S. government-related debt last month for the first time since January.