Euro zone bond yields creep up, Draghi says ECB policy working
Government bond yields in the euro area crept higher on Monday in the absence of any major policy cues from top central bankers at a gathering in Jackson Hole, Wyoming at the end of last week. Federal Reserve Chair Janet Yellen did not mention monetary policy in a highly anticipated speech at Jackson Hole. European Central Bank chief Mario Draghi, speaking late on Friday, said ECB policy is working and the euro zone’s economic recovery has taken hold even if more time is needed to lift inflation to the bank’s 2-percent target. The euro climbed to a 2-1/2-year high near $1.20 after Draghi held back from talking down the currency in his speech. There had been some speculation that Draghi could use the opportunity to tame a strong euro, which hurts exporters and helps dampen inflation by keeping down the price of imported goods. Bond yields were 1-2 basis points higher across the euro zone, although trade was thinned by a public holiday in Britain. German 10-year bond yields rose 1 bps to 0.39 percent , just off eight-week lows hit last week at 0.37 percent.
China’s factories seen posting another solid month of growth in August
China’s factories likely posted another solid month of growth in August, suggesting the world’s second-largest economy is still growing at a healthy clip despite rising financing costs and a cooling housing market, a Reuters poll showed. The official manufacturing Purchasing Managers’ Index (PMI) is expected to come in at 51.3 for August, down just a hair from July’s 51.4, according to a median forecast of 39 economists polled by Reuters. That would signal the 13th straight month of expansion for China’s manufacturers, who are enjoying their best profits in years thanks to a government-led construction boom and a recovery in exports. The 50-mark divides expansion from contraction a monthly basis. Driven by strong infrastructure spending and record bank lending last year, China’s economy grew by a faster-than-expected 6.9 percent in the first half of 2017 and looks set to easily meet the government’s full-year target of around 6.5 percent.
U.S. money funds held 20 pct T-bills due to October – Citi
U.S. money market funds at the end of July held $63 billion, or 20 percent, of outstanding Treasury bills due in October, when the government faces a deadline to increase the federal debt limit, according to Citi analysts. Yields on T-bills due in October have risen in the absence of a deal by lawmakers to raise the statutory borrowing cap, and they could rise more if members of Congress do not reach an agreement to raise the debt ceiling when they return from their summer recess next week, the analysts said in a research note published late Friday. They noted that money market fund managers had been slow to act on their bill holdings ahead of new industry rules going into effect last year. “Given that the MMF (money market fund) community started clearing up at-risk bill issuance just 2-3 weeks going into the reform, we may see further sales going forward,” they wrote. “Of course, some of that dynamic may be behind us since the data is as of end of July.” On Friday, October T-bill yields ended about 8 basis points to 20 basis points higher than yields on issues maturing in September and November, Reuters and Tradeweb data showed.