US Treasuries lure


The US economic data continued the trend of mediocrity that has run through the week. They might not have been high-profile numbers but they all managed to undershoot analysts' forecasts except for weekly jobless claims: initial and continuing claims were both a little higher than expected.  Import and export prices were lower on the month and the year, with import prices down by an annual 1.5% while export prices fell 0.7%.

Another trend that held good was investors' immunity to lacklustre data.  The USD was the top major-currency performer. In times of uncertainty investors are prepared to swallow their concerns about America as they stock up with safe Treasury bills and bonds. Ten-year T-bond yields slipped to 2.07%, down from 2.41% a month ago.


German bond yields provide another example of how high-quality government debt attracts buyers when other borrowers - in this case Italy - look questionable. Investors pay away 0.26% a year - a negative yield - for the privilege of having their money kept safe by the German government.  These are mostly intra-EUR transactions though: the euro itself is 0.1% weaker on the day against the USD.

The euro zone economy did not have much to say for itself this morning.  Germany's wholesale price index undershot forecast, falling 0.3% on the month and 1.6% on the year. Inflation in France slowed from 1.3% to 0.9%.


A third pattern that has held good this week is the CAD's renewed reliance on oil prices as a bellwether. Although the link looked strained this morning the Loonie moved in lockstep with WTI crude yesterday. Oil is down by 0.7% on the day and the CAD is 0.1% lower against the USD.

Thursday's Canadian ecostat was the new housing price index. "Nationally, new house prices in Canada remained unchanged in April for a third consecutive month."


As expected, ex-foreign secretary Boris Johnson emerged as the front-runner in the first round of voting to select Theresa May's successor as prime minister. His strategy is to ensure a gaffe-free campaign by avoiding public appearances, which might work with the Tory faithful but leaves investors in the dark about what he would actually do as prime minister. So far it has worked, at least as far as Mr Johnson's success is concerned: He received 114 votes, significantly more than his nearest rival Jeremy Hunt, who came second with 43. Michael Gove was third with 37. The GBP does not look too perturbed; it is 0.1% lower against the USD.

There were no UK ecostats today. The only significant agenda event is an appearance by Bank of England governor Mark Carney this morning.


Like the USD, the JPY benefited from uncertain investors' need for security.  The yen was the narrow winner up by 0.1% against the USD. 

Japanese data released overnight  covered industrial production and capacity utilization. The production numbers  - down by a monthly 1.1% and up by 0.6% on the year - were in line with forecasts. Capacity utilization was down by 0.8% at 97.9.

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