European 10-year bonds rose for a third week, with the benchmark German bund rounding out its first nine-day rally for more than two years, on speculation a UN report on Iraq's weapons program due tomorrow will reinforce demand for the safest securities.
The German 4 1/2 percent bund due in January 2013 yesterday rose 0.59, or 5.9 euros per 1,000-euro face amount, to 103.88. The last time it rose for nine consecutive days was Nov. 22 to Dec. 4, 2000. Its yield fell 7 basis points to 4.02 percent, the lowest since May 1999, bringing the weekly decline to 16 basis points. A basis point is 0.01 percentage point.
"Yields have come down very quickly but investors have got nothing to lose by waiting and seeing" what the inspectors' report will say, said Daragh Maher, an economist at ING Barings Ltd. "The overriding concern for the market is rising tensions in the Middle East, so the trend is still favorable for bonds."
Bonds have gained and stocks fallen on concern there may be war with Iraq. The inspectors will report to the UN Security Council Monday on what chief inspector Hans Blix said are ``mixed'' results monitoring Iraq's chemical, biological and nuclear arms programs.
The Dow Jones Stoxx 50 Index, which has lost 6.5 percent this week, yesterday had its lowest close since May 1997.
"Iraq will be the main focus for the bond markets over the next few weeks," said Maurice Meyers, who helps manage 30 billion euros (US$32 billion) in fixed-income assets at Robeco Group in Rotterdam. News on Iraq will probably "keep stocks depressed, which will help bonds."
Meyers said he's not going to sell any bonds until the events of next week become clear. As well as the arms inspectors' report on Monday, US President George W. Bush will give his State of the Union speech on Tuesday, and the Federal Reserve announces its decision on interest rates Wednesday.
The publication of the UN report Monday "will increase investor nervousness" about the prospect of a war, bolstering bonds, said Ian Douglas, chief bond strategist at UBS Warburg.
There won't be a "significant rise in yields until the fog of war retreats somewhat."
The US will have about 185,000 Navy, Air Force and Army troops in the Persian Gulf by mid-February, ready to take military action if Iraq fails to disarm. The UK is sending about 30,000 troops.
The yield on the 3 percent note due in December 2004 fell 3 basis point to 2.54 percent, the lowest since at least 1990, when Bloomberg records begin.
Bonds may also get a lift from speculation a faltering economy in the countries sharing the euro will prompt the European Central Bank to cut its key rate from 2.75 percent, analysts said.
Germany's economy, Europe's biggest, grew in 2002 at the slowest pace in nine years, a report last week showed. German business confidence stood at an 11-month low in December, and consumers were more pessimistic than at any time in the past eight years.
"You can't go against the trend" for higher bond prices, said Steve Major, head of fixed-income strategy at HSBC Holdings.
Major favors shorter-dated bonds because of the chance the ECB will cut interest rates, although he recommends investors sell notes maturing in two years and buy those maturing in three or four years.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is