Dollar Gains Before Yellen as Europe Bonds Rise on Greece

(Bloomberg) — The dollar strengthened and Treasuries fell before Federal Reserve Chair Janet Yellen speaks to lawmakers. Yields on European corporate and government debt dropped to record lows as Greece’s creditors review a list of debt-reduction policies.

The Bloomberg Dollar Spot Index climbed 0.3 percent at 7:01 a.m. in New York. The yield on 10-year Treasuries rose three basis points to 2.09 percent. The average rate on securities in the Bloomberg Eurozone Sovereign Bond Index dropped to 0.66 percent, while high-grade corporate yields slid to 0.91 percent, Bank of America Merrill Lynch index data show. The Stoxx Europe 600 Index added 0.1 percent and Standard & Poor’s 500 Index futures were little changed. U.K. natural gas jumped after Ukraine accused Russia of limiting fuel shipments. Turkey’s lira stayed lower after the central bank cut all three main rates.

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The list of Greek commitments includes maintaining current state-asset sales, consolidating pension funds to reduce costs and revamping tax collection and administration, according to a draft obtained by Bloomberg News. Investors will be watching for clues on the timing of interest-rate increases as Yellen begins two days of Congressional testimony.

“Obviously it’s going to be a crucial speech Yellen is offering up,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “If she talks about flexibility and the market perceives a June hike is still on the table, that obviously is bearish. Two- and five-year yields would be vulnerable for further increases.”

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The dollar strengthened 0.6 percent to 119.56 yen and was at $ 1.1325 per euro.

June Increase?

The Fed may raise rates in June, even if it doesn’t first remove a reference to being “patient” about increases from its policy statements, Richmond Fed President Jeffrey Lacker was cited by Market News International as saying.

Yellen “should leave intact a pretty high probability of at least a summer rate hike and maybe as soon as June,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “We do expect that the U.S. dollar will emerge somewhat stronger from her testimony.”

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Consumer confidence probably slipped in February from its highest level since 2007, economists said in a Bloomberg survey before a Conference Board report.

The U.S. currency jumped more than 1 percent to 74.47 cents per New Zealand dollar. New Zealand’s two-year ahead inflation expectations dropped to 1.8 percent, according to a central bank survey. That’s the least since the second quarter of 1999.

Greek Bonds

Bonds of the euro area’s lower-rated nations rallied, led by Greece. The 10-year Greek yield fell for a fifth day, reaching 8.85 percent, the lowest since Jan. 26. Italian 10-year bond yields fell four basis points to 1.46 percent and Spain’s declined four basis points to 1.38 percent.

The cost of insuring European corporate debt fell to the lowest level in more than seven years, with the Markit iTraxx Europe Index of credit-default swaps on investment-grade companies down one basis point at 52 basis points, according to data compiled by Bloomberg.

Whirlpool Corp. is the latest U.S. borrower to market bonds in euros this week, according to a person familiar with the deal. The maker of home appliances joins Kinder Morgan Inc., Flowserve Corp. and Priceline Group Inc. offering bonds in the single currency.

Credit-default swaps insuring $ 10 million of Greek government bonds for five years cost $ 3.9 million in advance and $ 100,00 annually, signaling a 65 percent probability of default, according to CMA.

BHP Earnings

The Stoxx 600 was little changed after a five-day gain. BHP Billiton Ltd. rose 4.9 percent as the world’s biggest mining company reported first-half earnings that beat analysts’ projections. Telefonica Deutschland Holding AG added 5.3 percent after posting full-year revenue that beat estimates.

Finmeccanica SpA slid 2.9 percent, reversing a gain of as much as 4.5 percent, after Hitachi Ltd. agreed to buy the Italian company’s rail businesses and a signals affiliate. Delta Lloyd NV fell 5.8 percent after reporting a decline in full-year operating income.

Credit Agricole SA declined 1.3 percent after saying its Chief Financial Officer Bernard Delpit is leaving, without naming a successor. Safran SA fell 1.1 percent as it said Delpit will join the aircraft-engines maker as its head of finance.

First Solar

First Solar Inc. rallied 8.9 percent in early New York trading and SunPower Corp. jumped 12 percent. The two largest U.S. solar-panel manufacturers are planning a joint venture and expect to register for an initial public offering for it.

Home Depot Inc. advanced 2.1 percent after the largest U.S. home-improvement retailer reported quarterly profit that topped analysts’ estimates as consumers spent more on their homes.

S&P 500 futures expiring in March were little changed with the index near a record. The Nasdaq Composite Index climbed for a ninth straight day, its longest streak since September 2010, closing 1.7 percent away from its record high in March

Russia’s ruble fell 1.5 percent as trading resumed in Moscow after Moody’s Investors Service became the second rating agency to cut the country’s credit rating to junk on Friday. Offshore, the currency rose 1.1 percent, rebounding from a 2.6 percent decline on Monday. The dollar-denominated RTS Index slid 2.8 percent, extending last week’s retreat.

Turkey’s lira fell for a second day. Hungary’s forint was little changed. Policy makers will keep rates unchanged today, another survey showed.

The Hang Seng China Enterprises Index rose less than 0.1 percent in Hong Kong. Taiwan’s benchmark gauge rose 1.1 percent as trading resumed trading today following Lunar New Year holidays. Mainland Chinese markets reopen tomorrow.

Gazprom Deal

U.K. next-month gas jumped as much as 2.6 percent, the most since Feb. 12. Ukraine’s state gas company said Monday that OAO Gazprom, its Russian counterpart, broke a supply deal by limiting shipments to less than half the level demanded. A halt in flows between the countries would risk disruption to supplies in Europe.

West Texas Intermediate crude oil for April delivery rose 0.7 percent to $ 49.78 a barrel. Brent, the benchmark for more than half of global oil, climbed 1.1 percent to $ 59.57 a barrel today in London.

To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net; Stephen Kirkland at skirkland@bloomberg.net Stephen Kirkland

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