Bond yields rise as Sweden ends negative rates, stocks gain

By Herbert Lash NEW YORK (Reuters) - Bond yields rose after Sweden stopped five years of negative interest rates, signalling an era of sub-zero rates may be near an end, while global equity markets extended a rally that has pushed U.S. and global stock benchmarks to record highs

Reuters December 20, 2019 00:09:11 IST
Bond yields rise as Sweden ends negative rates, stocks gain

Bond yields rise as Sweden ends negative rates stocks gain

By Herbert Lash

NEW YORK (Reuters) - Bond yields rose after Sweden stopped five years of negative interest rates, signalling an era of sub-zero rates may be near an end, while global equity markets extended a rally that has pushed U.S. and global stock benchmarks to record highs.

The dollar was roughly flat as investors awaited U.S. gross domestic product data on Friday. The greenback was little moved by a report showing U.S. factory activity in the mid-Atlantic region has nearly stalled this month.

Gold eased as optimism about a preliminary U.S.-China trade deal was offset by support from political uncertainty after the U.S. House of Representatives voted to impeach President Donald Trump.

Stocks rose as U.S. Treasury Secretary Steven Mnuchin said the United States and China would sign their phase one trade pact at the beginning of January. Mnuchin said it was completely finished and just undergoing a technical "scrub."

Sweden's Riksbank raised benchmark borrowing costs to zero from -0.25%, making the central bank the first of those around the world that cut rates into negative territory to inch its way back to zero - long considered their floor.

Bond yields rose across the euro zone, with those in higher-rated countries such as Germany, France and the Netherlands up 3-4 basis points .

The yield on Germany's benchmark 10-year Bund rose to as much as -0.208% , a six-month high.

Policy rates are still negative at the European Central Bank and the Japanese, Danish, Swiss and Hungarian central banks. All are expected to remain so for some time to come, with the exception of Hungary. "The Riksbank is moving away from negative rates, and in the markets' mind this is something that the ECB could try at some point," said Peter McCallum, rates strategist at Mizuho.

MSCI's gauge of stocks across the world <.MIWD00000PUS> gained 0.18%, lifting the global benchmark to a record high, while the three major equity indices on Wall Street also hit fresh highs.

The Dow Jones Industrial Average <.DJI> rose 111.79 points, or 0.4%, to 28,351.07. The S&P 500 <.SPX> gained 9.54 points, or 0.30%, to 3,200.68 and the Nasdaq Composite <.IXIC> added 40.45 points, or 0.46%, to 8,868.19.

Stocks in Europe also edged higher. The pan-regional STOXX 600 index <.STOXX> rose 0.09%, and the blue-chip FTSEurofirst 300 index <.FTEU3> of regional shares closed up a preliminary 0.08%.

Earlier in Asia, stocks pulled back from a 1-1/2 year peak. Japan's Nikkei <.N225> fell 0.3% and China's stocks slipped <.CSI300> for the second session despite trade optimism.

Oil prices hovered near the highest in three months in thin pre-Christmas trading, buoyed by the previous day's news that U.S. crude inventories declined and as U.S.-China trade tensions continued to ease.

Brent crude futures rose 46 cents to $66.63 a barrel, heading for the sixth straight day of gains. U.S. West Texas Intermediate (WTI) crude gained 48 cents at $61.41 a barrel.

The dollar index <.DXY> fell 0.06%, with the euro up 0.14% to $1.1126. The Japanese yen strengthened 0.27% versus the greenback at 109.24 per dollar.

The Swedish crown was flat versus the greenback at 9.42 per dollar.

Benchmark 10-year notes last rose 4/32 in price to yield 1.9099%.

Graphic - Euro zone inflation expectations: https://fingfx.thomsonreuters.com/gfx/mkt/13/28/28/INFLATION1912.png

(Reporting by Herbert Lash, additional reporting by Dhara Ranasinghe in London, editing by Chris Reese)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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