Gold hits record high above $850 per ounce

[Sapiens]

http://www.portfolio.com/news-market...-850-per-ounce

LONDON (Reuters) - Spot gold hit a record high at $855.10 an ounce on Wednesday in buying fuelled by a struggling dollar, surging oil and simmering geo-political tensions, traders said.

The metal was quoted at $855.10 an ounce by 11:03 a.m. ET, compared with $832.70/833.50 quoted in New York late on Monday.

Spot gold was fixed in London at a high of $850 an ounce on January 21, 1980.

(Reporting by Veronica Brown and Atul Prakash; Editing by David Evans)

[Sapiens]

2-Year Treasuries Gain Most in 3 Weeks as Manufacturing Falls

http://www.bloomberg.com/apps/news?p...jN8&refer=home

Jan. 2 (Bloomberg) -- Two-year Treasuries rose the most in more than three weeks after a private report showed manufacturing unexpectedly contracted last month.

The decline reinforced speculation the Federal Reserve will cut interest rates to stave off a recession. Yields on two-year notes, those most sensitive to monetary-policy expectations, are 192 basis points lower than they were a year ago.

The manufacturing report is ``definitely a bullish number for the market,'' said Mary Ann Hurley, vice president of fixed- income trading in Seattle at D.A. Davidson & Co. ``Ultimately, the market believes overall economic growth is going to have a higher priority to the Fed than inflation.''

The yield on the two-year note decreased 17 basis points to 2.88 percent at 10:45 a.m. in New York, according to bond broker Cantor Fitzgerald LP. It was the biggest decline since Dec. 11, when the Fed reduced borrowing costs to 4.25 percent. The price of the 3 1/4 percent security due in December 2009 rose 10/32, or $3.13 per $1,000 face amount, to 100 23/32. Ten-year yields dropped 10 basis points to 3.92 percent.

The Institute for Supply Management's factory index weakened to 47.7 from 50.8 in November. The median of 69 forecasts in a Bloomberg News survey was 50.5. Fifty is the dividing line between contraction and expansion.

[Sapiens]

Cheapest European Bonds in 4 Years

Cheapest European Bonds in 4 Years
http://www.bloomberg.com/apps/news?p...8wI&refer=home

Jan. 2 (Bloomberg) -- The world's biggest bond investors are buying in Europe, where the cheapest government securities in four years may promise better returns than Treasuries for the first time since 2005.

Federated Investors Inc., Standard Life Investments Ltd. and AXA Investment Managers Ltd., which manage a combined $1.4 trillion, prefer two-year notes in Europe to U.S. debt. The prospects for slowing economic growth and lower interest rates, combined with the widest difference in yields between German and U.S. two-year notes since October 2003, make Europe's government debt unbeatable, the money managers said.

European bonds proved a losing investment last year by returning 2.3 percent, less than the region's 3.1 percent inflation rate, according to index data compiled by Merrill Lynch & Co. While the European Central Bank left rates unchanged, the Federal Reserve reduced borrowing costs three times and Treasuries climbed 9.06 percent, the most since 2002.

``We are buying two-year money in Europe on the belief there's value there, and that eventually the ECB will be forced to cut interest rates,'' said Richard Batty, global investment strategist at Standard Life in Edinburgh, which oversees 140.6 billion pounds ($279.5 billion). ``We don't have that position in the dollar market.''

U.S. notes due in two years yielded 97 basis points less than German debt of the same maturity today, 1 basis point short of the widest gap since October 2003, as spreading losses from assets linked to subprime mortgages fueled demand for the safest U.S. assets. They yielded an average of about 27 basis points more than German securities in the last 12 months and 75 basis points more over the past four years.

Bigger Gains

Yields on two-year German notes will drop to 3.74 percent in 2008, from 3.85 percent today, according to the median of 13 forecasts compiled by Bloomberg. An investor buying 10 million euros ($14.6 million) of the securities would earn 408,000 euros by year-end, based on the survey.

An investment in $10 million of U.S. two-year notes would gain $239,000 if the yield rises to 3.76 percent, based on forecasts compiled by Bloomberg. The last time Europe's bond market provided better returns was in 2005 when the Fed was increasing interest rates 17 times.

Two-year notes are more sensitive to changes in monetary policy and gain more than debt with longer maturities when central banks reduce rates. New York-based Lehman Brothers Holdings Inc., whose fixed-income research team was voted the best on Wall Street by Institutional Investor magazine for seven straight years, is advising clients to sell shorter-maturity U.S. debt and buy comparable European bonds.

[GRG55]

Re: 2-Year Treasuries Gain Most in 3 Weeks as Manufacturing Falls

http://www.bloomberg.com/apps/news?p...jN8&refer=home

Jan. 2 (Bloomberg) -- Two-year Treasuries rose the most in more than three weeks after a private report showed manufacturing unexpectedly contracted last month...

...and oil up nearly $3.00 at this point in the trading day. Retest of the previous high before it finally collapses due to recession as many informed pundits forecast? Or some other dynamic underway? Hmmm...

[dbarberic]

Re: 2-Year Treasuries Gain Most in 3 Weeks as Manufacturing Falls

Almost $860 now.

Come on baby; take out the old nominal high.