Jan 24, 2011 5:00 PM GMT+0800
U.S. federal government debt will climb to 99 percent of gross domestic product this year from 93 percent in 2010, while the euro region will total 87 percent, according to International Monetary Fund forecasts ..
The EU has already agreed to bail out Greece and Ireland, and bond investors are concerned Portugal, and possibly Belgium and Spain may be next. Portugal 10-year yields have reached the 7 percent mark that preceded Ireland and Greece’s aid requests.
Bonds yields are still sending danger signals to some of the most-accurate forecasters, who say the rebound won’t last. Wells Fargo & Co., the best foreign-exchange predictor in the 18 months ended Dec. 31, expects a drop to $1.25 by year- end. John Taylor, chairman of the world’s largest currency hedge-fund firm, FX Concepts LLC, said on Jan. 5 the euro may fall below parity with the dollar this year.
Finance ministers from Europe’s top-rated countries, Germany, France, Austria, the Netherlands, Finland and Luxembourg, met on Jan. 17 to discuss strengthening the rescue fund. A “comprehensive package” will be assembled by March, Finance Minister Wolfgang Schaeuble said Jan. 13.
China, which has the world’s largest foreign-currency reserves, said this month it plans to buy securities from the region’s most-indebted countries. Japan said on Jan. 11 it will purchase bonds issued by one of Europe’s bailout funds, while Russia, holder of almost $500 billion of reserves, said it may do the same on Jan. 18
Euro-dollar three-month risk reversals, which measure demand for options to sell the single currency relative to those that allow for purchases, declined to 1.325 on Jan. 13 from 2.150 on Jan. 7, the fastest drop since the three days ended Sept. 16, according to data compiled by Bloomberg. The euro rallied from $1.2644 on Sept. 10 to about a 10-month high of $1.4282 on Nov. 4.
(Source : Bloomberg)
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