Treasuries rose, with seven-year yields falling to the lowest level in four months, amid speculation subdued inflation and slowing growth will boost demand at a sale of $29 billion of the securities today.
German government bonds rose with haven assets around the world after U.S. Treasury Secretary Jacob J. Lew said Congress needs to increase the debt ceiling by Oct. 17 or the nation risks defaulting on its payments.
The European Central Bank may be forced to choose “the nuclear option” of purchasing government bonds as the Greek debt crisis deepens, a decision that would weaken the euro, according to Societe Generale SA.
The pound rallied against the euro after minutes of the Bank of England’s latest meeting showed policy makers voted unanimously against expanding their stimulus program that tends to debase the currency.
The euro has overtaken Sweden’s krona as this year’s best performing major currency, revealing how far European Central Bank President Mario Draghi is falling behind his contemporaries in the foreign-exchange wars.
Spanish and Italian bonds rose on speculation the European Central Bank will augment the firepower of the region’s bailout fund as policy makers step up efforts to contain contagion from the debt crisis.
Stresses in the global financial system have stopped easing as European policy makers signal they’re unlikely to extend a third round of unlimited loans to the region’s banks and as bond yields in Spain and Portugal begin to rise again.