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Europe was once more a factor, even though Spain’s 2.5 billion euro bond auction saw support. Yields, however, rose and the Spanish 10-year finished the day yielding close to 6 percent.
Rumors that France’s AAA rating would be downgraded rattled investors early in the day, but Moody’s had reaffirmed that it was not expecting to take imminent action. Investors continued to focus on the French presidential election, and the strong possibility that President Nicolas Sarkozy may not win re-election in the second round of voting in May. The first round of voting is on Sunday, and he is expected to emerge with a strong rival in socialist candidate Francois Hollande.
“The polls show that he’s not going to win so I think the markets are adjusting to that,” said John Briggs, senior Treasury strategist at RBS. Hollande is in favor of raising taxes on the wealthy. He is also not seen as an easy ally for German leader Angela Merkel and does not favor of the fiscal compact.
The yield on the U.S. 10-year fell to 1.94 percent, as buyers supported U.S. Treasurys. The dollar was slightly higher against a basket of currencies, but it was weaker against the euro, which held above 1.31. Comments from IMF managing director Chirstine Lagarde that member countries had pledged $320 billion in additional resources supported the euro.
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