Use Swaptions to bet U.K. Interest Rates Have Peaked, Credit Suisse Says

(Bloomberg) -- Investors should use swaptions to bet
the Bank of England won't raise benchmark interest rates beyond
5.75 percent because inflation has peaked, according to Credit
Suisse.

Prices for swaptions, options on interest rate swaps,
signal traders expect further rate increases. Investors can
profit with swaptions if benchmark rates hold steady, analysts
at Credit Suisse, Switzerland's second-biggest bank, said in a
strategy note.


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S.Africa's Mboweni warns on inflation, hints on rates

(Reuters) - South African central bank chief Tito Mboweni warned on Friday inflationary pressures were "more worrying", hinting interest rates may have to rise again in Africa's biggest economy.

The Reserve Bank governor told parliament's finance committee there was no other instrument to tame inflation except rates, referring to commercial bank reserve requirements and restrictions on credit providers.


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S.Africa credit points to rate hike, trade gap up

(Reuters) - Demand for credit by South Africa's private sector grew at a faster pace in June, hardening the case for higher interest rates to curb spending, while a wider trade deficit pointed to continued pressure on the current account.

The Reserve Bank has raised its repo rate by 250 basis points to 9.5 percent since mid-2006 to tame inflation and robust consumer demand, but spending, driven by credit, remains high.


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TREASURIES-Bonds fall as stocks surge on confidence data

(Reuters) - Treasuries were little moved by tame inflation data and
news that business activity in the U.S. Midwest region
unexpectedly slowed sharply in July, as investors focused on
the stock market where stocks gained for a second day.




Rebounding stock markets reversed recent flight-to-quality
flows into Treasuries that had pushed benchmark 10-year
Treasury yields to two-month lows on Friday.


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Currency Fund Returns Reach Record in June on Carry Trades, Parker FX Says

(Bloomberg) -- Cumulative returns on currency funds
rose to a record in June as managers profited from declines in
the yen and the dollar, according to Parker Global Strategies.

The yen slid against the euro and the pound last month as
investors borrowed Japan's currency at the lowest interest rate
in the industrialized world to fund purchases of higher-yielding
assets, known as carry trades, Parker Global said. The dollar
fell against major currencies in June as slowing inflation and
consumer spending prompted traders to pare bets on a U.S. rate
increase, Parker Global said.


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Pound Rises on Speculation Floods Strengthen Case for Increase in Rates

(Bloomberg) -- The pound rose against the dollar,
snapping three days of losses, on speculation the worst floods in
60 years will cause inflation to accelerate, strengthening the
case for higher interest rates.

The Centre for Economic and Business Research yesterday said
the floods could add 0.5 percent to the inflation rate later this
year, forcing it to quicken to a decade-high, rather than decline
as forecast by the Bank of England. Policy makers will raise
borrowing costs to 6 percent by year-end after holding them at
5.75 percent at their Aug. 2 meeting, according to a Bloomberg
News survey.


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TIPS Prove Poor Tip for Bond Traders Anticipating Inflation's Acceleration

(Bloomberg) -- Treasury investors say inflation is
abating, even if the oil bulls are right and crude heads to $100
a barrel.

Pacific Investment Management Co. and Fidelity Investments
sold Treasury inflation-protected securities maturing next year,
confident that consumer prices will remain in check. Money
managers lost as much as $275 million on so-called TIPS in the
second half of 2006 because oil fell from record highs and
gasoline prices dropped.


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TREASURIES-Stocks turn bonds negative

(Reuters) - A government report showed the U.S. economy grew at a
stronger-than-expected annual rate of 3.4 percent in the second
quarter, rebounding from a dismal start to the year.




The report's inflation gauge plunged, indicating that the
Federal Reserve now has more leeway if it needs to cut
benchmark interest rates in the second half of this year.


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South African Rand Headed for Weekly Decline on Risk Aversion

(Bloomberg) -- South Africa's rand headed for its
biggest weekly decline in almost five months as investors sold
emerging-market assets on concern losses related to defaults on
U.S. subprime mortgages will slow the global economy.

The rand is the second worst performer among the 16 most
heavily traded currencies this week while investors also reduced
holdings of bonds as inflation stayed above target for a third
consecutive month. South African stocks are set for their biggest
weekly fall since the beginning of March.


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Bernanke's Forecast of Stronger Growth May Be Threatened by Market Tumult

(Bloomberg) -- The week's turmoil in financial
markets casts doubt on the Federal Reserve's forecast of a
gradual U.S. economic recovery in the second half, raising the
odds it will need to shift its focus to spurring growth from
fighting inflation.

The turbulence, as stocks suffered their worst drop in five
months while corporate borrowing costs soared, threatens a
triple whammy for the economy. It robs investors of spending
power, makes business investment more expensive and may prolong
the housing recession.


Read more at Bloomberg Stocks News

Yen Retreats From 2-Month High Versus Dollar as Individual Investors Sell

(Bloomberg) -- The yen fell from a two-month high
against the dollar as Japanese individual investors sold the
currency to invest in higher-yielding assets.

The yen has declined against all of the 16 most-active
currencies in the past three months as the lowest borrowing costs
among major economies encouraged so-called carry trades. An
Australian government report today showed faster-than-expected
inflation, sparking speculation of a rate increase next month and
pushing the local dollar to the strongest since 1989.


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Fed's Poole-Inflation moderating but not decisive

(Reuters) - Poole also said there was no need to make a "trade off" now
between growth and inflation.




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Sri Lanka's Central Bank Keeps Key Rate Unchanged at Highest Level in Asia

(Bloomberg) -- Sri Lanka's central bank kept its
benchmark interest rate unchanged at the highest level in Asia
to help bring inflation below 10 percent.

The Central Bank of Sri Lanka maintained its repurchase
rate at 10.5 percent for a fifth straight meeting, the Colombo-
based bank said in a statement today. Ten out of 11 analysts in
a Bloomberg News survey predicted the decision. One expected a
25 basis point cut.


Read more at Bloomberg Emerging Markets News

Peruvian Sol Trades Near Two-Month High Amid Central Bank Speculation

(Bloomberg) -- Peru's sol was little change,
trading near an almost two-month high, amid speculation the
central bank may raise interest rates to keep inflation from
accelerating.

The currency rose 0.01 percent to 3.1583 soles per dollar.
The sol has gained 1.1 percent this year, reaching an eight-year
high on May 18. The central bank said it bought $40 million in
the currency market today, adding to the $544 million purchased
so far this month to stem gains in the currency.


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US shares extend losses on Bernanke testimony

(Reuters) - U.S. stocks added to losses on Wednesday as Federal Reserve Chairman Ben Bernanke's comments to Congress about the economy, inflation and housing added to Wall Street jitters.

In addition, Bernanke said the Fed expects to see economic growth expand at 2.25 percent to 2.5 percent this year and 2.5 percent to 2.75 percent in 2008, one-quarter percentage point below the Fed's estimate six months ago.


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Canada's Dollar Falls After Unexpected Drop in Consumer Prices Last Month

(Bloomberg) -- Canada's dollar fell from a three-
decade high after a government report showed consumer prices
unexpectedly declined last month, reducing the likelihood of
another increase in borrowing costs by the central bank.

The currency has gained 11.8 percent this year on a
strengthening economy and higher prices for Canada's commodity
exports including oil. The Bank of Canada raised its benchmark
interest rate to 4.5 percent last week after inflation exceeded
its target of 2 percent.


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Hong Kong Stocks Slide on China Rate Concern; Sinopec, Citic Pacific Fall

(Bloomberg) -- Hong Kong's Hang Seng Index fell,
after yesterday closing above 23,000 for only the second time,
after a report said China's central bank will step up efforts to
cool the economy. China Petroleum & Chemical Corp. and Citic
Pacific Ltd. led the decline.

Mainland reports scheduled for release tomorrow are
expected to show gross domestic product rose at a double-digit
pace for a sixth straight quarter and inflation accelerated to a
two-year high, according to Bloomberg surveys of economists.


Read more at Bloomberg Stocks News

Dollar Advances Versus Yen After U.S. Core Producer Prices Climb in June

(Bloomberg) -- The dollar gained against the yen
after a government report showed a measure of prices paid to
U.S. producers rose more than analysts forecast.

Traders bought dollars as signs of quicker inflation
bolstered speculation the Federal Reserve will refrain from
lowering its benchmark lending rate this year.


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European shares slip in early trade, oils weigh

(Reuters) - European stocks slipped early on Tuesday, led lower by oil shares, as investors continued to worry about the U.S. economy and hunkered down for key inflation data releases that could provide clues on interest rates.

At 0723 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,623.67 points.


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Colombian Peso Strengthens Amid Renewed Appetite for High-Risk Securities

(Bloomberg) -- Colombia's peso gained to its
strongest in three weeks as renewed appetite for high-risk assets
boosted demand for the country's stocks and bonds.

``We continue to see appetite for risk that characterized
last week's close,'' said German Verdugo, chief analyst at
Bogota-based brokerage Correval SA. ``Today will likely see
little volatility in the market ahead of this week's U.S.
inflation report.''


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