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The pound rose against the dollar after Bank of England minutes showed Martin Weale became the second policy maker to call for higher interest rates.
The euro extended gains, appreciating to more than $1.37 for the second day.
The pledge by Japan and China to buy European debt is encouraging Asian funds to follow suit as agencies start selling bonds to finance Ireland’s bailout.
A 5 billion euro ($6.84 billion) sale yesterday drew 44.5 billion euros in orders as the Japanese government snapped up more than 20 percent of the issue. Asian investors bought about 38 percent and government agencies 43 percent, according to two people familiar with the transaction. State institutions took 38.5 percent of the securities at a similar issue on Jan. 5, according to the European Commission in Brussels.
“I heard these issues will be hot,” said Masataka Horii, one of four managers in Tokyo of the $33.9 billion Kokusai Global Sovereign Open Fund, Asia’s largest bond fund. “Investors may see the new bonds as safe because central banks are buying.” He declined to say whether he would bid.
Kokusai, Daiwa SB Investments Ltd. and Fukoku Mutual Life Insurance Co. say they are interested in the AAA rated bonds sold to fund bailouts, even after investors sent the debt of Greece, Ireland, Portugal and Spain tumbling. ICBC Credit Suisse Asset Management Co. said it is interested in buying European government debt. German Chancellor Angela Merkel said her nation will do whatever is needed to save the 17-nation currency, while Europe’s economy is showing signs of improvement
The European Financial Stability Facility’s five-year 2.75 percent bonds were sold at 2.89 percent, or 6 basis points more than the benchmark swap rate, according to data compiled by Bloomberg. That’s down from the range of 8 basis points to 10 basis points where the bonds were initially marketed. German five-year debt with the same AAA rating has a yield spread of 44 basis points below the swap rate.
The much awaited FOMC decision is due at 1915GMT.
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