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U.S. Federal Reserve officials are puzzling over why bond borrowing rates spiked lately even as Fed policy expectations have remained largely unchanged. Whether a resurfacing "term premium'" now demanded to buy and hold longer-term bonds, is responsible is central to the conundrum. Britain's brief budget and debt shock late last year and the way the Bank of England was forced to react was perhaps a taster. "Once current debt has been refinanced and the average interest on debt reflects the higher long rates, absent changes in policy, debt ratios will increase," Blanchard wrote. The opinions expressed here are those of the author, a columnist for Reutersby Mike Dolan Editing by Marguerita ChoyOur Standards: The Thomson Reuters Trust Principles.

Persons: Marcos Brindicci, Olivier Blanchard, Washington's, Blanchard, it's, Morgan Stanley, Mike Dolan, Marguerita Choy Organizations: REUTERS, . Federal Reserve, Bank of England, International Monetary Fund, Washington's Peterson Institute for International Economics, U.S, Congressional, Reuters, Thomson Locations: Buenos Aires, Argentina, United States, Europe

U.S. Federal Reserve officials are puzzling over why bond borrowing rates spiked lately even as Fed policy expectations have remained largely unchanged. Whether a resurfacing "term premium'" now demanded to buy and hold longer-term bonds, is responsible is central to the conundrum. Britain's brief budget and debt shock late last year and the way the Bank of England was forced to react was perhaps a taster. "Once current debt has been refinanced and the average interest on debt reflects the higher long rates, absent changes in policy, debt ratios will increase," Blanchard wrote. US debt costs soarRates minus Growth hits budget mathCBO's long-term debt projectionsDYSFUNCTION AND EXPLOSIONThere were tinges of optimism though.

REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing RightsLONDON, Nov 8 (Reuters) - If the notorious 'term premium' is evaporating again, then last month's bond rout may just have been a nightmare. "If that's coming from term premium and it's tightening, then we have got to take that into account." As Summers estimated this week, a term premium just back at 60-year averages would put it at 150bps - 130bps above current levels. Morgan Stanley estimates an additional near $1 trillion in gross debt sales from G7 governments are coming down the pike next year. Morgan Stanley chart on G7 debt sales in 2024Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters.

Persons: Dado Ruvic, Christopher Waller, Larry Summers, selloff, York Fed's, Jerome Powell, Austan Goolsbee, Lisa Cook, Summers, Morgan Stanley, Mike Dolan, Josie Kao Organizations: REUTERS, Federal Reserve, Treasury, Fed, ., The, NY, Reuters Graphics Reuters, Reuters, Chicago Fed, Congress, Thomson Locations: York, midyear, 150bps

A general view of the Bank of England in the City of London, Britain, September 25, 2023. In making that call the BoE report focuses mostly on consumption, which it estimates makes up about 60% of GDP. As a result, the BoE expects the fallout from rate moves to date to "grow over time" even if one-off quarterly hits have peaked. And whatever the slow-burning hit to growth and consumption, inflation surprises could well change the increasingly comfortable markets picture. BOE chart on GDP outlookBOE chart on consumption hit from rate risesReuters Graphics Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reutersby Mike Dolan X: @reutersMikeD; editing by David EvansOur Standards: The Thomson Reuters Trust Principles.

Persons: Hollie Adams, Huw Pill, what's, BoE, Modupe Adegbembo, Andy Burgess, BOE, Mike Dolan, David Evans Organizations: Bank of England, City of, REUTERS, Bank, Reuters, AXA Investment Managers, Thomson Locations: City, City of London, Britain, British

And some banks think the Bank of England may be the latest to paper over the QT cracks as soon as this week. Already, there's been some awkward shuffling of feet around a process that was meant to be just balance sheet plumbing. The Federal Reserve may be further away from dealing with the QT issue head on. Deutsche Bank's UK strategists agree and think "the bar for a shift in QT policy is lower heading into yearend." Deutsche argues the BoE could either skew gilt sales shorter or agree to sell evenly based on current market valuations.

Persons: there's, BOE, BoE, BofA, Deutsche, Mike Dolan, Lisa Shumaker Organizations: Bank of England, European Central Bank, Federal, . Treasury, Bank, Treasury, Bank of America, Deutsche Bank's, Reuters Graphics Reuters, Reuters, Thomson Locations: Treasuries, yearend

Speaking at this week's global finance meeting in Riyadh, HSBC boss Noel Quinn warned of a potential "tipping point on fiscal deficits" for a number of countries across the world. And some analysts fear the uncertainty of next year's funding crush is filtering out the steepening yield curve via the term premium. Term premium at highest in 8 yearsReuters GraphicsCBO long-term US debt and deficit projections'DOOM LOOP'? That's spooky enough, until you start to factor in the recent yield spike and or a return of the term premium to 60-year averages of 150 bp. Tipping point or not, there's a danger the market is starting crystallise the problem it fears most.

Persons: Sukree, Noel Quinn, it's, that's, Stephen Jen, Jen, Goldman Sachs, Jeremy Hunt, Mike Dolan Organizations: HSBC, New York Fed, Federal Reserve, Fed, JPMorgan, Treasury, CBO, Moody's, Reuters Graphics Reuters, Reuters, Thomson Locations: Kasikornbank, Bangkok, Riyadh, U.S, Washington, Europe, Italy

☆ Treasury yields continue retreat after 10-year slips back below 5%
▼ + stars: | 2023-10-24 | by ( Elliot Smith | ) www.cnbc.com time to read: +2 min

ET, the yield on the benchmark 10-year Treasury note was down around 2.4 basis points at 4.8145% while the yield on the 30-year Treasury bond slipped just over 3 basis points to 4.9559%. U.S. Treasury yields continued to moderate on Tuesday after slipping back below 5%, though they remained near 16-year highs. Yields fell after Pershing Square's Bill Ackman on Monday disclosed that he had covered his bond short position. Markets are all but certain that the Fed funds target range will remain unchanged next week, according to CME Group's FedWatch tool. Auctions will be held Tuesday for $75 billion of 42-day Treasury bills and $51 billion of 2-year notes.

Persons: Pershing, Bill Ackman, Ackman, Jim Reid, Reid, Jerome Powell, Powell Organizations: Treasury, Deutsche Bank, Treasurys, Federal Locations: London

The 40-year bond bull market - a slow-inflating bubble like any other to some people - has crashed. Bank of America chart on survey of global funds' bond positioningBond Multiverse Returns Flip Positive2008... OR 2000? Of course, bond bubbles and bursts - at least for top-rated sovereigns - are not same as their equity counterparts, even if the short-term performance of bond funds seems to ape them. But for bond funds praying for a shorter-term price performance pickup, the situation looks nervier. With such an ephemeral variable at work, picking a durable turn in the battered bond market may prove fiendishly difficult.

Persons: Jason Lee, That's, Fed's, Olivier Davanne, midyear, Davanne, Mike Dolan Organizations: Hong, REUTERS, Treasury, U.S, Bank of America's, Federal Reserve, of America, Bloomberg, Invest, Reuters, Thomson Locations: Hong Kong, Paris

Based on International Monetary Fund data on comparative international investment positions through the early part of this year, U.S. portfolio investment overseas - equity, fund shares and debt securities - stood at more than $14.5 trillion. US funds shy of overseas equityUS economic growth roaring at more than 5%US expensive for a reason? The upshot could be an ever wider U.S. deficit on its net international investment position - potentially lifting the dollar as that inflates, but leaving it vulnerable to the yawning gap and foreign investor sentiment down the road. IMF chart on US net international investment deficitUS stocks lead the packThe opinions expressed here are those of the author, a columnist for ReutersEditing by Josie KaoOur Standards: The Thomson Reuters Trust Principles. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Persons: Brendan McDermid, that's, it's, Julius Baer's, Yves Bonzon, Josie Kao Organizations: New York Stock Exchange, REUTERS, Atlanta Federal, Monetary, ICI, Thomson, Reuters Locations: New York City, U.S, China, Gaza, Russia, Ukraine, Moscow, Washington, Taiwan, United States, Swiss, Switzerland, Germany

NEW YORK (AP) — Shares fell in Asia as investors braced Monday for an expected invasion by Israel in the Gaza Strip. On Friday, the price of a barrel of benchmark U.S. crude oil jumped $4.78 to settle at $87.69. Early Monday, U.S. crude oil was unchanged while Brent was up 3 cents at $90.92 a barrel. Worries about the war pulled Treasury yields lower, which often happens when investors head for safer investments during times of stress. The yield on the 10-year Treasury fell to 4.63% from 4.70% late Thursday.

Persons: —, Israel, Brent, Korea's Kospi, Australia's, Wells, JPMorgan Chase, Jamie Dimon, Todd Vasos Organizations: Economics, Markets, Nikkei, Nasdaq, Dow, Treasury, United Nations, Federal Reserve, JPMorgan Chase, JPMorgan, UnitedHealth, Wall, Dollar, U.S . Locations: Asia, Israel, Gaza, U.S, Hong Kong, Shanghai, Wells Fargo

☆ How U.S. soybeans influence global economics
▼ + stars: | 2023-10-12 | by ( Andrea Miller | In Dreajmiller | ) www.cnbc.com time to read: +3 min

"Soybeans are kind of that wonder crop that has amazing capabilities" Arlan Suderman, chief commodities economist at StoneX, told CNBC. "The average soybean production in our county 40 years ago, in 1980, was 31 bushels. The global soybean market exploded in recent years with U.S. production at the forefront. However, the U.S. has since lost its dominance, in part, thanks to its reliance on a single export market: China. According to data from the USDA, about half of the value of U.S. soybean exports head to China.

Persons: Himanshu Gupta, ClimateAI, Suderman, wasn't, Meagan Kaiser, Joe Janzen, Janzen, Kaiser Organizations: National Oilseed Processors Association, United, CNBC, U.S . Department of Agriculture, University of Illinois Locations: U.S, China, Brazil, Argentina

Israeli assets and the shekel remain under pressure and oil and gold prices are marginally higher than last week. World Markets Impact From MidEast Attacks WanesBlackRock chart on its Geopolitical Risk IndicatorNOWHERE TO RUN TO... Last updated shortly before the weekend events in Israel, BlackRock's Geopolitical Risk Indicator - which attempts to capture market attention to political risks - had indeed crept up to six month highs. Releasing its World Economic Outlook on Tuesday, the International Monetary Fund warned that more volatile commodity prices were a possible reflection of both greater climate and geopolitical risk. And yet hand wringing about geopolitical risk in different corners of the globe can also deflect from rising political risks in core economies - not the least in the United States.

Persons: Brendan McDermid, Vincent Mortier, Anna Rosenberg, Kristina Hooper reckons, Hooper, that's, It's, Amundi's Rosenberg, Pierre, Olivier Gourinchas, Gourinchas, Josie Kao Organizations: New York Stock Exchange, REUTERS, West Bank, International Monetary Fund, IMF, Treasury, Reuters, Thomson Locations: New York City, U.S, Israel, Gaza, Iran, United States, Saudi Arabia, Russia, China, Taiwan, Ukraine

Re-enter risk premia on what should be 'risk free' bonds. The renewed corporate profits upswing riffs off this relatively robust nominal growth picture too - as do still benign corporate debt premia. However, keeping a lid on 5% nominal GDP may well be what's irking bonds as much as anything. While turning 10-year averages takes some time, nominal GDP growth according to a real time model from the Atlanta Fed is closer to 8% right now. CBO deficit projections to 2030US nominal GDP growth running at 8%?

Persons: York Fed's, Ajay Rajadhyaksha, today's, Treasuries, Fitch, Andrew Heavens Organizations: Treasury, Federal, Fed, The, Barclays, Societe Generale's, Atlanta Fed, Moody's, U.S . AAA, Reuters, Thomson Locations: U.S, Washington, York, 35bp, 150bp, Treasuries, China, Europe

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 26, 2023. A near-miss on a debt ceiling showdown in the Spring led to the loss of another Triple-A sovereign credit rating. A fiscal adjustment akin to the one enacted in 1993 would be enough to do that again over 5 years. "However, this looks unlikely anytime soon given congressional gridlock, a lack of political attention to deficit reduction and the upcoming 2024 election," it concluded. On current poll readings at least, next year's election will do nothing to end the fiscal war.

Persons: Brendan McDermid, it's, Donald Trump, Democrat Joe Biden, Erik Nielsen, what's, Stephen Jen, Jen, Trump, Biden, Goldman Sachs, Goldman, William Maclean Organizations: New York Stock Exchange, REUTERS, U.S, Presidential, AAA, Democrat, Biden, Trump, Congress, Ukraine, Treasury, Republican, Reuters, GRIDLOCK, Thomson Locations: New York City, U.S, loggerheads, Russia, Ukraine, United States

☆ Deutsche Bank examined economic data going all the way back to the 1700s and narrowed down the 4 criteria that indicate a recession is coming — and the US economy just triggered the final warning sign
▼ + stars: | 2023-09-24 | by ( Mark Reeth | ) www.businessinsider.com time to read: +8 min

And while 12 months of speculation can seem like a lifetime for investors who just want an answer, it's really only a small moment in economic history. Reid and his team spotted plenty of patterns in all that data, including the common warning signs of a recession. For example, scholars and economists have been tracking recession data in the UK since 1700, while Italy only began tracking recessions in 1980. Reid wrote that black swan events such as geopolitical shocks, natural disasters, and global pandemics happen more often than people think. "And that's before we get on to more traditional causes of recessions, like monetary tightening or speculative bubbles," Reid wrote.

Persons: it's, Jim Reid, Reid, would've, Deutsche Bank Reid Organizations: Deutsche Bank Locations: Canada, France, Germany, Italy, Japan

☆ Opinion: Rupert Murdoch helped wreck media — and politics
▼ + stars: | 2023-09-21 | by ( Opinion David Zurawik | ) edition.cnn.com time to read: +5 min

CNN —Few media figures in the last 27 years have had a larger and more profound effect on American political and media life than Rupert Murdoch. Ailes, who helped Richard Nixon get elected president in 1968, specialized in the political use of media. Again, Murdoch is not the only reason for the lack of trust in the media and the flood of disinformation and misinformation. I have been writing about Murdoch and Fox since the 1980s, and have observed that Murdoch was more concerned about money than ideology. In a commercial sense, Murdoch is an incredibly successful media figure.

Persons: David Zurawik, Rupert Murdoch, David Zurawik Mich Rouse, Murdoch, Lachlan, Murdoch’s, Roger Ailes, Richard Nixon, Adolf Hitler, Benito Mussolini, Mark Zuckerberg, James Organizations: Goucher College, Baltimore Sun, CNN, Fox and News Corporation, Murdoch’s Fox News, Democrats, Fox News, Murdoch, Capitol, Fox, Facebook, Media, Sport Committee Locations: Australia, America, Europe, Germany, Italy, American, Elon Musk’s

But the essence of the argument is that lower bond volatility ups the amount of cash liquidity flowing around world markets, and vice versa. But it is the incremental movement in this giant pool that arguably matters most for stock markets and asset prices. Even though global liquidity is shrinking as you might expect in the face of rising Western interest rates, central bank balance sheet reduction and a higher dollar, other offsets are significant. But falling bond volatility has likely played a big part in softening the blow too. "The two together have helped overall liquidity conditions - but we are mindful that bond markets are likely to remain volatile and need to be monitored carefully."

Persons: CrossBorder, Mike Dolan, Matthew Lewis Organizations: Federal Reserve, coy, Treasury, Fed, Bank, People's Bank of, New York Fed, Reuters Graphics, Reuters, Thomson Locations: Treasuries, punchbowl, People's Bank of China, United States

☆ US homebuyers are waiting for the Fed to start cutting interest rates. Here's when 9 experts say it's going to happen.
▼ + stars: | 2023-09-18 | by ( Jacob Zinkula | ) www.businessinsider.com time to read: +6 min

Mortgage rates could decline if the Federal Reserve cuts interest rates next year. Here are nine projections from experts on when the Fed's first rate cut will come. While these factors serve as deterrents for prospective buyers, interest rates may not stay this high forever. AdvertisementAdvertisementWhile declining interest rates wouldn't directly cause mortgage rates to fall, the two tend to move in the same direction. AdvertisementAdvertisementFebruaryOn August 31, Preston Caldwell, a Morningstar senior US economist, wrote in a note that he expected the Fed to start cutting interest rates in February.

Persons: Bob Michele, J.P, —, we'll, Preston Caldwell, David Einhorn, Diane Swonk, Andrew Hollenhorst, Goldman Sachs, David Mericle, Simona Mocuta, Jeff Morton Organizations: Federal Reserve, Service, Federal, Bloomberg Television, Morgan Asset, Morningstar, KPMG, Citi, Reuters, State Street Global Advisors, DWS Locations: Wall, Silicon, North America's

U.S. Commerce Secretary Gina Raimondo's trip to China last month had promised some economic and trade detente between the two superpowers now at loggerheads. And none of the 222 funds polled expected China economic growth to be any higher next year than this - mirroring a recent Reuters survey of domestic and overseas banks and investors. As these sorts of surveys go, there's an awful lot in there that could spell "peak gloom". Indeed, shorting China equities was deemed the second "most crowded trade" behind long exposure to supercharged Big Tech stocks. Even if the economy turns, political catalysts for a return to China may be slow in coming.

Persons: Aly, Gina Raimondo's, it's, Jamie Dimon, Jay Clayton, Jenny Johnson, Franklin Templeton, Willem Sels, Mike Dolan, Sharon Singleton Organizations: REUTERS, . Commerce, Bank of, Big Tech, Reuters, Reuters Graphics Reuters, JPMorgan, Investments, The Ontario Teachers, Caisse, Franklin, HSBC Private Banking, Thomson Locations: Shanghai, Shenzhen, China, loggerheads, Wall, Asia, Silicon Valley, Hong Kong, Temasek, Bridgewater, Blackrock, India, Indonesia, Washington, United States

REUTERS/Brendan McDermid Acquire Licensing RightsLONDON, Sept 8 (Reuters) - Rising U.S. business bankruptcies may raise a red flag in what otherwise appears like an economy now impervious to rising interest rates. Commenting on the numbers, insolvency research organisation ABI blamed elevated interest rates, price inflation and a resumption of student loan payments as just some of the headwinds causing stress. That partly mirrors some of built-in household resilience to rising rates related to long-term fixed-rate borrowings and still-high cash savings that now earn significantly higher rates of interest now too. And that 10% - accounting for more than 60% of index market cap - had seen no rise in net interest payments so far in the Fed campaign. But creeping insolvencies among the smaller firms - many of whom have been dubbed 'zombies' for years due to their survival solely on low interest rates - may be a better reflection of what's starting to happen at the coalface of the economy.

Persons: Brendan McDermid, Albert Edwards, Edwards, Andrew Lapthorne, Russell, NFIB, Mike Dolan, Josie Kao Organizations: New York Stock Exchange, REUTERS, Yellow Corp, P Global Market Intelligence, Reuters, Societe Generale, Fed, National Federation of Independent Business, Reuters Graphics Reuters, Thomson Locations: New York City, U.S, midyear

"Further progress is likely to become more difficult as base effects fade, and supply-constraints could drive global energy and food prices higher again." Brent crude prices have risen 27% since mid-year and U.S. crude is up 30%, with U.S. retail pump prices already up almost 10% so far since June. Oil and inflation expectationsReuters GraphicsSLOWING DESCENTAnd alongside creeping worries about rising debt supply, the long end of bond markets has been rattled again by the oil price jump. And this has been a far bigger influence on the inflation trajectory than oil prices per se. Yet, restive crude prices will still cloud a messy and tricky battle with inflation expectations just as policy tightening cycles near an end.

Persons: Brent that's, Christian Keller, Akash Utsav, Andrew Goodwin, there's, George H.W, Jamie Freed Organizations: Brent, UBS, Organization for Economic Cooperation, Development, Barclays, Federal Reserve, European Central Bank, Bank of England, U.S, Treasury, Oxford, Monetary Fund, Reuters Graphics Reuters, Reuters, Thomson Locations: Ukraine, Saudi Arabia, Russia, tailwind, U.S, Europe, Britain, West, George H.W . Bush

Specifically, she outlined puzzlement at why the inflation-adjusted risk-free rates priced by markets - real Overnight Index Swap yields from one to 10 years - had subsided again since the last ECB rate hike in July - back to where they were in February when ECB policy rates were just 2.5%. Long-term real yields from benchmark German government bond markets are positive again this year for the first time in almost a decade. But they have fallen almost 20bp from just before the last ECB rate hike to just above 0.1% now. Minutes released today from the last ECB meeting suggest the council is still undecided about its next step this month, but many market analysts see the tension building. ECB chart from Isabel Schnabel speech on rising market inflation premiaReuters GraphicsReuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters.

Persons: Isabel Schnabel, It's, Carsten Brzeski, Josie Kao Organizations: Central Bank, disinflation, ECB, Reuters Graphics Reuters, ING, Reuters, Thomson Locations: Frankfurt, U.S

Fed Chair Jerome Powell was almost brusque in his re-statement of the central bank's anti-inflation commitment at the annual Jackson Hole symposium on Friday. Tracking that rather than more-skittish policy rate futures would have proved a better guide to how subsequent months panned out and to the summer doldrums in bonds and stocks. And yet the September meeting could still be the 'big reveal' as it sees publication of the Fed's updated 'dot plot' that will likely show just where they then see the cycle crest. San Francisco Fed chart on dispersion of Fed rate projections by horizonSan Francisco Fed index of Fed uncertaintyACCIDENT OR DESIGN? As to whether the Fed is guiding everyone to safe and happy place, there continues to be sceptics about the 'soft landing'.

Persons: Jerome Powell, Jackson, that's, it's, Andrew Foerster, Zinnia Martinez, Bruce Kasman, Joseph Lupton Organizations: Federal, Reuters Graphics Reuters, Atlanta, San Francisco Fed, San, Fed, San Francisco, JPMorgan, Reuters, Thomson Locations: U.S, synch, San Francisco Fed

LONDON, Aug 25 (Reuters) - In an investment world trumpeting new-found ethical and sustainability guidelines, the seeming indifference of markets to democratic credentials still remains stark. There's little doubt that emerging market risks are many and rising for Western investors. What's more, there were as many emerging economies in its sample with relatively low bond spreads in the group with very low V&A scores as the group with very high V&A scores. If you removed those two wipeouts, screening just for V&A democratic values made much less difference to the bottom line. "Taking heed of these geopolitical risks could be the crucial difference between securing your returns or ending up with nothing."

Persons: Morgan's, Eamon Aghdasi, Mina Tomovska, Saker Nusseibeh, Nick Macfie Organizations: U.S ., Hermes, Financial, Reuters, Thomson Locations: Brazil, Russia, India, China, South Africa, Saudi Arabia, Iran, UAE, Egypt, Argentina, Ukraine, Taiwan, Boston, Belarus, Washington

LONDON, Aug 23 (Reuters) - The United States and China may feel some financial detente is wise at this point - even if goading one another plays well domestically. But elements of the once-feared bind of 'mutally-assured financial destruction' (MAFD) still apply. Pulling the rug out from under either - battering U.S. and Chinese demand in effect - seems to make little economic sense at least. America had new markets and investments and a seemingly durable new creditor that kept borrowing rates low and consumption up. Falling China Share of Foreign US Treasury HoldingsChina FX Reserves vs Global ReservesUS Treasury Debt Climbs as Fed Pulls Back'MAFD'But is that where the situation has landed post-pandemic?

Persons: Larry Summers, Summers, Goldman Sachs, Jim O'Neill, O'Neill, Gina Raimondo's, Stephen Jen, Eurizon SLJ, Treasuries, Deepa Babington Organizations: U.S . Treasury Securities, ., Treasury, Foreign US Treasury Holdings China FX, Global Reserves, U.S ., Commerce, U.S, Reuters Graphics Reuters, Reuters, Thomson Locations: United States, China, Washington, Ukraine, Taiwan, Hong Kong, U.S, Beijing, America

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