RIGZONE
"Oil Settles Near January Lows Amid Strong Dollar and Broader Markets"
by Bloomberg | Ilena Peng and Julia Fanzeres
Monday, September 26, 2022
Oil declined, taking direction from broader markets as the potential impact of rising interest rates worldwide subdued investor sentiment.
Crude gave up a short-lived rally with both benchmarks falling to near nine-month lows as the dollar traded at an all-time high, which makes commodities priced in the currency less attractive.
Brent settled below $85 a barrel and West Texas Intermediate remains under $80.
“Crude prices are still riding the FX-volatility roller coaster,” said Ed Moya, senior market analyst at Oanda.
“Historic moves with currencies is troubling for the global growth outlook and that will ultimately weigh on the crude demand outlook.”
Meanwhile, the EU continues to struggle with reaching an agreement on Russian oil price caps and will likely push back the deal until a broader sanctions package has been agreed on.
Oil is on track for a substantial quarterly slump as leading central banks including the US Federal Reserve raise interest rates aggressively to fight inflation, hurting the outlook for energy demand and sapping investors’ appetite for risk.
The Fed’s tightening helped drive up the US dollar.
Prices:
Brent for November settlement sank $2.09 to settle at $84.06 a barrel in New York.
WTI for November delivery dropped $2.03 to $76.71 a barrel.
The Bloomberg Dollar Spot Index spiked as much as 1.2% earlier in the day, and is 15% higher year-to-date.
The slump in prices may induce the Organization of Petroleum Exporting Countries and its allies to consider intervening to stem the slide, either verbally or by announcing a reduction in output.
Earlier this month, OPEC+ announced a token supply cut and said members would monitor the market.
The market is also keeping an eye on a hurricane in the Gulf of Mexico that is headed for the west coast of Florida.
Chevron and BP have both shut platforms southeast of New Orleans and evacuated personnel.
The current track, headed for Tampa, leaves most of the Gulf’s energy complex unscathed.
https://www.rigzone.com/news/wire/oil_s ... 8-article/
THE DAILY NEWS
Re: THE DAILY NEWS
CNBC
"10-year Treasury yield tops 3.9%, rises to highest level since 2010"
Sarah Min @_SARAHMIN Sophie Kiderlin @SKIDERLIN
Yields soared on Monday as markets digested the Federal Reserve’s interest rate hikes and absorbed economic commentary from Fed speakers.
The benchmark 10-year Treasury note yielded 3.926%, surging nearly 23 points to its highest point since April 2010.
It hit a high of 3.931%.
The yield on the policy-sensitive 2-year Treasury surged to 4.343%.
It reached a high of 4.351%, or the highest level since August 2007.
Yields and prices have an inverted relationship.
One basis point is equivalent to 0.01%.
Markets continued to digest the impact of the Federal Reserve’s most recent policy decisions after the central bank hiked interest rates by 75 basis points last week and suggested it would keep doing so throughout 2022 and 2023 to push back against surging inflation.
The continued rate hikes raised concerns about a recession among some investors and analysts, especially as they have been widening the gap between the yield on the 2-year and 10-year Treasuries, leading to a steeply inverted yield curve.
Many view this as a key indicator of economic downturn.
Traders are expecting to gain further insight into the Federal Reserve’s economic and policy expectations on Monday as a slew of Fed speakers made remarks.
This includes speeches from Boston Fed president Susan Collins, Atlanta Fed president Raphael Bostic and Cleveland Fed president Loretta Mester.
Boston Fed president Susan Collins on Monday cited a need for ‘clear and convincing signs’ that inflation is falling before easing up on interest rate increases.
— CNBC’s Jeff Cox contributed to this report.
Data also provided by Reuters
https://www.cnbc.com/2022/09/26/2-year- ... hikes.html
"10-year Treasury yield tops 3.9%, rises to highest level since 2010"
Sarah Min @_SARAHMIN Sophie Kiderlin @SKIDERLIN
Yields soared on Monday as markets digested the Federal Reserve’s interest rate hikes and absorbed economic commentary from Fed speakers.
The benchmark 10-year Treasury note yielded 3.926%, surging nearly 23 points to its highest point since April 2010.
It hit a high of 3.931%.
The yield on the policy-sensitive 2-year Treasury surged to 4.343%.
It reached a high of 4.351%, or the highest level since August 2007.
Yields and prices have an inverted relationship.
One basis point is equivalent to 0.01%.
Markets continued to digest the impact of the Federal Reserve’s most recent policy decisions after the central bank hiked interest rates by 75 basis points last week and suggested it would keep doing so throughout 2022 and 2023 to push back against surging inflation.
The continued rate hikes raised concerns about a recession among some investors and analysts, especially as they have been widening the gap between the yield on the 2-year and 10-year Treasuries, leading to a steeply inverted yield curve.
Many view this as a key indicator of economic downturn.
Traders are expecting to gain further insight into the Federal Reserve’s economic and policy expectations on Monday as a slew of Fed speakers made remarks.
This includes speeches from Boston Fed president Susan Collins, Atlanta Fed president Raphael Bostic and Cleveland Fed president Loretta Mester.
Boston Fed president Susan Collins on Monday cited a need for ‘clear and convincing signs’ that inflation is falling before easing up on interest rate increases.
— CNBC’s Jeff Cox contributed to this report.
Data also provided by Reuters
https://www.cnbc.com/2022/09/26/2-year- ... hikes.html
Re: THE DAILY NEWS
REUTERS
"Republican Toomey blasts Biden's 'irresponsible' use of Cold War-era defense law"
By Andrea Shalal
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Republican Senator Pat Toomey on Monday blasted President Joe Biden for what he called the increasing and "irresponsible" use of a Cold War-era defense law to boost production of baby food, solar panel components and other non-defense items.
Toomey, the top Republican on the Senate Banking Committee, told Biden that using the Defense Production Act in this way disrupted supply chains and violated the intent of the law to make goods available in actual national security emergencies.
"If your administration continues to abuse the DPA and skirt legitimate questions surrounding its use, Congress may have to curtail the executive branch’s ability to so easily invoke it," Toomey wrote in a letter obtained by Reuters.
Democrats now control the Senate, but unexpected losses in the November midterms could give Republicans more power to curb use of the DPA.
Biden's predecessor, Donald Trump, invoked the DPA in 2019 to stockpile rare earths, the specialized minerals used to make magnets found in weaponry and EVs, and then again in March 2020 to order General Motors to produce life-saving ventilators.
Biden has made broader use of the DPA in his presidency, including using it to ramp up production of supplies used in the response to COVID-19, infant formula and solar panel components.
The 1950 law gives the Pentagon wide powers to procure equipment necessary for national defense.
The White House had no immediate comment.
Toomey said Biden had waived a requirement to notify the Senate Banking Committee, which oversees the law, prior to any DPA expenditures, on six separate occasions since March, and expressed concern he was using the law to advance a partisan agenda.
He said a future Republican president could decide the DPA is a convenient means for funding construction of a border wall or finishing a long-stalled natural gas pipeline, even though these projects were not related to the defense-industrial base.
Toomey asked Biden to answer a series of detailed questions about the administration's reasons for invoking the law by Oct. 11.
Reporting by Andrea Shalal; Editing by Nick Macfie
https://www.reuters.com/world/us/republ ... 022-09-26/
"Republican Toomey blasts Biden's 'irresponsible' use of Cold War-era defense law"
By Andrea Shalal
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Republican Senator Pat Toomey on Monday blasted President Joe Biden for what he called the increasing and "irresponsible" use of a Cold War-era defense law to boost production of baby food, solar panel components and other non-defense items.
Toomey, the top Republican on the Senate Banking Committee, told Biden that using the Defense Production Act in this way disrupted supply chains and violated the intent of the law to make goods available in actual national security emergencies.
"If your administration continues to abuse the DPA and skirt legitimate questions surrounding its use, Congress may have to curtail the executive branch’s ability to so easily invoke it," Toomey wrote in a letter obtained by Reuters.
Democrats now control the Senate, but unexpected losses in the November midterms could give Republicans more power to curb use of the DPA.
Biden's predecessor, Donald Trump, invoked the DPA in 2019 to stockpile rare earths, the specialized minerals used to make magnets found in weaponry and EVs, and then again in March 2020 to order General Motors to produce life-saving ventilators.
Biden has made broader use of the DPA in his presidency, including using it to ramp up production of supplies used in the response to COVID-19, infant formula and solar panel components.
The 1950 law gives the Pentagon wide powers to procure equipment necessary for national defense.
The White House had no immediate comment.
Toomey said Biden had waived a requirement to notify the Senate Banking Committee, which oversees the law, prior to any DPA expenditures, on six separate occasions since March, and expressed concern he was using the law to advance a partisan agenda.
He said a future Republican president could decide the DPA is a convenient means for funding construction of a border wall or finishing a long-stalled natural gas pipeline, even though these projects were not related to the defense-industrial base.
Toomey asked Biden to answer a series of detailed questions about the administration's reasons for invoking the law by Oct. 11.
Reporting by Andrea Shalal; Editing by Nick Macfie
https://www.reuters.com/world/us/republ ... 022-09-26/
Re: THE DAILY NEWS
REUTERS
"U.S. Congress negotiators set nearly $12 bln in new Ukraine aid -sources"
Reuters
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Negotiators of a stop-gap spending bill in the U.S. Congress have agreed to include nearly $12 billion in new military and economic aid to Ukraine in response to a request from the Biden administration, sources familiar with the talks said on Monday.
The sources, who asked not to be identified ahead of the announcement, said the funding would include $4.5 billion to provide defense capabilities and equipment for Ukraine, as well as $2.7 billion to continue military, intelligence and other defense support.
It also will include $4.5 billion to continue to provide direct budget support to the Kyiv government through the next quarter.
That way President Volodymyr Zelenskiy's administration can pay salaries to essential staff, support Ukrainians fleeing conflict and cover other critical expenses to help civilians, a government official said.
U.S. President Joe Biden asked Congress earlier this month to provide $11.7 billion in new emergency military and economic aid for Ukraine in the stopgap spending bill.
There is widespread support in Congress from both Biden's fellow Democrats and Republicans for helping Ukraine to defend itself following Russia's invasion.
Congress is facing a midnight Friday deadline to pass the spending bill, which also would temporarily fund a wide range of U.S. government programs.
In addition to the previously listed funding, the package - which could be announced as soon as later on Monday - includes $2 billion for the U.S. energy industry, to address the impact of the war and reduce future energy costs.
One of the sources familiar with the package said the funding request - known as a continuing resolution - would also include resettlement funding for Afghan refugees.
In a separate, but related authorization request, a U.S. official said the Biden administration also planned to ask Congress for an additional $3.5 billion in Presidential Drawdown Authority, which allows the president to authorize the transfer of excess weapons from U.S. stocks.
Washington and its allies have sent billions of dollars in security and economic assistance to Ukraine during the seven-month-long war.
Reporting by Richard Cowan, Steve Holland, Mike Stone and Patricia Zengerle; editing by Grant McCool
https://www.reuters.com/world/us/us-con ... 022-09-26/
"U.S. Congress negotiators set nearly $12 bln in new Ukraine aid -sources"
Reuters
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Negotiators of a stop-gap spending bill in the U.S. Congress have agreed to include nearly $12 billion in new military and economic aid to Ukraine in response to a request from the Biden administration, sources familiar with the talks said on Monday.
The sources, who asked not to be identified ahead of the announcement, said the funding would include $4.5 billion to provide defense capabilities and equipment for Ukraine, as well as $2.7 billion to continue military, intelligence and other defense support.
It also will include $4.5 billion to continue to provide direct budget support to the Kyiv government through the next quarter.
That way President Volodymyr Zelenskiy's administration can pay salaries to essential staff, support Ukrainians fleeing conflict and cover other critical expenses to help civilians, a government official said.
U.S. President Joe Biden asked Congress earlier this month to provide $11.7 billion in new emergency military and economic aid for Ukraine in the stopgap spending bill.
There is widespread support in Congress from both Biden's fellow Democrats and Republicans for helping Ukraine to defend itself following Russia's invasion.
Congress is facing a midnight Friday deadline to pass the spending bill, which also would temporarily fund a wide range of U.S. government programs.
In addition to the previously listed funding, the package - which could be announced as soon as later on Monday - includes $2 billion for the U.S. energy industry, to address the impact of the war and reduce future energy costs.
One of the sources familiar with the package said the funding request - known as a continuing resolution - would also include resettlement funding for Afghan refugees.
In a separate, but related authorization request, a U.S. official said the Biden administration also planned to ask Congress for an additional $3.5 billion in Presidential Drawdown Authority, which allows the president to authorize the transfer of excess weapons from U.S. stocks.
Washington and its allies have sent billions of dollars in security and economic assistance to Ukraine during the seven-month-long war.
Reporting by Richard Cowan, Steve Holland, Mike Stone and Patricia Zengerle; editing by Grant McCool
https://www.reuters.com/world/us/us-con ... 022-09-26/
Re: THE DAILY NEWS
REUTERS
"Biden plan to cancel some U.S. student loan debt will cost $400 bln -CBO"
By David Shepardson and Eric Beech
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - U.S. President Joe Biden's executive actions cancelling some student loan debt will cost about $400 billion, about a quarter of funds owed, the Congressional Budget Office (CBO) said on Monday.
As of June 30, 43 million borrowers held $1.6 trillion in federal student loans.
About $430 billion of that debt will be canceled, CBO estimated.
CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.
Of 37 million borrowers with direct loans from the federal government, CBO estimated 95% of borrowers meet the income criteria for eligibility and 45% of income-eligible borrowers will have their entire outstanding debt canceled.
In August, the White House released a "cash flow" estimate of foregone loan repayments of $24 billion a year, or about $240 billion over a decade - assuming that 75% of eligible borrowers apply.
White House Chief of Staff Ron Klain said on Twitter the CBO estimate is a 30-year score rather than a more common 10-year estimate.
He said the CBO is consistent with the White House estimate and CBO "puts the first year cost at $21B."
Reuters reported in August that non-government budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.
The U.S. government in March 2020 temporarily suspended interest and payments on federal student loans at the start of the COVID-19 pandemic.
The extension of that pause from September through Dec. 31 will increase outstanding student loan costs by a further $20 billion, CBO said.
The CBO said its $400 billion "present-value" cost estimates do not include any effects of the actions impacting income-driven repayment plans, which the Committee for a Responsible Federal Budget estimates will cost a further $120 billion.
Bharat Ramamurti, deputy director of the White House's National Economic Council, told reporters last month the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared to the prior year.
CBO acknowledged its estimates include big unknowns, especially the uncertain projection "of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action."
Reporting by Eric Beech and David Shepardson; Additional reporting by Caitlin Webber
https://www.reuters.com/world/us/biden- ... 022-09-26/
"Biden plan to cancel some U.S. student loan debt will cost $400 bln -CBO"
By David Shepardson and Eric Beech
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - U.S. President Joe Biden's executive actions cancelling some student loan debt will cost about $400 billion, about a quarter of funds owed, the Congressional Budget Office (CBO) said on Monday.
As of June 30, 43 million borrowers held $1.6 trillion in federal student loans.
About $430 billion of that debt will be canceled, CBO estimated.
CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.
Of 37 million borrowers with direct loans from the federal government, CBO estimated 95% of borrowers meet the income criteria for eligibility and 45% of income-eligible borrowers will have their entire outstanding debt canceled.
In August, the White House released a "cash flow" estimate of foregone loan repayments of $24 billion a year, or about $240 billion over a decade - assuming that 75% of eligible borrowers apply.
White House Chief of Staff Ron Klain said on Twitter the CBO estimate is a 30-year score rather than a more common 10-year estimate.
He said the CBO is consistent with the White House estimate and CBO "puts the first year cost at $21B."
Reuters reported in August that non-government budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.
The U.S. government in March 2020 temporarily suspended interest and payments on federal student loans at the start of the COVID-19 pandemic.
The extension of that pause from September through Dec. 31 will increase outstanding student loan costs by a further $20 billion, CBO said.
The CBO said its $400 billion "present-value" cost estimates do not include any effects of the actions impacting income-driven repayment plans, which the Committee for a Responsible Federal Budget estimates will cost a further $120 billion.
Bharat Ramamurti, deputy director of the White House's National Economic Council, told reporters last month the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared to the prior year.
CBO acknowledged its estimates include big unknowns, especially the uncertain projection "of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action."
Reporting by Eric Beech and David Shepardson; Additional reporting by Caitlin Webber
https://www.reuters.com/world/us/biden- ... 022-09-26/
Re: THE DAILY NEWS
REUTERS
"Fed's Mester: with inflation high, better to act 'aggressively'"
By Ann Saphir
SEPTEMBER 26, 2022
(Reuters) - With inflation “unacceptably high,” the Federal Reserve should lift rates higher and keep policy restrictive for some time, Cleveland Fed President Loretta Mester said on Monday -- and if there is an error to be made, better that the Fed do too much than to do too little.
“When there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about,” Mester said in remarks prepared for delivery to the Massachusetts Institute of Technology.
Mester said she would be “very cautious” about assessing inflation, and would need to see several months of declines in month-to-month readings to be convinced it had peaked.
Similarly, she said she will “guard against being complacent” on long-term inflation expectations that have recently dropped a bit but may not, she said, be as well-anchored as hoped and could rise again.
Policymakers faced with uncertainty over inflation expectations should risk setting policy too tight rather than too loose, she said.
“Research indicates that erroneously assuming that longer-term inflation expectations are well anchored at the level consistent with price stability when, in fact, they are not is a more costly error for the economy than assuming they are not well-anchored when they actually are,” Mester said.
The Fed last week increased its policy rate to 3%-3.25% in its third 75 basis point hike in so many meetings.
Policymakers signaled another similar sized hike is likely at their next meeting in November, with more increases on tap in subsequent months, as the U.S. central bank seeks to get borrowing costs high enough to bite into growth and bring down inflation running at three times its target, even at the cost of a rise in unemployment.
“Further increases in our policy rate will be needed,” Mester said.
“In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30X1ZJ
"Fed's Mester: with inflation high, better to act 'aggressively'"
By Ann Saphir
SEPTEMBER 26, 2022
(Reuters) - With inflation “unacceptably high,” the Federal Reserve should lift rates higher and keep policy restrictive for some time, Cleveland Fed President Loretta Mester said on Monday -- and if there is an error to be made, better that the Fed do too much than to do too little.
“When there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about,” Mester said in remarks prepared for delivery to the Massachusetts Institute of Technology.
Mester said she would be “very cautious” about assessing inflation, and would need to see several months of declines in month-to-month readings to be convinced it had peaked.
Similarly, she said she will “guard against being complacent” on long-term inflation expectations that have recently dropped a bit but may not, she said, be as well-anchored as hoped and could rise again.
Policymakers faced with uncertainty over inflation expectations should risk setting policy too tight rather than too loose, she said.
“Research indicates that erroneously assuming that longer-term inflation expectations are well anchored at the level consistent with price stability when, in fact, they are not is a more costly error for the economy than assuming they are not well-anchored when they actually are,” Mester said.
The Fed last week increased its policy rate to 3%-3.25% in its third 75 basis point hike in so many meetings.
Policymakers signaled another similar sized hike is likely at their next meeting in November, with more increases on tap in subsequent months, as the U.S. central bank seeks to get borrowing costs high enough to bite into growth and bring down inflation running at three times its target, even at the cost of a rise in unemployment.
“Further increases in our policy rate will be needed,” Mester said.
“In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30X1ZJ
Re: THE DAILY NEWS
REUTERS
"TREASURIES-U.S. yields hit fresh highs as rate hike concerns grip markets"
By Davide Barbuscia
SEPTEMBER 26, 2022
NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields hit fresh highs on Monday, rising in tandem with euro zone and British government debt yields amid concerns that central banks globally will keep tightening monetary policy to curb stubbornly high inflation.
Global bond yields - which move inversely to prices - kept climbing after a week that saw the Federal Reserve deliver its third straight 75 basis point rate hike and the British pound slide to a 37-year low against the dollar after the country's new finance minister unleashed historic tax cuts and huge increases in borrowing.
Sterling dropped further on Monday, and a renewed sell-off in British gilts pushed euro zone yields higher.
Atlanta Fed President Raphael Bostic said on Monday events in the United Kingdom could raise economic stress in Europe and the United States.
Two-year Treasury yields, which tend to be more sensitive to interest rate changes, rose to a fresh 15-year high of 4.312%, and benchmark 10-year note yields rose nearly 20 basis points from their Friday close, climbing to an intra-day high of 3.9%, the highest since April 2010.
"Back-to-back statements from Fed Chair Jerome Powell, first from Jackson Hole and then last week, were clear and unambiguous that the inflation has to be brought under control by any means necessary ... finally the market is listening," said Dean Smith, chief strategist at FolioBeyond.
Reflecting expectations of tighter monetary policies, real yields - represented by the yield on Treasury Inflation-Protected Securities (TIPS) - jumped on Monday.
The five-year TIPS yield climbed about 25 basis points to 1.87%, its highest since January 2009, and the 10-year real yield rose over 20 bps hitting 1.57%, its highest since April 2010.
Concerns that a Fed, dead-set on bringing inflation down, may tighten financial conditions to the point of pushing the economy into sharp contraction continued to grip markets, but some investors' expectations that the Fed may soon embark on a policy U-turn to stimulate a dwindling economy were dashed when Powell last week said that he and his fellow policymakers would "keep at" their battle to beat down inflation.
Bringing down price pressure is going to require "a steepening of the yield curve, higher long-term rates and some actually observed lower inflation prints, and we're not going to see that this year," Smith said.
The inversion in the yield curve between two-year and 10-year notes was at minus 44.5 basis points on Monday, still deep in negative territory but steeper than last week when that curve - seen as signaling an impending recession - was the most inverted in at least two decades.
Boston Fed President Susan Collins said on Monday that the Fed's need to bring down high inflation will cause the jobless rate to rise but that a recession was not inevitable.
Fed officials said last week they see rates rising to 4.6% in 2023, much higher than previous views, and projected year-end economic growth for 2022 at 0.2%, rising to 1.2% in 2023.
"The Fed still sees positive growth this year and sees it picking up next year."
"But it also wants to see evidence core inflation is on a decisive 2% trajectory beyond 2023 before it stops hiking," the BlackRock Investment Institute said in a note on Monday.
"This soft landing doesn't add up to us ..."
"We think the Fed is not only underestimating the recession needed but ignoring that it’s logically necessary," it said.
(Reporting by Davide Barbuscia; Editing by Nick Zieminski and Andrea Ricci)
https://www.reuters.com/article/usa-bon ... SL8N30X57N
"TREASURIES-U.S. yields hit fresh highs as rate hike concerns grip markets"
By Davide Barbuscia
SEPTEMBER 26, 2022
NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields hit fresh highs on Monday, rising in tandem with euro zone and British government debt yields amid concerns that central banks globally will keep tightening monetary policy to curb stubbornly high inflation.
Global bond yields - which move inversely to prices - kept climbing after a week that saw the Federal Reserve deliver its third straight 75 basis point rate hike and the British pound slide to a 37-year low against the dollar after the country's new finance minister unleashed historic tax cuts and huge increases in borrowing.
Sterling dropped further on Monday, and a renewed sell-off in British gilts pushed euro zone yields higher.
Atlanta Fed President Raphael Bostic said on Monday events in the United Kingdom could raise economic stress in Europe and the United States.
Two-year Treasury yields, which tend to be more sensitive to interest rate changes, rose to a fresh 15-year high of 4.312%, and benchmark 10-year note yields rose nearly 20 basis points from their Friday close, climbing to an intra-day high of 3.9%, the highest since April 2010.
"Back-to-back statements from Fed Chair Jerome Powell, first from Jackson Hole and then last week, were clear and unambiguous that the inflation has to be brought under control by any means necessary ... finally the market is listening," said Dean Smith, chief strategist at FolioBeyond.
Reflecting expectations of tighter monetary policies, real yields - represented by the yield on Treasury Inflation-Protected Securities (TIPS) - jumped on Monday.
The five-year TIPS yield climbed about 25 basis points to 1.87%, its highest since January 2009, and the 10-year real yield rose over 20 bps hitting 1.57%, its highest since April 2010.
Concerns that a Fed, dead-set on bringing inflation down, may tighten financial conditions to the point of pushing the economy into sharp contraction continued to grip markets, but some investors' expectations that the Fed may soon embark on a policy U-turn to stimulate a dwindling economy were dashed when Powell last week said that he and his fellow policymakers would "keep at" their battle to beat down inflation.
Bringing down price pressure is going to require "a steepening of the yield curve, higher long-term rates and some actually observed lower inflation prints, and we're not going to see that this year," Smith said.
The inversion in the yield curve between two-year and 10-year notes was at minus 44.5 basis points on Monday, still deep in negative territory but steeper than last week when that curve - seen as signaling an impending recession - was the most inverted in at least two decades.
Boston Fed President Susan Collins said on Monday that the Fed's need to bring down high inflation will cause the jobless rate to rise but that a recession was not inevitable.
Fed officials said last week they see rates rising to 4.6% in 2023, much higher than previous views, and projected year-end economic growth for 2022 at 0.2%, rising to 1.2% in 2023.
"The Fed still sees positive growth this year and sees it picking up next year."
"But it also wants to see evidence core inflation is on a decisive 2% trajectory beyond 2023 before it stops hiking," the BlackRock Investment Institute said in a note on Monday.
"This soft landing doesn't add up to us ..."
"We think the Fed is not only underestimating the recession needed but ignoring that it’s logically necessary," it said.
(Reporting by Davide Barbuscia; Editing by Nick Zieminski and Andrea Ricci)
https://www.reuters.com/article/usa-bon ... SL8N30X57N
Re: THE DAILY NEWS
REUTERS
"Bank of England 'will not hesitate' to act as it monitors market turmoil"
By Amanda Cooper, David Milliken and Andy Bruce
September 26, 2022
Summary
* Pound briefly touched a record low against dollar
* Five-year gilts match Friday's record daily slump
* Yields on 2-year and 5-year debt up 100 bps in 2 days
* Finance minister to detail fiscal plans on Nov. 23
* BoE monitoring developments 'very closely'
LONDON, Sept 26 (Reuters) - The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely", after the pound plunged to a record low and British bond prices collapsed in response to the new government's financial plans.
Finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a so-called mini-budget that was designed to grow the economy by funding tax cuts with huge increases in government borrowing.
Such was the market turmoil on Monday there was growing speculation in financial markets that the BoE would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.
Instead, with the pound fragile and bond prices still tumbling, Kwarteng issued a statement just before the British stock market closed to say he would set out medium-term debt-cutting plans on Nov. 23, alongside forecasts from the independent Office for Budget Responsibility of the full scale of government borrowing.
The central bank welcomed "the commitment to sustainable economic growth" from Kwarteng and the independent scrutiny that the OBR growth and borrowing forecasts would bring.
"The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said.
"The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit."
U.S. Federal Reserve official Raphael Bostic said the market moves could lead to greater economic stress in Europe and the United States, while analysts and investors said the government had done the bare minimum to reassure markets.
"There seems no reason to believe that markets will give the government the benefit of the doubt ahead of a new fiscal plan by Kwasi Kwarteng," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
"The market could force their hand and there still could be an emergency rate hike before the next BoE meeting," he said, referring to the next scheduled policy announcement on Nov. 3.
INTENSE PRESSURE
The Treasury and central bank statements came towards the end of a day of turmoil for Britain's currency and debt.
While the pound plunged by as much as 5% against the dollar to touch $1.0327, its weakest on record, in Asian trade, it had pared most of the day's losses in European trading on hopes of an emergency rate hike.
The statement at the close of trading on Monday pushed the pound back to as low as $1.0645 from $1.0820.
Sterling was trading at $1.0680 at 1644 GMT, down 1.6% on the day.
In the market for British government bonds, or gilts, the pressure had been even more intense, with five-year bond prices recording their joint-biggest daily fall since at least 1991, matching Friday's historic slump.
The five-year gilt's yield - the cost for the British government of new borrowing over five years - reached its highest since September 2008 at 4.603%, and has risen a full percentage point in the last two trading days as Prime Minister Liz Truss's government lost credibility with investors.
"The reaction to the proposed plan is a real concern and a fear that the new actions will add uncertainty to the economy," Atlanta Fed President Bostic told the Washington Post.
"The key question will be what does this mean for ultimately weakening the European economy, which is an important consideration for how the U.S. economy is going to perform."
With markets remaining hugely volatile, British lenders Halifax, Virgin Money and Skipton Building Society withdrew mortgage products from the market.
Gilt yields showed little reaction to the BoE and government statements, but very short-term interest rate swaps slashed the odds of an emergency rate rise in the coming week.
Mohamed El-Erian, chief economic adviser at Allianz, had earlier said the central bank would have no choice but to raise interest rates if Truss and Kwarteng did not back down.
"And not by a little, by 100 basis points, by one full percentage point to try and stabilise the situation," he told BBC Radio.
Truss, Britain's former foreign secretary, was elected as prime minister earlier this month by a vote of the Conservative Party's 170,000 members - not the broader electorate - after an internal party rebellion that drove Boris Johnson out of power.
She largely beat her rivals to the top job by vowing to reignite economic growth through tax cuts and deregulation to bring an end to the largely stagnant real wage growth that has marked her party's 12 years in government.
Her pledge to end so-called "Treasury orthodoxy" and go for growth marked a step change in British financial policy, harking back to the Thatcherite and Reaganomics doctrines of the 1980s.
"Markets go up and down," one veteran Conservative Party source said on Monday, declining to be named.
"We did something structural, short term, that will have seismic and positive long term benefits."
Further highlighting the extent to which investors have punished UK assets, the difference in 10-year borrowing costs for the British and German governments exploded to its widest since 1992, when Britain crashed out of the European Exchange Rate Mechanism.
British 10-year government bond prices are now on track for their biggest slump in any calendar month since at least 1957, according to a Reuters analysis of Refinitiv and BoE data.
Writing by Kate Holton and Amanda Cooper; additional reporting by Muvija M, Elizabeth Piper, Kylie MacLellan, Andy Bruce and Harry Robertson; Editing by Hugh Lawson, Mark Potter, Toby Chopra and Alexander Smith
https://www.reuters.com/markets/europe/ ... 022-09-26/
"Bank of England 'will not hesitate' to act as it monitors market turmoil"
By Amanda Cooper, David Milliken and Andy Bruce
September 26, 2022
Summary
* Pound briefly touched a record low against dollar
* Five-year gilts match Friday's record daily slump
* Yields on 2-year and 5-year debt up 100 bps in 2 days
* Finance minister to detail fiscal plans on Nov. 23
* BoE monitoring developments 'very closely'
LONDON, Sept 26 (Reuters) - The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely", after the pound plunged to a record low and British bond prices collapsed in response to the new government's financial plans.
Finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a so-called mini-budget that was designed to grow the economy by funding tax cuts with huge increases in government borrowing.
Such was the market turmoil on Monday there was growing speculation in financial markets that the BoE would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.
Instead, with the pound fragile and bond prices still tumbling, Kwarteng issued a statement just before the British stock market closed to say he would set out medium-term debt-cutting plans on Nov. 23, alongside forecasts from the independent Office for Budget Responsibility of the full scale of government borrowing.
The central bank welcomed "the commitment to sustainable economic growth" from Kwarteng and the independent scrutiny that the OBR growth and borrowing forecasts would bring.
"The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said.
"The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit."
U.S. Federal Reserve official Raphael Bostic said the market moves could lead to greater economic stress in Europe and the United States, while analysts and investors said the government had done the bare minimum to reassure markets.
"There seems no reason to believe that markets will give the government the benefit of the doubt ahead of a new fiscal plan by Kwasi Kwarteng," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
"The market could force their hand and there still could be an emergency rate hike before the next BoE meeting," he said, referring to the next scheduled policy announcement on Nov. 3.
INTENSE PRESSURE
The Treasury and central bank statements came towards the end of a day of turmoil for Britain's currency and debt.
While the pound plunged by as much as 5% against the dollar to touch $1.0327, its weakest on record, in Asian trade, it had pared most of the day's losses in European trading on hopes of an emergency rate hike.
The statement at the close of trading on Monday pushed the pound back to as low as $1.0645 from $1.0820.
Sterling was trading at $1.0680 at 1644 GMT, down 1.6% on the day.
In the market for British government bonds, or gilts, the pressure had been even more intense, with five-year bond prices recording their joint-biggest daily fall since at least 1991, matching Friday's historic slump.
The five-year gilt's yield - the cost for the British government of new borrowing over five years - reached its highest since September 2008 at 4.603%, and has risen a full percentage point in the last two trading days as Prime Minister Liz Truss's government lost credibility with investors.
"The reaction to the proposed plan is a real concern and a fear that the new actions will add uncertainty to the economy," Atlanta Fed President Bostic told the Washington Post.
"The key question will be what does this mean for ultimately weakening the European economy, which is an important consideration for how the U.S. economy is going to perform."
With markets remaining hugely volatile, British lenders Halifax, Virgin Money and Skipton Building Society withdrew mortgage products from the market.
Gilt yields showed little reaction to the BoE and government statements, but very short-term interest rate swaps slashed the odds of an emergency rate rise in the coming week.
Mohamed El-Erian, chief economic adviser at Allianz, had earlier said the central bank would have no choice but to raise interest rates if Truss and Kwarteng did not back down.
"And not by a little, by 100 basis points, by one full percentage point to try and stabilise the situation," he told BBC Radio.
Truss, Britain's former foreign secretary, was elected as prime minister earlier this month by a vote of the Conservative Party's 170,000 members - not the broader electorate - after an internal party rebellion that drove Boris Johnson out of power.
She largely beat her rivals to the top job by vowing to reignite economic growth through tax cuts and deregulation to bring an end to the largely stagnant real wage growth that has marked her party's 12 years in government.
Her pledge to end so-called "Treasury orthodoxy" and go for growth marked a step change in British financial policy, harking back to the Thatcherite and Reaganomics doctrines of the 1980s.
"Markets go up and down," one veteran Conservative Party source said on Monday, declining to be named.
"We did something structural, short term, that will have seismic and positive long term benefits."
Further highlighting the extent to which investors have punished UK assets, the difference in 10-year borrowing costs for the British and German governments exploded to its widest since 1992, when Britain crashed out of the European Exchange Rate Mechanism.
British 10-year government bond prices are now on track for their biggest slump in any calendar month since at least 1957, according to a Reuters analysis of Refinitiv and BoE data.
Writing by Kate Holton and Amanda Cooper; additional reporting by Muvija M, Elizabeth Piper, Kylie MacLellan, Andy Bruce and Harry Robertson; Editing by Hugh Lawson, Mark Potter, Toby Chopra and Alexander Smith
https://www.reuters.com/markets/europe/ ... 022-09-26/
Re: THE DAILY NEWS
REUTERS
"Wall Street ends lower, Dow confirms bear market"
By Noel Randewich
September 26, 2022
Summary
* Fed rate hikes have investors 'throwing in the towel'
* Casinos jump as Macau allows tour groups after nearly 3 years
* Indexes: Dow -1.11%, S&P 500 -1.03%, Nasdaq -0.60%
Sept 26 (Reuters) - Wall Street slid deeper into a bear market on Monday, with the S&P 500 and Dow closing lower as investors fretted that the Federal Reserve's aggressive campaign against inflation could throw the U.S. economy into a sharp downturn.
After two weeks of mostly steady losses on the U.S. stock market, the Dow Jones Industrial Average confirmed it has been in a bear market since early January.
The S&P 500 index confirmed in June it was in a bear market, and on Monday it ended the session below its mid-June closing low, extending this year's overall selloff.
With the Fed signaling last Wednesday that high interest rates could last through 2023, the S&P 500 has relinquished the last of its gains made in a summer rally.
"Investors are just throwing in the towel," said Jake Dollarhide, Chief Executive Officer of Longbow Asset Management in Tulsa, Oklahoma.
"It's the uncertainty about the high-water mark for the Fed funds rate."
"Is it 4.6%, is it 5%?"
"Is it sometime in 2023?"
Confidence among stock traders was also shaken by dramatic moves in the global foreign exchange market as sterling hit an all-time low on worries that the new British government's fiscal plan released Friday threatened to stretch the country's finances.
That added an extra layer of volatility to markets, where investors are worried about a global recession amid decades-high inflation.
The CBOE Volatility index hovered near three-month highs.
The Dow is now down 20.5% from its record high close on Jan. 4.
According to a widely used definition, ending the session down 20% or more from its record high close confirms the Dow has been in a bear market since hitting its January peak.
The S&P 500 has yet to drop below its intra-day low on June 17.
It is down about 23% so far in 2022.
In Monday's session, the Dow Jones Industrial Average fell 1.11% to end at 29,260.81 points, while the S&P 500 lost 1.03% to 3,655.04.
The Nasdaq Composite dropped 0.6% to 10,802.92.
Ten of 11 S&P 500s sector indexes fell, led by 2.6% drops in real estate and energy.
Gains in Amazon and Costco Wholesale Corp helped limit losses in the Nasdaq.
Shares of casino operators Wynn Resorts, Las Vegas Sands Corp and Melco Resorts & Entertainment jumped between 11.8% and 25.5% after Macau planned to open to mainland Chinese tour groups in November for the first time in almost three years.
Volume on U.S. exchanges was 11.9 billion shares, compared with the 11.2 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancing ones on the NYSE by a 5.37-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 120 new lows; the Nasdaq Composite recorded 16 new highs and 594 new lows.
Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Editing by Anil D'Silva, Shounak Dasgupta and David Gregoro
https://www.reuters.com/markets/europe/ ... 022-09-26/
"Wall Street ends lower, Dow confirms bear market"
By Noel Randewich
September 26, 2022
Summary
* Fed rate hikes have investors 'throwing in the towel'
* Casinos jump as Macau allows tour groups after nearly 3 years
* Indexes: Dow -1.11%, S&P 500 -1.03%, Nasdaq -0.60%
Sept 26 (Reuters) - Wall Street slid deeper into a bear market on Monday, with the S&P 500 and Dow closing lower as investors fretted that the Federal Reserve's aggressive campaign against inflation could throw the U.S. economy into a sharp downturn.
After two weeks of mostly steady losses on the U.S. stock market, the Dow Jones Industrial Average confirmed it has been in a bear market since early January.
The S&P 500 index confirmed in June it was in a bear market, and on Monday it ended the session below its mid-June closing low, extending this year's overall selloff.
With the Fed signaling last Wednesday that high interest rates could last through 2023, the S&P 500 has relinquished the last of its gains made in a summer rally.
"Investors are just throwing in the towel," said Jake Dollarhide, Chief Executive Officer of Longbow Asset Management in Tulsa, Oklahoma.
"It's the uncertainty about the high-water mark for the Fed funds rate."
"Is it 4.6%, is it 5%?"
"Is it sometime in 2023?"
Confidence among stock traders was also shaken by dramatic moves in the global foreign exchange market as sterling hit an all-time low on worries that the new British government's fiscal plan released Friday threatened to stretch the country's finances.
That added an extra layer of volatility to markets, where investors are worried about a global recession amid decades-high inflation.
The CBOE Volatility index hovered near three-month highs.
The Dow is now down 20.5% from its record high close on Jan. 4.
According to a widely used definition, ending the session down 20% or more from its record high close confirms the Dow has been in a bear market since hitting its January peak.
The S&P 500 has yet to drop below its intra-day low on June 17.
It is down about 23% so far in 2022.
In Monday's session, the Dow Jones Industrial Average fell 1.11% to end at 29,260.81 points, while the S&P 500 lost 1.03% to 3,655.04.
The Nasdaq Composite dropped 0.6% to 10,802.92.
Ten of 11 S&P 500s sector indexes fell, led by 2.6% drops in real estate and energy.
Gains in Amazon and Costco Wholesale Corp helped limit losses in the Nasdaq.
Shares of casino operators Wynn Resorts, Las Vegas Sands Corp and Melco Resorts & Entertainment jumped between 11.8% and 25.5% after Macau planned to open to mainland Chinese tour groups in November for the first time in almost three years.
Volume on U.S. exchanges was 11.9 billion shares, compared with the 11.2 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancing ones on the NYSE by a 5.37-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 120 new lows; the Nasdaq Composite recorded 16 new highs and 594 new lows.
Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Editing by Anil D'Silva, Shounak Dasgupta and David Gregoro
https://www.reuters.com/markets/europe/ ... 022-09-26/
Re: THE DAILY NEWS
REUTERS
"U.S. dollar strength creating 'untenable' situation that risks financial crisis - Morgan Stanley"
Reuters
September 26, 2022
NEW YORK, Sept 26 (Reuters) - The recent rally in the U.S. dollar is creating an “untenable situation" for riskier assets that could end in a financial or economic crisis, strategists at Morgan Stanley warned in a note Monday.
The dollar index hit a new two-decade high Monday as the pound hit an all-time low against the greenback.
The wild swings in currencies are another pressure on the global economy and corporate earnings, which are expected to fall as the Federal Reserve’s aggressive interest rate hikes over the summer begin to weigh on spending.
“The ultimate lows for stocks, and highs for yields, will likely be determined by the growth trajectory in earnings and the economy rather than inflation or the Fed,” analysts including Michael Wilson at Morgan Stanley wrote.
The pressures from the dollar’s rally will help push the S&P 500 to a new bear market low between 3000 and 3400 by early 2023, the firm said.
The S&P 500 fell 1% on Monday and it is close to its year low.
Reporting by David Randall; Editing by Andrea Ricci
https://www.reuters.com/markets/europe/ ... 022-09-26/
"U.S. dollar strength creating 'untenable' situation that risks financial crisis - Morgan Stanley"
Reuters
September 26, 2022
NEW YORK, Sept 26 (Reuters) - The recent rally in the U.S. dollar is creating an “untenable situation" for riskier assets that could end in a financial or economic crisis, strategists at Morgan Stanley warned in a note Monday.
The dollar index hit a new two-decade high Monday as the pound hit an all-time low against the greenback.
The wild swings in currencies are another pressure on the global economy and corporate earnings, which are expected to fall as the Federal Reserve’s aggressive interest rate hikes over the summer begin to weigh on spending.
“The ultimate lows for stocks, and highs for yields, will likely be determined by the growth trajectory in earnings and the economy rather than inflation or the Fed,” analysts including Michael Wilson at Morgan Stanley wrote.
The pressures from the dollar’s rally will help push the S&P 500 to a new bear market low between 3000 and 3400 by early 2023, the firm said.
The S&P 500 fell 1% on Monday and it is close to its year low.
Reporting by David Randall; Editing by Andrea Ricci
https://www.reuters.com/markets/europe/ ... 022-09-26/