Latest news with #USFiscalPolicy
Asharq Al-Awsat
02-07-2025
- Business
- Asharq Al-Awsat
Gold Edges Higher on Fiscal Debt Concerns while Traders await US Jobs Data
Gold prices edged higher on Wednesday as investors shifted their focus to the US fiscal situation and lingering uncertainty ahead of the July 9 deadline for US tariffs to take effect. Spot gold was up 0.1% at $3,340.67 per ounce at 1157 GMT. US gold futures were steady at $3,351.10. "The markets are again focused on the US fiscal situation ... and combined with uncertainty about the July 9 tariff deadline, these create fog for traders, who are directing flows towards safe-haven assets like gold," said Ricardo Evangelista, senior analyst at brokerage ActivTrades, Reuters reported. US Senate Republicans narrowly passed President Donald Trump's tax and spending bill on Tuesday, a package cutting taxes, reducing social safety net programmes and boosting military spending while adding $3.3 trillion to the national debt. "We still think debt level concerns, ongoing pressure on the Fed to adjust their rates and weaker US economic data will support the price of gold," said UBS commodity analyst Giovanni Staunovo. Data on Tuesday showed US job openings increased unexpectedly in May, but a decline in hiring added to signs that the labor market has shifted into lower gear. Fed Chair Jerome Powell reiterated that the US central bank plans to "wait and learn more" about the impact of tariffs on inflation before lowering interest rates, again setting aside Trump's demands for immediate and deep rate cuts. The focus now shifts to US ADP employment data due later in the day, followed by June non-farm payroll figures on Thursday, for further insights into labor market conditions. In other precious metals, spot silver gained 0.5% to $36.24 an ounce, platinum rose 2.2% to $1,380.31 and palladium climbed 2% to $1,122.
Reuters
01-07-2025
- Business
- Reuters
Rupee inches up, near-tenor swap maturities trim central bank's forward book
MUMBAI, July 1 (Reuters) - The Indian rupee inched up on Tuesday, tracking regional peers and the dollar index's decline to a three-year low amid persistent worries over U.S. fiscal and trade policies. Data released after market-hours on Monday showed that the size of Reserve Bank of India's FX forward book shrank to $65.2 billion at the end of May, down from $72.6 billion in the previous month. The data is released with a one-month lag. The Reserve Bank of India's aggregate short dollar position in FX forwards and futures had climbed to a record in February amid dollar-selling interventions by the central bank to support the rupee. The rupee has recovered about 2.5% since hitting an all-time low of 87.95 in February, aided by a dollar's struggles. Maturity of near-tenor swaps - worth about $7.4 billion in the up to 1-month bucket in April - likely contributed to shrinking the central bank's aggregate short dollar positions. "While the RBI had increased the short dollar positions in its forward book during periods of INR volatility, it has opportunistically termed out some of those positions while also letting some positions mature," said B. Prasanna, treasury head at ICICI Bank. On the day, the rupee and its regional peers were boosted by the dollar index drop to a multi-year low on worries over the U.S. fiscal deficit and uncertainty surrounding trade deals with major countries. The rupee was up 0.2% at 85.59 per U.S. dollar as of 10:20 a.m. IST. U.S. Treasury Secretary Scott Bessent warned on Monday that countries could be notified of sharply higher tariffs as a July 9 deadline approaches. The White House, meanwhile, said that an update on a trade deal with India was expected "very soon."
Forbes
25-05-2025
- Business
- Forbes
Bond Yields & Stocks: Something's Happening Here
The recent sharp rise in US Treasury bond yields has raised questions about whether the move is ... More connected to US fiscal policy or the end of American exceptionalism. The evidence for alternate explanations is examined. Despite some pundits being quite convinced that US fiscal policy or the end of American exceptionalism is the reason for the recent rise in US Treasury yields, Buffalo Springfield was closer to reality when they sang, 'Something's happening here, What it is ain't exactly clear.' It is not disputed that 10-year US Treasury yields are 52 basis points (0.52%) higher since the 2025 low of 3.99% on April 4. Using US Treasury Inflation-Protected Securities (TIPS) data, expected higher inflation accounted for 15 basis points, while the remaining 37 are from a higher real (after-inflation) return. 10-Year US Treasury Note: Yield Decomposition Notably, yields were at their nadir when the betting odds of recession were at their highest. As one should expect, yields have risen as the odds of a recession have declined. Directionally, the move in yields is logical, though some might still argue that yields have increased more than is warranted. Yields & Recession Odds US government bond yields in the US have risen more than many other developed countries since April 4. Interestingly, our neighbor to the North has experienced a similar increase. 10-Year Government Bond Yield Change Since US Low Notably, global government bond yields hit their low during the pandemic and have trended higher since then. Global Yields If one looks at government yields since the end of last year, a different picture emerges. While higher government bond yields have been a global phenomenon, the US has seen slightly lower yields! 10-Year Government Bond Year-To-Date Yield Change The other proof point for those arguing for the danger of US fiscal policy or the end of American exceptionalism is the recent weakness in the US currency relative to other currencies. While there is no doubt that the US dollar has been weaker year-to-date, it follows a period of exceptional relative strength. The US dollar remains stronger than it has been most of the time since 1999. Further, as shown in the historical data, periods of a weaker US dollar do not uniformly lead to higher US Treasury bond yields. US Dollar Without exception, the fiscal position of large countries, as measured by government debt relative to GDP, deteriorated with the impact of spending during the pandemic. Most countries were already piling on more debt relative to economic activity, but the pandemic accelerated the trend. Government Debt-To-GDP There is no magic level of debt-to-GDP that signals disaster since countries with a more resilient economy can service more debt. Furthermore, countries like the US, which has a high per capita GDP, control of the global reserve currency, and only issues debt in that currency, can handle significantly more debt levels than most other countries. German government debt levels are understated relative to reality. While Germany isn't legally liable for the debts of its profligately spending neighbors, it shares a common currency and its share of European Union (EU) issued debt. Historically, Germany has been forced to contribute the most to bailout funds when other EU countries have encountered problems. Recent Government Debt-To-GDP Ratios The US House of Representatives passed its tax legislation, which, despite reports to the contrary, does not make the US fiscal situation any worse, according to Strategas. Tariffs should produce about $200 billion in revenue annually and are not included in the legislation's official scoring, leading to much confusion. The US Senate will almost certainly make some changes, so the House bill is unlikely to be the final version implemented. The S&P 500 sits only 5.6% below its mid-February high in a robust rebound from the 19% decline from the peak reached on April 8. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), has fared worse, and the group is 12% below its mid-December summit. Market Returns The proximate cause of the decline in stocks last week was the reheating of the tariff war, which increased the headwinds for the US and global economy. President Trump threatened the European Union with a 50% tariff and smartphone makers, notably Apple (AAPL), with a 25% tariff rate. The betting odds of recession rose to 41%, sending stocks 2.6% lower last week. Betting Odds of 2025 US Recession Despite the likely economic drag from the tariffs, only two expected rate cuts for 2025 are expected. There is little chance of a rate cut at the mid-June Federal Reserve meeting. Number Of Fed Rate Cuts Expected The primary focus will likely remain on the fallout from the tariffs, with markets watching for any changes in US policy and retaliation or concessions from other countries. Friday's April inflation reading will likely be friendly. The Core PCE Price Index is the Federal Reserve's favorite measure of inflation and should moderate to 2.5% year-over-year from the 2.6% pace in March. The last Magnificent 7 stock to report earnings is Nvidia (NVDA) on Wednesday after the close. As the leader in artificial intelligence chips, its results and forecasts will be closely watched to judge the health of technology spending. The rise in US Treasury yields does not point to a US-specific problem; instead, it is a function of the lower probability of an economic downturn and perhaps a shift in the global appetite for government bonds. Yields are not high enough yet to significantly negatively impact stock valuation since the higher yields are accompanied by less risk of an earnings decline from a recession. Like many other countries, the current fiscal trajectory in the US is unsustainable, but the recent tax bill wouldn't worsen things. Investors can be forgiven for wishing it improved the path, but the Senate will have their say next, and bond market participants will be watching closely. Government bond investors are demanding higher yields from most countries, so there might be a shift in the willingness of markets to fund large deficits, but it is too early to know for sure.
Bloomberg
23-05-2025
- Business
- Bloomberg
Bloomberg Daybreak Asia: Treasuries Hold Gains, Bitcoin Hits New All-Time High
Asian shares posted a modest gain early Friday, after a rebound in Treasuries and the dollar eased some concerns about US fiscal policy. A regional stock gauge advanced 0.4% on gains in Japan, Australia and South Korea. US equity-index futures fluctuated in early Asian trading after the S&P 500 ended fractionally lower for its third daily decline. Treasuries steadied after rallying across the curve Thursday on moderating US fiscal concerns. We get market perspective from Eric Sterner, Chief Investment Officer at Apollon Wealth Management. Plus - Bitcoin surpassed $111,000 for the first time, with traders increasingly bullish on the prospects of the original cryptocurrency amid mounting institutional demand and support from Donald Trump's administration. Bitcoin climbed as much as 3.4% on Thursday to hit a record of $111,980, before paring some of the increase. Smaller tokens also rose in a broad rally, with second-ranked Ether at one point up about 7.3%. We get reaction from Peter Chung, Head of Research at quant crypto firm, Presto Research.
Yahoo
22-05-2025
- Business
- Yahoo
StanChart on 'Buy America' Trade, Outlook for Treasury Yields
Standard Chartered's Audrey Goh speaks on Bloomberg's The Asia Trade about the recent spike in US bond yields, driven partly by concerns over the sustainability of US fiscal policies. Despite the ongoing market turmoil, Goh remains optimistic about the near-term outlook for US equities to rebound and notes that market volatility is trending lower.
