2025-01-08 19:44

US 10-yr Treasury yields hit highest since April UK 10-yr gilt yields at highest since 2008 Bonds selloff ripples into currencies, stocks LONDON/NEW YORK, Jan 8 (Reuters) - A sharp selloff in the world's biggest government bond markets and a continued rise in the dollar sent shockwaves through financial markets, with pain seen deepening as uncertainty grows over U.S. President-elect Donald Trump's policies. On Wednesday, the 10-year Treasury yield , underpinning trillions of dollars in daily global transactions, jumped above 4.7% to the highest since April, and UK peers hit their highest levels since 2008 , . Yields rise when bond prices fall. There was no obvious trigger for the latest wave of heavy selling. Germany's 10-year Bund yield touched a more than five-month high amid accelerating euro zone inflation, and elevated bond supply. The yield , the euro zone benchmark, was up nearly four basis points to 2.524% at the end of Wednesday. Japan's 10-year benchmark hit a 13-1/2 year high of 1.185% in morning trade in Asia on Thursday. The moves unleashed a fresh wave of selling in currencies against the greenback, especially for sterling , which slid more than 1% before slightly recovering, and the euro , which was headed closer toward the $1 mark. The S&P 500, which has rallied post Trump's win, has recently started to falter, although it closed more or less flat on Wednesday. Trump, in a press conference at Mar-a-Lago on Tuesday, decried high U.S. interest rates despite the Federal Reserve being in the midst of an easing cycle. "Inflation is continuing to rage, and interest rates are far too high," the president-elect said. Central banks all but declared victory over inflation in 2024, but a number of metrics show price pressures are rising again. Trump's plans for higher trade tariffs, tax cuts and deregulation threaten to push up inflation and strain government finances, thereby also limiting the Federal Reserve's scope to cut interest rates. "What it really boils down to is the term premium," said Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia, referring to the premium investors demand for holding long-term bonds. "85% of the rise in yields that we have seen since mid-September is accounted for by the term premium," he said. "That is a reflection that fiscal policy uncertainty continues to climb as we head to the new administration being sworn in." Hughey pointed out that the current term premium for the 10-year note is 54 bps, up from negative 29 bps in mid-September. This means that 10-year yields are 54 bps higher than what can be justified by Fed policy expectations. SUPPLY WAVE Other governments are busy repairing their own finances and shoring up their economies, while ramping up bond sales. Long-dated yields, which tend to be less susceptible to short-term swings in expectations for monetary policy, have hit multi-year highs globally, partly because of the tidal wave of new bonds this year. Europe's bond markets are having to absorb heavy issuance to start the year, with Germany selling 5 billion euros of 10-year Bunds and Italy selling new 10-year and 20-year green bonds via syndication. Byron Anderson, head of fixed income at Laffer Tengler Investments in Scottsdale, Arizona, cited about $14.6 trillion of Treasury debt maturing over the next two years, which means there is a lot of debt to extend beyond one year. Traders say the incoming Trump administration will need to change the current focus on relying more on short-term debt. Thirty-year Treasury bond yields have risen 60 basis points in a month - the largest such increase since October 2023. They are now perilously close to 5%, a level rarely seen in the past two decades. This has pushed the premium of 30-year yields to two-year yields to its highest in nearly three years - a dynamic known as "curve steepening". "There's a big pipeline of bonds that needs to be sold, so that gives you a steeper curve as well as a higher term premium in longer bonds. I think that's one of the main drivers," said Danske Bank chief analyst Jens Peter Soerensen. UK 30-year gilt yields have hit their highest since 1998 to around 5.4%, adding to worries about the impact of higher borrowing costs on the British government's already shaky finances. Chinese government bonds have been going the other way and rallying, pushing yields to record lows as the economy stalls and investors expect rate cuts. But even that rally took a breather on Thursday with ten-year yields flat at 1.6%. Sign up here. https://www.reuters.com/markets/rates-bonds/global-markets-yields-2025-01-08/

2025-01-08 19:30

SAO PAULO, Jan 8 (Reuters) - Brazil registered a total net outflow of $18.01 billion in 2024, the largest amount since 2020, central bank data showed on Wednesday, amid a historic depreciation of the Brazilian real in the final weeks of the year. The result was driven by net outflows on the financial segment, according to the data, including foreign investments, profit remittances, and interest payments, despite a net inflow on the commercial segment, related to exports and imports. The Brazilian real depreciated by more than 27% last year, its biggest swing since 2020. The currency hit record lows in the last two months of 2024 amid market worries over government spending as well as currency outflows. In December alone, Latin America's largest economy reported a net outflow of $26.41 billion, the central bank data showed. In 2025, the real has so far regained some ground, strengthening about 1% against the U.S. dollar in the spot market. Sign up here. https://www.reuters.com/world/americas/brazil-posts-largest-yearly-dollar-outflow-since-2020-2025-01-08/

2025-01-08 19:23

Canadian dollar dips 0.2% against the greenback Trades in a range of 1.4340 to 1.4409 Price of U.S. oil decreases 1.4% 10-year yield touches a 6-week high at 3.384% TORONTO, Jan 8 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Wednesday as U.S. Treasury yields climbed and investors grew more worried about the threat of American trade tariffs. The loonie was trading 0.2% lower at 1.4390 to the U.S. dollar, or 69.49 U.S. cents, after trading in a range of 1.4340 to 1.4409. It touched a near 5-year low in December at 1.4467, pressured by a hawkish shift by the Federal Reserve and U.S. President-elect Donald Trump's threat of a 25% tariff on imports from Canada. "Looking at the broader rebound in the USD, tariffs look like the culprit here again as Trump mulls over emergency legislation with regard to implementing tariffs," said George Davis, chief technical strategist at RBC Capital Markets. "This has boosted the USD across the board." The U.S. dollar (.DXY) , opens new tab rose for a second straight session against a basket of major currencies as U.S. bond yields continued their recent advance, following a report that Trump was contemplating the use of emergency measures to allow for a new tariff program. The price of oil, one of Canada's major exports, gave back some of its recent gains after large builds in U.S. fuel inventories last week. U.S. crude oil futures were trading 1.4% lower at $73.23 a barrel. Investors were awaiting U.S. and Canadian employment data on Friday for clues on prospects of additional interest rate cuts by the Fed and the Bank of Canada. Economists forecast that Canada's economy added 25,000 jobs in December and the unemployment rate edged up to 6.9% from 6.8% in November. Canadian bond yields moved higher across a steeper curve, tracking moves in U.S. Treasuries. The 10-year was up 4.1 basis points at 3.343%, after earlier touching its highest level since Nov. 25 at 3.384%. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-edges-lower-us-tariff-threat-grows-2025-01-08/

2025-01-08 19:21

USDA says new vaccines will match current virus strain Current outbreak has killed over 130 million birds in all 50 states Trade risks hinder immediate vaccine deployment, Agriculture Secretary Vilsack has said Jan 8 (Reuters) - The U.S. will rebuild a stockpile of bird flu vaccines for poultry that match the strain of the virus circulating in commercial flocks and wild birds, the Department of Agriculture said on Wednesday, in a sign of the widespread and devastating nature of the nation's persistent outbreak. The outbreak, which began in poultry in early 2022, has killed more than 130 million commercial, backyard and wild birds in all 50 states, according to the U.S. Centers for Disease Control and Prevention. Deaths of millions of egg-laying hens pushed wholesale egg prices to record highs last month. Bird flu is also circulating among dairy cattle herds and has infected nearly 70 people, most of them farm workers exposed to sick poultry or cattle. The U.S. reported its first human death related to bird flu on Monday. The U.S. built a poultry vaccine stockpile after the prior major bird flu outbreak in 2014 and 2015, though the vaccines were never used, the agency said in a press release. "USDA believes it is prudent to again pursue a stockpile that matches current outbreak strains," the release said. Egg and turkey farm groups have called for deploying a vaccine, citing the economic toll for farmers of killing their flocks. Agriculture Secretary Tom Vilsack has said such deployment would not be possible in the short term, in part due to trade risks. Many countries ban imports of vaccinated poultry over concerns the vaccine could mask the presence of the virus. The vaccines purchased by USDA following the prior bird flu outbreak were developed by Merck & Co (MRK.N) , opens new tab, Ceva (CEVA.O) , opens new tab and one by U.S. government researchers, said David Suarez, who was acting laboratory director of the USDA’s Southeast Poultry Research Laboratory in Athens, Georgia, in a 2023 interview. "All the vaccines they purchased expired, and they threw it away," Suarez said in 2023. Suarez at the time said there was limited appetite for rebuilding a vaccine stockpile until it was likely birds would be vaccinated. "There's not an appetite of using the limited resources on something that only has a shelf life of two to three years," he said. Animal health company Zoetis (ZTS.N) , opens new tab reached out to USDA during the 2022 outbreak and was told the government did not plan to make new purchases for its vaccine stockpile, the company said in 2023. The USDA also said it has enrolled 28 states in its national bulk milk testing program to detect bird flu in dairy herds, and that testing so far had not detected new infected herds in states that previously were virus-free. In the past 30 days, USDA has reported infected herds in California and Texas, according to agency data. Sign up here. https://www.reuters.com/business/healthcare-pharmaceuticals/us-build-new-stockpile-bird-flu-vaccine-poultry-2025-01-08/

2025-01-08 19:12

NEW YORK, Jan 8 (Reuters) - U.S. crude oil imports from Canada rose last week to the highest on record, data from the U.S. Energy Information Administration (EIA) showed on Wednesday, ahead of incoming U.S. president Donald Trump's plans to levy a 25% tariff on Canadian imports. Trump, who has long complained about Canada's trade surplus with the U.S., on Tuesday threatened to use economic force to turn Canada into the 51st U.S. state. He previously said he will apply tariffs on imports from Canada and Mexico immediately after his inauguration on Jan. 20. Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023. Many U.S. oil refiners, especially in the Midwest, are geared specifically to run heavier crude oil grades sourced from Canada. U.S. crude oil imports from Canada rose by 689,000 barrels a day in the week ended Jan. 3 to 4.42 million barrels a day, the highest in records going back to June 2010, the EIA data showed. That was the biggest week-over-week jump in imports from Canada since the week ended July 12, 2024. "Canada obviously matters a lot, and there's a lot of two-way trade," said Josh Young, chief investment officer at Houston, Texas-based investment firm Bison Interests. Total U.S. imports of crude oil fell by 498,000 bpd to 6.43 million bpd last week, the lowest in a month, EIA data showed. The jump in imports from Canada could also be due to strong Canadian output, Kpler analyst Matt Smith said. He noted that Canadian onshore stockpiles have risen from a 4-year low in October, even as exports from the Westridge terminal at the Port of Vancouver, supplied by the Trans Mountain pipeline, have been steady. Sign up here. https://www.reuters.com/markets/commodities/us-oil-imports-canada-hit-record-ahead-tariff-threat-eia-data-shows-2025-01-08/

2025-01-08 17:58

NEW YORK, Jan 8 (Reuters) - Longer-term U.S. Treasury yields have surged to multi-month highs, outpacing a rise in shorter-dated yields, with some of the disparity reflecting anticipation that the incoming Trump administration will need to change the current focus on relying more on short-term debt, traders say. President Joe Biden's Treasury Secretary Janet Yellen has increased sales of Treasury bills, debt maturing in one year or less, which have seen strong demand from money market investors. But that has taken the portion of bills above the recommended levels for the overall debt outstanding, a process that will likely need to be addressed by President-elect Donald Trump's nominee for Treasury chief Scott Bessent. “The market is building more term premium into the long end to account for the fiscal situation, the deficit, and potentially a lot more issuance in the long end of the curve as they unwind the Yellen policy,” said Dan Mulholland, head of rates – trading and sales at Crews & Associates. Ten-year yields were below those on two-year notes until around September and have been rising at a faster pace since June. Ten-year yields reached 4.73% on Wednesday, the highest since April, while two-year yields have held relatively steady at 4.27%. Traders say that abundant supply of short-term debt was a factor keeping the U.S. Treasury yield curve inverted for longer than is usual, from around July 2022 to September, which is now being reversed. "That kept the yield curve inverted, and now I think there's a feeling that that's not the way to do it," said Tom di Galoma, head of fixed income trading at Curvature Securities. An expected increase in longer-dated debt is not the only factor pushing yields higher. Trump’s policies are expected to boost growth and potentially inflation, both of which will lead to higher interest rates. The Treasury often uses sales of short-term debt as a kind of shock absorber that it can increase or decrease when it faces large swings in its borrowing needs. But longer-term, market observers say it's unwise to rely too much on short-term debt, as it increases refinancing risks if market conditions turn. Outstanding Treasury debt has surged to $36 trillion from $23 trillion in late 2019 as the government relies more on debt to finance spending and plug its budget deficit, which analysts expect will continue to worsen for the foreseeable future. Treasury bills now account for 22% of debt, above the 15-20% recommendation by the Treasury Borrowing Advisory Committee. They reached 25% in 2020 as the government ramped up spending related to COVID-related business closures. They then fell back to around 15% in 2022 but have taken a larger share of overall debt issuance since. While the Treasury is not expected to immediately increase its longer-dated debt auctions, market participants have begun pricing for the likely eventuality and will watch the U.S. government’s quarterly refunding announcements for signals on when it will likely begin. “Trump's Treasury Secretary is not going to cause disruption in the market by suddenly changing the auction sizes, but it could be that in late April, early May, that we start to see announcements for higher coupon auction sizes,” said Will Compernolle, macro strategist at FHN Financial. He added that increases in longer-dated debt may begin in the summer. Sign up here. https://www.reuters.com/markets/rates-bonds/treasury-yield-surge-reflects-expectations-more-long-term-debt-2025-01-08/