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Archives: Reuters Articles

US equity funds see strong inflows as earnings optimism boost risk appetite

US equity funds see strong inflows as earnings optimism boost risk appetite

US equity funds saw robust inflows in the week through October 22 bolstered by optimism over a broadly upbeat quarterly earnings season so far.

Easing US-China trade tensions, with trade talks between US President Donald Trump and Chinese President Xi Jinping planned for next week, also supported sentiments.

Investors bought a net USD 9.65 billion worth of US equity funds during the week, after two weeks of net outflows, data from LSEG Lipper showed.

A generally upbeat earnings season so far, with strong results from General Motors, Coca-Cola, and 3M, in the most recent week, renewed investor appetite for equity funds.

Weekly net investments in technology sector funds jumped to a three-week high of USD 1.38 billion. Industrial and consumer staples sectors also received notable investments of USD 805 million and USD 586 million, respectively.

US bond funds attracted USD 8.4 billion, with investors logging a third weekly net purchase.

Short-to-intermediate investment-grade funds stood out as these funds received USD 3.63 billion, the largest weekly inflow since July 2.

Municipal debt funds and general domestic taxable fixed income funds also witnessed USD 1.12 billion and USD 556 million worth of inflows, respectively.

Investors, meanwhile, pumped USD 22.81 billion into US money market funds as they registered a fourth weekly net purchase in five weeks.

(Reporting by Gaurav Dogra, Editing by Nick Zieminski)

 

US dollar set for modest weekly gain after soft inflation data

US dollar set for modest weekly gain after soft inflation data

NEW YORK – The US dollar was almost flat on Friday after dipping following fresh inflation data that showed US consumer prices increased less than expected in September, keeping the Federal Reserve on track to cut interest rates again next week.

The Consumer Price Index rose 0.3% last month and 3.0% in the 12 months through September. Economists polled by Reuters had forecast the CPI increasing by 0.4% for the month and rising 3.1% year-on-year.

The US dollar index was last down 0.021% at 98.934, after earlier falling as much as 0.2%, still on track for a modest weekly gain.

“The headline was a bit softer than expected,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets. “The dollar was sold on the news, even though the market had nearly 100% confidence before the report that the Fed would cut rates, not only next week, but in December.”

The CPI report was published despite an economic data blackout because of the government shutdown. The figure, used by the Social Security Administration to calculate its cost-of-living adjustment for millions of retirees and other benefits recipients, was initially due on October 15.

The euro rose and was last up 0.06% at USD 1.163. Business activity in the euro zone grew at a faster pace than expected in October, led by the bloc’s services industry, a survey showed on Friday.

ALL EYES ON TRADE

Trade war worries were back on the agenda after US President Donald Trump said all trade talks with Canada were terminated over an advertisement by the province of Ontario which featured a recording of former President Ronald Reagan speaking negatively about tariffs.

The Canadian dollar was last slightly weaker at 1.40 per US dollar, but market reaction overall was fairly subdued. Investors’ focus remained on the looming meeting between Trump and Chinese President Xi Jinping next week.

The proposed Trump-Xi meeting in South Korea has spurred some expectations of a resolution to the on-again-off-again trade war between the world’s top two economies.

“I think expectations are quite high for the Trump-Xi meeting, with the upside risk of a significant de-escalation following the face-to-face meeting,” said Ben Bennett, head of investment strategy for Asia at L&G Asset Management.

New US sanctions on Russian suppliers Rosneft and Lukoil over Russia’s war in Ukraine pushed up oil prices.

That weighed on currencies tied to oil imports, including the yen. The yen’s performance is also linked to the policies of Japan’s new Prime Minister Sanae Takaichi, widely viewed as a fiscal and monetary dove.

The yen weakened to a two-week low and last fetched 152.85 per US dollar. Data earlier on Friday showed Japan’s core consumer prices stayed above the central bank’s 2% target, keeping alive expectations of a near-term rate hike.

Takaichi is preparing an economic stimulus package that is likely to exceed last year’s USD 92 billion to help households tackle inflation, government sources familiar with the plan told Reuters on Wednesday.

Sterling was down 0.15% at USD 1.33, after stronger-than-expected retail sales that were boosted by demand for gold from online jewellers. It was down about 1% this week after soft inflation data had investors adding to expectations for a rate cut from the Bank of England this year.

(Reporting by Hannah Lang in New York; additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Nick Zieminski, Peter Graff, and Diane Craft)

 

Gold trims losses after US inflation data; set to end nine-week win streak

Gold trims losses after US inflation data; set to end nine-week win streak

Gold prices pared losses on Friday after slightly softer-than-expected US inflation data reinforced expectations that the Federal Reserve will cut interest rates next week, but the metal was still set for its first weekly loss in 10 weeks.

Spot gold fell 0.2% at USD 4,118.29 per ounce by 01:42 p.m. ET (1742 GMT), after falling nearly 2% earlier in the session. The price is down over 3% for the week.

US gold futures for December delivery settled 0.2% lower at USD 4,137.8 per ounce.

“Gold and silver jump as September core CPI comes in lower than expectations, but it’s likely insufficient to entirely blunt this week’s selloff. Price action suggests that gold and, especially silver, need another leg lower before consolidation,” said Tai Wong, an independent metals trader.

Spot gold notched a record high of USD 4,381.21 on Monday, but has fallen over 6% since, as investors booked profits and signs of easing US-China trade tensions dented safe-haven demand.

Spot silver was down 0.6% at USD 48.65/oz, on track for a weekly loss of over 6%.

Labor Department data showed that US consumer prices rose 3.0% in the 12 months through September, slightly below economists’ expectations of a 3.1% increase.

Traders are almost fully pricing in a rate cut at the US central bank’s meeting next week, with another expected in December.

Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.

Meanwhile, the White House confirmed on Thursday that US President Donald Trump will meet Chinese President Xi Jinping next week, ahead of the November 1 deadline for additional US tariffs on Chinese imports.

“If (gold prices) fall below USD 4,000, we’re going to continue to see more of a dramatic washout in the market, perhaps down to USD 3,850, the next major support level,” said Phillip Streible, chief market strategist at Blue Line Futures.

Bullion has gained 55% this year, on geopolitical and trade tensions, robust central bank buying, and expectations of US interest rate cuts, among other factors.

Elsewhere, platinum slipped 1% to USD 1,608.77, and palladium fell 0.5% to USD 1,450.05.

(Reporting by Noel John, Kavya Balaraman, and Pablo Sinha in Bengaluru; Editing by Vijay Kishore, Alexandra Hudson, Leroy Leo, and Alan Barona)

 

US yields flat to marginally higher as market girds for next week’s rate cut

US yields flat to marginally higher as market girds for next week’s rate cut

NEW YORK – US Treasury yields were little changed to modestly higher on Friday, with data that showed consumer prices in the world’s largest economy rising less than expected in September supporting expectations of another interest rate cut next week.

A consumer sentiment survey from the University of Michigan showed a decline in the index, but with one-year inflation expectations showing steady levels.

Investors, however, were more focused on the US Consumer Price Index (CPI), which rose 0.3% last month after climbing 0.4% in August, data showed. On a year-on-year basis, the CPI grew 3.0% after advancing 2.9% in August.

Economists polled by Reuters had forecast the CPI increasing 0.4% and rising 3.1% year-on-year.

Excluding the volatile food and energy components, the CPI gained 0.2% after rising 0.3% in August. The so-called core CPI increased 3.0% year-on-year after rising 3.1% in August.

In afternoon trading, the benchmark 10-year yield turned lower after the CPI data, but was last up 1.2 basis points (bps) at 4%. The yield, however, was down about 1 bp on the week, its fourth straight weekly decline.

US 30-year bond yields were up 1.6 bps at 4.587%.

On the shorter end of the curve, the two-year yield, which reflects interest rate expectations, was slightly up at 3.484%. On the week, the two-year yield was up 1.8 bps, on track for its largest weekly decline since the week of September 22.

Rate moves during the week were largely confined to tight ranges, with no real catalyst as the federal government remained shuttered for a 24th straight day.

“Inflation is relatively tame. And you’ve still got a problem in the jobs market, there’s no question about it, which I think is why the Fed is going to continue doing what they’re doing,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“It looks around 88% now for two more cuts this year. So, it’s going to happen,” Saluzzi said.

The Federal Reserve is expected to reduce rates two more times this year, with a quarter-percentage-point cut baked in for the October 28-29 meeting, according to LSEG calculations using rate futures. For 2026, the Fed funds futures market has priced in about three more 25-bps cuts.

Jeremy Schwartz, senior US economist at Nomura in New York, said that while the CPI came out a little softer than expected, there are still signs of underlying pressure.

“As long as you’re in that mode where you’re tolerating a little bit more inflation, this is a good report. This is going to encourage them to keep on that path of insurance cuts or normalization, depending on how you view it,” Schwartz noted.

The yield curve, meanwhile, steepened in the wake of the CPI data, with the spread between US two-year and 10-year yields at 52.2 bps, from 50.8 bps late on Thursday. It was a pullback from the flattening trend seen in the last few days.

The curve hit 48 bps immediately after the inflation number, the flattest since September 12.

(Reporting by Gertrude Chavez-Dreyfuss, Additional reporting by Alden Bentley and Laura Matthews; Editing by Philippa Fletcher, Will Dunham, and Franklin Paul)

 

Japan’s Nikkei falls on profit-booking from Takaichi rally

Japan’s Nikkei falls on profit-booking from Takaichi rally

TOKYO – Japan’s Nikkei share average fell more than 1% on Thursday, as investors sold stocks to book profits from a rally driven by expectations for fiscal dove Sanae Takaichi’s new government.

As of 0019 GMT, the Nikkei was down 1.3% at 48,648.86. The broader Topix fell 0.61% to 3,246.49.

“Investors had scooped up stocks ahead of the parliamentary vote to elect Takaichi as prime minister, and as soon as she was elected, they started a selloff as all the good news was priced in,” said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

Hardline conservative Takaichi was elected Japan’s first female prime minister on Tuesday, sending the Nikkei to a record intraday high of 49,945.95 on that day. The index is set to fall for a second straight session if this momentum holds.

Sentiment was also hurt by concerns over the US-China relationship after reports that the Trump administration was considering curbs on exports to China made with US software.

“The news on the US-China issues became a trigger for the selloff, but it was not a fundamental reason for today’s declines,” Shimada said.

Technology investor SoftBank Group fell 2.97% to become the biggest drag for the Nikkei. Chip-related Advantest and Tokyo Electron lost 2.72% and 2.86%, respectively.

Meanwhile, defence-related shares rose, with Sumitomo Heavy Industries surging 8.3%. Kawasaki Heavy Industries and IHI rose 2.85% and 1.92%, respectively.

The shares rose on expectations that Japan may propose to boost defence spending as Takaichi and US President Donald Trump are scheduled to hold a meeting next week, Shimada said.

Of the more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 58% rose, 36% fell and 4% traded flat.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu)

 

Dollar edges up ahead of CPI, trade news; yen slips

Dollar edges up ahead of CPI, trade news; yen slips

TOKYO – The dollar drifted higher against its major peers on Thursday as traders waited on the delayed release of US consumer inflation data on Friday, while digesting tariff threats between Washington and Beijing.

The yen weakened to a one-week low against the dollar as the market awaited details of a big stimulus package from new Prime Minister Sanae Takaichi, widely viewed as favouring fiscal and monetary easing.

Sterling remained under pressure after British data on Wednesday showed consumer inflation held steady at 3.8% last month, defying economists’ estimates for it to accelerate.

Traders rushed to price a 75% chance of the Bank of England cutting rates by its December meeting – up sharply from a 46% probability before the data was published – although those odds had eased back to 61% on Thursday.

The US dollar index, which measures the currency against the yen, sterling, euro and three other peers, edged up 0.05% to 98.979 as of 0050 GMT.

The dollar added 0.17% to 152.21 yen, and earlier touched 152.26 yen for the first time since October 14.

Sterling sagged 0.09% to USD 1.3345. The euro eased 0.06% to USD 1.1604.

The Trump administration is considering curbs on a wide array of software-powered exports to China, from laptops to jet engines, to retaliate against Beijing’s latest round of rare earth export restrictions, Reuters reported on Wednesday.

The currency market reaction, though, has been largely sanguine, with traditional safe havens such as the yen and Swiss franc finding little support, while gold continued its retreat from a record high.

“Trade tensions remain the driver of volatility in the markets (but) it can be strongly argued market participants expect these threats not to materialize into action,” said Kyle Rodda, a senior financial markets analyst at Capital.com.

“They are being seen as brinkmanship and ways to drive negotiations forward.”

Meanwhile, the dearth of official US macroeconomic data continues with the government shutdown about to enter its 23rd day, although the consumer price index is due for release on Friday, more than a week late. Other data, such as monthly payrolls, have not been released at all.

“Markets are marking time. There’s not a lot of reliable news,” said National Australia Bank strategist Gavin Friend.

And even the CPI report “is almost being looked through”, because almost irrespective of what it shows, “everybody thinks the Fed is going to cut next week, and probably again in December”, Friend said.

Market-implied odds of a quarter-point Fed interest rate cut stands at 97% for October 29. A total of 48.5 basis points of reductions are priced in over the remainder of the year.

The Bank of Japan decides policy on October 30, with traders laying around 1-in-5 odds on a quarter-point rate hike.

Economists generally think the new prime minister won’t delay the BOJ from raising rates, but most still expect the next hike will come in December at the earliest, with January being the most popular choice, according to a recent Reuters poll.

Takaichi is preparing an economic stimulus package that is likely to exceed last year’s USD 92 billion to help households tackle inflation, government sources familiar with the plan told Reuters on Wednesday.

The exact scale of the package is still being finalised, the sources said. It could be announced as early as next month.

(Reporting by Kevin Buckland; Editing by Jacqueline Wong)

 

From FOMO to fear of margin calls: gold’s wild ride enters new stage

From FOMO to fear of margin calls: gold’s wild ride enters new stage

LONDON – Gold’s remarkable rise has moved into a new phase with the swelling influence of speculators bringing greater volatility yet market players are sticking with forecasts for higher prices in 2026 even if central bank demand eases.

On track for its biggest yearly rise since 1979, gold’s 54% rise year to date has seen it break through key psychological resistance levels at USD 3,000 per troy ounce in March and USD 4,000 in October.

Powering the run have been political tensions and US tariff uncertainty, and more recently, a wave of fear-of-missing-out (FOMO) buying.

“The nature of the rally has changed, driven now by Western investors rather than the stickier emerging market buyers of most of the last two years,” said John Reade, senior market strategist at the World Gold Council.

“This means more uncertainty and volatility even if the factors driving gold look set to continue,” he added.

On Monday, gold hit a record USD 4,381 an ounce, a level few had predicted a year ago or expected to see any time in their lifetimes.

Delegates heading to the London Bullion Market Association (LBMA) conference in Japan next week had forecast a year ago a price of USD 2,941 by this point.

Having achieved so many major milestones, bullion saw a 5% sell-off on Tuesday in the steepest daily fall for five years, driving the market’s relative strength index, which measures the magnitude of price changes, to “normal” from “overbought” for the first time in seven weeks.

“A consolidation would in fact not be unusual after such a sharp and steep rally and should be considered healthy,” said Julius Baer analyst Carsten Menke. “The fundamental backdrop for gold remains favourable.”

US RATE CUTS AND STOCKS

Gold’s record high on Monday took it up 20% since rate cuts by the US Federal Reserve in September.

That outpaced bullion’s performance versus most recent Fed easing cycles, according to analysts at Oxford Economics.

“In previous cycles the Fed was not cutting interest rates at all-time highs in US stocks, with bubble talk in markets and inflation still convincingly above their target,” said Nicky Shiels, head of metals strategy at MKS PAMP.

“Seems like this ‘everything bubble’ has room to run, and gold prices through USD 4,500 will only sustain the FOMO buying in retail.”

Gold prices have increased twofold in the past two years, having surpassed the 1980 inflation-adjusted high calculated by MKS PAMP at USD 3,590 (nominal high of USD 850 then).

A WARY EYE ON RISING S&P 500

Market specialists are keeping a wary eye on a rising S&P 500 stock index and a simultaneous inflow of investor cash into bullion, mindful of historical cases when sharp corrections in equity markets forced the sale of safe haven assets, including gold.

“A portion of gold purchases have been made as a hedge against equity market declines,” HSBC analyst James Steel said in a recent note.

“A correction in equities could, as they have in the past, trigger long liquidation as investors seek to raise cash or meet margin calls.”

CENTRAL BANKS, INSTITUTIONAL INVESTORS

With exponential gains over the past month, emerging market central banks don’t have to do much to keep progressing their common aim – increasing the share of gold in their foreign currency reserves for diversification.

Although central bank buying is widely expected to remain elevated for years, having supported demand for bullion since late 2022, the price rally automatically increases the value of their holdings.

“That thinking also applies to long-term institutional investors who are perhaps hitting portfolio thresholds and need to de-risk and reduce their gold holdings,” Shiels said.

Analysts also caution that if investor momentum slows in 2026, excess physical supply could begin to weigh on prices as demand from the jewellery sector in the key consuming regions is falling.

China’s January-September gold imports fell 26% in tonnage terms, according to the Trade Data Monitor. India’s January-July imports fell 25%.

(Reporting by Polina Devitt; Editing by Veronica Brown and Jason Neely)

 

Gold extends retreat from record high; US inflation data in focus

Gold extends retreat from record high; US inflation data in focus

Gold prices fell further on Wednesday, as investors took profits from bullion’s recent record rally while awaiting US inflation data due later this week for more cues on the Federal Reserve’s interest rate-cut path.

FUNDAMENTALS

* Spot gold was down 0.3% at USD 4,113.54 per ounce, as of 0115 GMT. Bullion fell more than 5% on Tuesday in its steepest fall since August 2020.

* US gold futures for December delivery climbed 0.5% to USD 4,129.80 per ounce.

* US President Donald Trump said he expected to reach a fair trade deal with Chinese President Xi Jinping when the two meet next week in South Korea, and played down the risks of a clash over the issue of Taiwan.

* Gold prices have gained about 56% this year, reaching an all-time peak of USD 4,381.21 on Monday, bolstered by geopolitical and economic uncertainties, rate-cut bets and sustained central bank buying.

* Investors now look forward to the release of US consumer price index report for September on Friday. The report has been delayed due to the US government shutdown.

* The Fed will lower its key interest rate by 25 basis points next week and again in December, according to a Reuters poll of economists who remain deeply divided on where rates will be by the end of next year.

* Meanwhile, the European Central Bank, which meets next week, is not expected to deliver a rate cut any time soon.

* Gold tends to appreciate when interest rates are low as they reduce the opportunity cost of holding non-yielding bullion.

* Elsewhere, spot silver fell 0.9% to USD 48.29 per ounce, platinum slipped 1.1% to USD 1,534.44 and palladium was flat at USD 1,406.76 per ounce

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)

 

Stocks mostly flat but earnings a positive; gold drops 5%

Stocks mostly flat but earnings a positive; gold drops 5%

NEW YORK – Major stock indexes were mostly near flat on Tuesday, with upbeat results and forecasts from top US companies providing some support, while gold prices dropped more than 5% as investors took profits after a recent rally.

The yen fell to a one-week low after conservative Sanae Takaichi was elected as Japan’s prime minister. Japan’s Nikkei share gauge closed at a record high on Tuesday.

Spot gold fell 5.31% to USD 4,123.85 an ounce, and had its steepest daily percentage fall since August 2020. Prices scaled an all-time peak of USD 4,381.21 on Monday and have gained about 60% this year.

US President Donald Trump said he expected to reach a fair trade deal with Chinese President Xi Jinping when the two meet next week in South Korea, and played down the risks of a clash over the issue of Taiwan.

The prospect of a resolution also helped bolster investor sentiment, along with a deal between Australia and the United States for the supply of rare earths minerals.

In earnings, GM shares jumped after the company raised its full-year forecast, and Coca-Cola gained after the company posted results that beat analysts’ estimates.

But the S&P 500 technology sector was down 0.2%, and Michael Green, chief strategist at Simplify Asset Management in Philadelphia, said the reaction to some earnings surprises was modest.

“The earnings are better than expected as companies continue to gain slightly in terms of margins, which suggests that (companies) have to be passing through the tariffs or pushing the tariffs back onto the importers,” Green said.

The Dow Jones Industrial Average rose 218.16 points, or 0.47%, to 46,924.74, the S&P 500 rose 0.22 points, essentially flat, to 6,735.35 and the Nasdaq Composite fell 36.88 points, or 0.16%, to 22,953.67.

MSCI’s gauge of stocks across the globe fell 0.84 points, or 0.08%, to 994.85.

The pan-European STOXX 600 index rose 0.21%.

Against the Japanese yen, the dollar strengthened 0.81% to 151.96.

Takaichi became Japan’s first female prime minister and leader of its ruling Liberal Democratic Party on Tuesday.

Traders bet that Takaichi’s government could muddy the interest rate outlook and bring about greater fiscal spending.

The dollar also rose against other currencies. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was 0.35% higher at 98.95, with the euro down 0.33% at USD 1.1602.

US Treasury yields eased as investors looked ahead to the Federal Reserve’s next moves.

The Fed could deliver as many as three rate cuts in the next six months based on market-based expectations, while the European Central Bank, which meets next week, is not expected to deliver a rate cut any time soon.

The yield on benchmark US 10-year notes fell 2.9 basis points to 3.959%, from 3.988% late on Monday.

Investor confidence was hit hard last week as a clutch of bad loans at US regional banks ignited concern over credit risks that threatened to spill into the broader markets. The prolonged US government shutdown also weighed on risk assets.

Oil prices ended higher. Brent crude futures rose 31 cents, or 0.5%, to settle at USD 61.32 a barrel, while US West Texas Intermediate crude futures for November delivery, which expired on Tuesday’s settlement, closed up 30 cents, or 0.5%, at USD 57.82.

(Reporting by Caroline Valetkevitch; Additional reporting by Amanda Cooper in London and Pranav Kashyap and Twesha Dikshit in Bengaluru; Editing by Will Dunham, Zieminski, and Jamie Freed)

 

US bonds rise as investors eye Fed rate cut, delayed inflation data

US bonds rise as investors eye Fed rate cut, delayed inflation data

NEW YORK – US Treasuries rose for a second straight session on Tuesday, pushing their yields lower and with not much of a catalyst moving the market, as investors continued to position for the prospect of multiple Federal Reserve interest rate cuts in the rest of 2025 and next year.

Ahead of the US central bank’s policy meeting next week, Fed officials are currently in a blackout period in which they are temporarily restricted from making public comments or speeches about monetary policy.

Bond investors will be looking to the release on Friday of the Consumer Price Index report for September for clues on whether or not inflation remains under control. The CPI excluding volatile food and energy items is expected to have increased 0.3% on a month-over-month basis, according to the consensus forecast of economists polled by Reuters. That reading would be unchanged from August.

A three-week shutdown of the US government has delayed the release of the CPI report and many other economic indicators.

“We’re not running away to lower rates with the lack of data,” said Gregory Faranello, head of US rates strategy at AmeriVet Securities in New York.

“But the rate market remains firm with room for lower yields in the US 10-year (note). With the Fed priced on the short-end for what we know … we view a continued move lower from here consistent with a flatter yield curve,” he noted.

The Fed is expected to reduce rates two more times this year, with a quarter-percentage-point cut baked in for the October 28-29 meeting, according to LSEG calculations using rate futures. For 2026, the fed funds futures market has priced in three more 25-basis-point cuts.

‘BOND MARKET HAS ROOM TO RALLY’

In afternoon trading, the benchmark 10-year yield slipped 2.7 bps to 3.961%, while 30-year bond yields were down 3.3 bps at 4.546%.

On the shorter end of the curve, US two-year yields, which reflect interest rate expectations, slipped 1 bp to 3.455%.

“I still think the bond market has room to rally even with the economy expected to continue to grow in the short term,” said Vinny Bleau, director of fixed income capital markets at Raymond James in Memphis.

“The low of 3.85% from April might be the lowest 10s (10-year notes) get this year. Into next year, I think if the Fed continues to ease some, the job market weakens more, or some combination of factors, 10s could fall to around 3.60% to 3.70% which are the lows reached in late September/early October of last year,” he added.

Moves in the Treasury market were also fairly contained in narrow ranges, with the federal government now in its second-longest shutdown along with the 1995-1996 closure.

The easing of US-China trade tensions also has helped support bids for Treasuries. US President Donald Trump on Monday expressed optimism about a potential fair trade deal with Chinese President Xi Jinping, following his previous comments that the hefty US tariffs on China are “not sustainable.”

The yield curve, meanwhile, continued to bull flatten, with the spread between US two-year and 10-year yields at 50.2 bps, from 52.3 late on Monday. The curve hit 50 bps on Tuesday, the flattest since September 17, suggesting possibly that investors have lowered their inflation expectations.

A bull flattening curve refers to a scenario in which long-term rates are falling more quickly than those on the short end of the curve, and typically precedes Fed rate cuts.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Will Dunham and Paul Simao)

 

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