US yields extend decline after GDP data, Fed comments

NEW YORK, Nov 29 – US Treasury yields dropped on Wednesday, with the benchmark 10-year Treasury note on track for a third straight session of declines, as the latest reading on economic growth failed to upend market expectations that a Federal Reserve rate cut was on the horizon.

Gross domestic product increased at a 5.2% annualized rate last quarter, revised up from the previously reported 4.9% pace and the fastest pace of expansion since the fourth quarter of 2021, the Commerce Department’s Bureau of Economic Analysis said in its second estimate of third-quarter GDP. However, the effect of borrowing costs on the labor market and spending appears to have stalled momentum.

The yield on 10-year Treasury notes declined 7 basis points to 4.269% after falling to 4.253%, its lowest since Sept. 14. For the month, the yield is currently on track for its biggest drop since December 2008.

Softening economic data, including a reading on inflation two weeks ago, has heightened expectations the Fed has completed its rate hike cycle, while projecting a greater likelihood the central bank will need to cut rates in the coming months.

“We’ve just had a gigantic move and it’s ongoing, it raises the question what’s going on, why the big move and there’s a number of factors – one of them is that when the rates got up to 5% the Fed said, ‘No mas, we are tightening too much,'” said Robert Tipp, Chief Investment Strategist and Head of Global Bonds at PGIM Fixed Income in Newark, New Jersey.

“The next thing that happened was the data started going the right way, the unemployment rate is up and inflation is decelerating and that all points the light in the direction of the next move is going to be a cut… right now everything came together to traverse from the high side to the low side.”

Underscoring the slowing momentum in the economy, the Fed said in its “Beige Book” on Wednesday that US economic activity slowed from late October through the middle of November, while businesses reported inflation largely moderating and easier hiring for jobs.

Markets are pricing in a nearly 80% chance that the Fed will cut rates by at least 25 basis points in May, according to CME’s FedWatch Tool, up from about 65% on Tuesday. Projections for a March cut of at least 25 basis points have also grown and are now showing a nearly 50% chance compared with a roughly 35% chance the prior day.

The yield on the 30-year Treasury bond fell 8 basis points to 4.444%.

Yields fell on Tuesday after Fed Governor Christopher Waller, seen as a hawkish member of the central bank, flagged the possibility of a rate cut if inflation continues to decline.

On Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic said he expects US growth to slow and inflation to continue to ease on the back of tight monetary policy, although Richmond Fed President Thomas Barkin, a non-voting member of the central bank, said talking about rate cuts is “premature.”

The two-year US Treasury yield, which typically moves in step with interest rate expectations, fell 9 basis points to 4.65% after touching 4.608%, its lowest level since July 13.

Investors will get another look at inflation data on Thursday in the form of the personal consumption expenditures (PCE) price index.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a negative 38.3 basis points, up from a negative 52.62 on Tuesday.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.171% after closing at 2.173% on Tuesday.

The 10-year TIPS breakeven rate was last at 2.224%, indicating the market sees inflation averaging about 2.2% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Deepa Babington)

Gold steadies near 7-month peak on Fed rate cut bets

Nov 29 – Gold firmed near its highest in about seven months on Wednesday as expectations that the US Federal Reserve may cut interest rates by the first half of next year boosted the outlook for the zero-yield precious metal.

Spot gold was up 0.1% at USD 2,043.94 per ounce by 3:44 p.m. ET (2044 GMT), after hitting its highest since May 5.

US gold futures settled 0.3% higher at USD 2,067.1.

“Our belief is that there could be some pullback in gold next week, but in general, we believe this trend of sideways to higher momentum will continue in the near future,” said David Meger, director of metals trading at High Ridge Futures.

“The current belief is that the Fed is done hiking rates and rate cuts will come by 2024, if data supports or undermines that argument, we will see the gold market trade accordingly.”

Lower rates boost demand for non-yielding gold.

Traders are now pricing in a 48% chance of rates easing in March, up from about 35% on Tuesday, CME’s FedWatch Tool showed.

Fed Governor Christopher Waller on Tuesday flagged a possible rate cut in the months ahead.

The dollar index rose 0.1% for the day after dropping to its lowest since Aug. 11. A weaker dollar makes gold cheaper for overseas buyers.

Also helping gold, benchmark 10-year Treasury yields fell, poised to mark their worst month since July 2021.

Investors will monitor the US Personal Consumption Expenditures (PCE) data on Thursday, the Fed’s preferred inflation indicator, for further insights into the rate outlook.

Beyond near-term economic, interest rate, and geopolitical concerns, US gold investors’ focus is likely to shift towards the state of financial markets, said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

Silver fell 0.1% to USD 24.99 per ounce and platinum lost 0.9% to USD 931.20. Palladium dropped 2.5% to USD 1,028.39 per ounce.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad; additional reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Tomasz Janowski and Shailesh Kuber)

Dollar rises from three-month low; hawkish RBNZ boosts kiwi

LONDON/SINGAPORE, Nov 29 – The US dollar ticked up on Wednesday after falling to its lowest in more than three months on hopes that the Federal Reserve will soon be cutting rates.

New Zealand’s dollar was one of the biggest movers, rising 0.49% to USD 0.6166, after the Reserve Bank of New Zealand on Wednesday held interest rates but warned that further policy tightening might be needed.

The kiwi had surged more than 1% earlier in the session to a four-month high of USD 0.6207.

Comments from Fed official Christopher Waller flagging a possible rate cut in the months ahead sent U.S. bond yields and the dollar sliding on Tuesday.

“(Waller’s) relatively hawkish, historically speaking, so if his attitude is turning a little bit more dovish, it sort of says that perhaps a general consensus of the board members is that rates have peaked and maybe could even be cut next year,” said Kyle Rodda, senior financial market analyst at Capital.com.

The dollar index, which tracks the currency against six peers, hit its lowest since early August at 102.46.

It then pared some of its losses and was last up 0.12% at 102.73. The dollar was on track to fall 3.7% in November, its biggest monthly drop in a year.

“Essentially it’s come off the back of the U.S. and global bond rally, in particular with the U.S. 10-year (Treasury note),” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

The U.S. 10-year Treasury yield US10YT=RR dropped 5 basis points (bps) on Tuesday and was down by the same amount again on Wednesday to 4.2898%, its lowest since mid-September.

Yields move inversely to price, and lower bond yields make fixed income investments in a country look less attractive relative to peers, weighing on the local currency.

The euro briefly crossed USD 1.10 for the first time since August on Tuesday but pared gains and was little changed at USD 1.0991.

Inflation data from Spain and the German state of North Rhine-Westphalia showed that price pressures in the euro zone continued to ease in November.

“On an intraday basis (the euro) has come off the high… so there has been some impact for sure,” Tan said.

“But of course, on the flip side U.S. bond yields are continuing to grind lower,” he added. “There are two contrasting forces at play here.”

The euro zone-wide inflation figure is due out on Thursday, before the Fed’s preferred measure of U.S. inflation, the personal consumption expenditures index, or PCE.

Japan’s yen, which is particularly sensitive to U.S. bond yields, held on to recent gains on Wednesday. The dollar was little changed at 147.37 after earlier falling to a more-than-two-month low of 146.68 yen.

China’s onshore yuan finished the domestic session at 7.1246 per dollar, the strongest closing price since June 16.

Gold at near 7-month peak as dollar, yields dip on Fed rate-cut bets

Nov 29 – Gold prices touched nearly a seven-month high on Wednesday, propelled by a decline in the U.S. dollar and bond yields as investors grew confident that the Federal Reserve would likely cut interest rates by the first half of next year.

Spot gold rose 0.1% to USD 2,042.66 per ounce by 0817 GMT, after hitting its highest since May 5. US. gold futures for December delivery rose 0.2% to USD 2,043.60 per ounce.

“Gold is driven by an increasing market expectation of a Fed pivot from a hawkish tilt to a dovish tilt in the first half of next year – earlier than it did before,” said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.

“The key point to look for is the PCE (personal consumption expenditures) data and markets are expecting another slowdown in U.S. inflationary pressure.”

Fed Governor Christopher Waller on Tuesday flagged a possible rate cut in the months ahead.

Traders are now pricing in a more than 70% chance of rates easing in May, compared with a 50% chance on Tuesday, CME’s FedWatch Tool shows.

Lower rates reduce the opportunity cost of holding non-interest-bearing bullion.

Investors’ attention is now on the revised U.S. third-quarter GDP figures due at 1330 GMT and key PCE data – the Fed’s preferred inflation gauge – on Thursday.

Making gold less expensive for other currency holders, the dollar index hit a more than three-month low against its rivals and was poised to mark its worst monthly performance in a year. Yields on 10-year Treasury notes fell to an over two-month low of 4.2802%.

Spot gold may extend gains into a range of USD 2,059-USD 2,069 per ounce, Reuters technical analyst Wang Tao said.

Spot silver fell 0.1% to USD 24.99 per ounce and platinum slipped 0.4% to USD 936.17. Palladium dropped 1% to USD 1,044.96 per ounce.

Oil prices gain near 2% on expectations of deeper OPEC+ cuts

BENGALURU, Nov 29 – Oil prices rose more than USD 1 a barrel on Wednesday as investors focused their attention on expectations of fresh supply cuts from OPEC+ and looked past a jump in US crude, gasoline, and distillate stockpiles.

Brent crude futures advanced by USD 1.42, or 1.7%, to settle at USD 83.10 a barrel, while US West Texas Intermediate (WTI) crude futures gained USD 1.45, or 1.9%, to settle at USD 77.86 a barrel.

Oil markets have found support from hopes of some form of a price-supportive resolution from the OPEC+ group, Kpler analyst Matt Smith said.

Members of OPEC+, which includes the Organization of Petroleum Exporting Countries and its allies such as Russia, are due to hold a policy meeting on Thursday. Talks ahead of the meeting were focusing on additional cuts, although details were yet to be agreed, sources close to the group told Reuters.

Another media report earlier said that the cut could be of as much as 1 million barrels a day.

“All eyes are on the Nov. 30 OPEC meeting, and the fine details will matter,” CFRA analyst Stewart Glickman said.

The Energy Information Administration reported a surprise build in US crude oil and distillate fuel stocks last week, indicating weak demand. Gasoline stocks also rose by more than expected, the data showed.

However, the impact of those builds was neutralized by large draws in other refined products, like residual fuel oil, UBS analyst Giovanni Staunovo said.

A severe storm in the Black Sea region has disrupted up to 2 million bpd of oil exports from Kazakhstan and Russia, according to state officials and port agent data, raising the prospect of short-term supply tightness.

Kazakhstan’s largest oilfields are cutting combined daily oil output by 56% from Nov. 27, the Kazakh energy ministry said.

(Reporting by Shariq Khan; Additional reporting by Ahmad Ghaddar, Yuka Obayashi, and Muyu Xu; Editing by Marguerita Choy, Kirsten Donovan, and Daniel Wallis)

Stocks rise as dollar falls, gold rallies on Fed commentary

NEW YORK/LONDON, Nov 28 – MSCI’s global stock index advanced on Tuesday while the dollar fell as a Federal Reserve official signaled that the US central bank was done raising rates and could even consider rate cuts if inflation keeps easing.

The US dollar index hit a 3-1/2 month low and was on track for its biggest monthly drop in a year as investors took the view that growth in the world’s largest economy is starting to slow down, with the market starting to price in a rate cut by the first half of the year.

Fed Governor Christopher Waller bolstered these bets by flagging the possibility of lowering the Fed policy rate in the months ahead if inflation continues to come down. Waller also said he was “increasingly confident” the current interest rate setting would prove adequate to lower inflation to the Fed’s 2% target.

Another Fed governor, Michelle Bowman, said the central bank will likely need to raise borrowing costs further in order to bring inflation back down to its target.

Traders appeared to take their cues from Waller with increased bets for the first rate cut taking place as soon as March with the probability for a 25 basis-point cut last at nearly 33%, up from 21.5% on Monday, according to the latest data from CME Group’s Fedwatch tool. The majority expected a cut of at least one notch in May, according to CME data.

The market saw Waller’s comments as the first sign the Fed “recognizes they might be able to cut rates next year” while other officials “took some of the euphoria” away, according to Anthony Saglimbene, Ameriprise chief market strategist.

And Saglimbene said, “It’s normal you’ll see stocks consolidate in the last few days of a really strong month. … For the rest of the year, momentum is biased to the upside.”

While trading in stocks was choppy, Wall Street indexes managed to close higher. The Dow Jones Industrial Average rose 83.51 points, or 0.24%, to 35,416.98, the S&P 500 .SPX gained 4.46 points, or 0.10%, to 4,554.89 and the Nasdaq Composite .IXIC added 40.73 points, or 0.29%, to 14,281.76.

MSCI’s gauge of stocks across the globe gained 0.27%.

Also on Tuesday, a survey showed US consumer confidence rose in November after three months of declines, though households still anticipated a recession over the next year.

Later this week the spotlight will be on the US October personal consumption expenditures report (PCE), which includes core PCE, which is the Fed’s preferred measure of inflation. Also, euro zone consumer inflation figures should give further clarity on where prices and monetary policy are headed there.

After the Fed commentary, US Treasury yields dipped with benchmark 10-year notes down 6 basis points to 4.328%, from 4.388% late on Monday.

In currencies, the dollar index =USD fell 0.368%, with the euro up 0.32% to USD 1.0988.

The Japanese yen strengthened 0.82% versus the greenback at 147.47 per dollar, while Sterling was last trading at USD 1.2694, up 0.55% on the day.

With some encouragement from the weaker dollar, spot gold prices were up 1.4% at USD 2,040.79 an ounce after hitting their highest level since May in their fourth consecutive gain.

Oil prices settled higher on Tuesday on the possibility that OPEC+ will extend or deepen supply cuts, a storm-related drop in Kazakh oil output and the weaker US dollar.

US crude settled up 2.07% at USD 76.41 per barrel and Brent settled at USD 81.68, up 2.13% on the day.

(Additional reporting by Sinéad Carew, Gertrude Chavez-Dreyfuss, and Chuck Mikolajczak in New York, Amanda Cooper in London, Ankur Banerjee; Editing by Frances Kerry, Will Dunham, Marguerita Choy, and Chizu Nomiyama)

Financial conditions loosen again

Nov 29 – Interest rate decisions and guidance from New Zealand and Thailand, and inflation figures from Australia will be the main events for Asian markets on Wednesday, as a curiously directionless week for risk assets reaches the midway point.

While emerging markets and Asian equities clocked up decent gains on Tuesday, Wall Street struggled to make much headway despite a seemingly constructive market and economic backdrop.

The dollar, Treasury yields, and stock market volatility all fell, and US consumer confidence was higher than expected. Fed Governor Christopher Waller – thought to be close to Fed Chair Jerome Powell’s thinking on policy – also signaled that US interest rates could be cut in the months ahead.

The dollar and two-year Treasury yield slid to fresh three-month lows, the 10-year yield hit a two-month low and the VIX volatility index fell back to recent lows last seen before the pandemic. Yet the S&P 500 and Nasdaq ended flat.

Perhaps that broad loosening of financial conditions will give Asian markets a bigger boost on Wednesday, although the underperformance of Chinese stocks shows little sign of abating even as the central bank chief pledged to keep monetary policy “accommodative” to provide support to the economy.”

The first of the main policy events in the region on Wednesday will be the Reserve Bank of New Zealand’s policy decision. It is widely expected to hold the cash rate at 5.50%, so investors’ interest will lie more in the bank’s guidance.

Traders expect up to 50 basis points of easing next year, with the first cut coming in July. That’s about half of what the Fed is expected to do, so it’s no wonder the New Zealand dollar is outperforming – it is up 6.5% in the past month.

Thailand’s central bank is also expected to keep rates on hold, at 2.50%, through the middle of 2025. Disappointing third quarter growth and the exchange rate’s 7% appreciation over the last month will have eased any lingering pressure on policymakers to raise rates again.

Finally, figures from Australia are expected to show that price pressures cooled in October, with the annual rate of weighted consumer inflation slowing to 5.20% from 5.60%.

Reserve Bank of Australia Governor Michele Bullock on Tuesday reaffirmed that monetary policy was restrictive and working to dampen demand, though inflation in the service sector was proving sticker than hoped.

The RBA is expected to keep its cash rate on hold at 4.35% next week, although there is around a 10% chance of a quarter-point hike, according to futures market pricing.

Here are key developments that could provide more direction to markets on Wednesday:

– New Zealand interest rate decision

– Thailand interest rate decision

– Australia inflation

(By Jamie McGeever)

US recap: Dollar sold far and wide as Fed cuts gain credibility

Nov 28 – The dollar index fell 0.3% as Treasury yields slid after Fed speakers noted the historically rapid progress being made in reducing inflation and Governor Christopher Waller even allowing that rate cuts are possible in coming months if disinflation persists.

These views were more dovish than the messaging that followed the Fed’s last meeting, prompting the futures market to price in a rate cut in May as being nearly twice as likely as a hold, and 100bp of rate cuts by December 2024.

Two-year Treasury yields fell nearly 9bp and 10-year yields 3bp, briefly breaching important yield supports, allowing the dollar index to approach the 61.8% Fibo of 2023’s uptrend.

EUR/USD rose 0.3%, well clear of its 61.8% retracement of this year’s slide at 1.0960, but off its 1.1009 highs. A 3bp rise in 2-year bund-Treasury yield spreads and risk-on flows stemming from lower US and European yields weighed on the haven dollar, though retreated some from midday peaks.

The even more risk-sensitive sterling rose 0.45%, but backed off before reaching its 61.8% Fibo of its July-October slide at 1.2722. The BoE is seen waiting longer than the Fed to begin cutting rates and only reducing them by 67bp next year.

USD/JPY fell 0.75%, continuing its post-multi-year double-top reversal of 2023’s uptrend, with the decline greased by 2-year JGB yields falling about a quarter as much 2-year Treasury yields from recent peaks.

A close below the daily cloud base and last month’s low at 147.30 would be very bearish and likely to put what’s left of the biggest net spec long position since 2017 under greater duress, with medium-term targets closer to 140. But the current 147.325 low on EBS keeps the focus on Thursday’s key US data.

The BoJ is under some pressure to move away from negative rates and reduce efforts to cap JGB yields because the extraordinarily weak yen and stubborn inflation are seen by many in Japan as doing more harm than good to the economy.

Wednesday features German CPI, revisions to US Q3 GDP, and the beige book, which might contain regional feedback that supports Waller’s rate cut prospecting.

Thursday’s month-end session looks far more pivotal with euro zone inflation data followed by US core PCE, income, consumption, and savings rate for November, as well as jobless claims and pending home sales, the forecasts for which hue toward a more dovish Fed and weaker dollar.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold extends gains on Fed pause bets, dollar retreat

Nov 28 – Gold rose for a fourth consecutive session on Tuesday and hit a more than six-month high, driven by a retreating dollar and expectations that the US Federal Reserve has finished hiking interest rates.

Spot gold gained 1.4% at USD 2,041.55 per ounce by 3:00 p.m. ET (2000 GMT), the highest since May 10.

US gold futures for December delivery settled 1.4% higher at USD 2,040.

The near-term outlook for gold remains bullish, with the dollar index in a downtrend on hopes the Fed will no longer raise interest rates and will maybe even cut them by springtime, said Jim Wyckoff, senior analyst at Kitco Metals.

However, “if (US) GDP numbers and inflation indicators are stronger than expected, it will dent traders’ enthusiasm in bullion,” Wyckoff added.

Fed policymakers look increasingly comfortable closing out the year with interest rates on hold and waiting before cutting them. Lower rates reduce the opportunity cost of holding non-interest-bearing bullion.

Fed Governor Christopher Waller said he is “increasingly confident” that policy is in the right spot.

Making bullion less expensive for overseas buyers, the dollar index touched its lowest since mid-August.

Investors will monitor Thursday’s US Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation indicator. The focus is also on the revised US third-quarter GDP figures scheduled for Wednesday.

“A sense of caution ahead of another busy week for global financial markets is also lending support to the precious metal. Given how the USD 2,000 level proved an extremely tough resistance to conquer, gold could end up dipping without a potent fundamental catalyst,” FXTM senior research analyst Lukman Otunuga said.

Silver rose 1.4% to USD 24.97 per ounce, platinum XPT= was up 2.3% at USD 939.80. Palladium fell 1.4% to USD 1,055.59 per ounce.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Krishna Chandra Eluri, Barbara Lewis, and Richard Chang)

Dollar around three-month low, set for biggest monthly fall in a year

TOKYO/LONDON, Nov 28 – The US dollar hit a three-month low against a basket of peers on Tuesday before steadying, as traders continued to unwind long dollar positions before this week’s U.S. and euro zone inflation data.

The dollar index =USD, a measure of the greenback against six major currencies, was last at 103.2 up around 0.1% on the day, edging off the 103.15 it touched in Asia trade, the lowest since Aug. 31.

The index is on track for a loss of more than 3% in November, its worst performance in a year.

“Markets have been wanting to get ahead of the next big theme – monetary easing, better conditions for risk assets and a weaker dollar – but as we’ve seen this morning, that’s starting to run out of steam,” said Simon Harvey, head of FX analysis at Monex Europe.

“Shorter term we’re keeping an eye on the general sentiment in markets – the big trade of this month has been long equities short dollar – and then these psychological levels – the euro has bumping against USD 1.0960 and each of its runs at that in the past week has been thwarted.”

The euro and sterling were broadly steady with the common currency at USD 1.09495 and the pound at USD 1.2627, both around their highest in about three months.

Market expectation that the Fed’s rate increase cycle has finally come to an end has also put downward pressure on the greenback. U.S. rate futures showed about a 25% chance that the Fed could begin cutting rates as early as March and increasing to nearly 45% by May, according to the CME FedWatch tool.

Traders are now eyeing U.S. core personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – this week for more confirmation that inflation in the world’s largest economy is slowing.

PCE tops off a slew of other key economic events this week, including flash inflation data from major euro zone economies, with bloc wide data due Thursday, Chinese purchasing managers’ index (PMI) data and OPEC+ decision.

After delaying its policy meeting to this Thursday, OPEC+ is looking at deepening oil production cuts, Reuters reported, citing an OPEC+ source.

The Japanese yen was steady at 148.63 per dollar, continuing its recovery from the brink of 152 per dollar earlier in the month as the dollar weakened.

The Swiss franc was at 0.8810 per dollar, steady on the day, also around its firmest since the start of September, and the Australian dollar briefly touched a near four-month high of USD 0.6632.

The kiwi momentarily hit its highest since Aug. 10 at USD 0.6114 before sliding back. The Reserve Bank of New Zealand has its monetary policy meeting on Wednesday, where it is expected to keep interest rates steady at 5.50% for the fourth straight time.

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