Investors flock to one-month bills on US debt ceiling jitters, shun others

April 24 (Reuters) – Rising concerns that the US Treasury Department could hit its debt limit in the coming months are leading investors to shun certain Treasury bills and pour into others as they seek out low risk places to park cash.

Congress will need to raise the US debt ceiling or risk a catastrophic debt default, with analysts predicting the Treasury is most likely to run out of funds in July or August.

As a result, some investors are avoiding debt that comes due in this timeframe. But they are also seeking safe places to park cash. That has led one-month bill yields to tumble, and the spread between one-month and three-month bills to expand to its widest level since the one-month bills were introduced in 2001.

“You’re seeing this demand for the very front-end … and then the three- to four-month part of the bill curve is quite cheap because of these debt ceiling concerns,” said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.

“There’s a lot of cash on the sidelines. Money left the regional banking systems and made it to the larger banks and then from there to money market funds. Money market funds are the highest they’ve been and there’s a dearth of supply,” Rajappa added.

The failure of two regional banks, including Silicon Valley Bank in mid-March, has increased demand for Treasury bills on concerns about the safety of uninsured bank deposits. But the Treasury has cut its issuance of short-term debt as it bumps up against its debt limit.

“The market is nervous and is avoiding the debt ceiling issues and has unfortunately nowhere to go because bill supply continues to be cut,” said Gennadiy Goldberg, a senior interest rate strategist at TD Securities in New York.

Yields on one-month bills were last at 3.362%. after reaching 3.206% last Thursday, the lowest since Oct. 20. They are now trading around 130 basis points below the Fed funds rate, the largest gap since 2008.

Yields on three-month bills, meanwhile, have increased to 5.113%, and are holding just below a 22-year high of 5.318% reached on Thursday. The gap between one-month and three-month bills has widened to a record at around 175 basis points.

The Treasury is expected to increase bill issuance once the debt ceiling is raised. Until then, investors are also likely to continue to make use of the Federal Reserve’s reverse repurchase agreement facility, which is seeing daily demand of around USD 2.25 trillion.

(Additional reporting by Stefano Rebaudo in London; Editing by Alex Richardson)

Japan’s 10-year yield nearly flat ahead of BOJ policy meeting

TOKYO, April 24 (Reuters) – Japan’s 10-year government bond was almost flat on Monday ahead of the Bank of Japan’s policy meeting towards the end of this week, as investors shrugged off comments from BOJ Governor Kazuo Ueda.

The 10-year JGB yield edged up 0.5 basis point (bp) to 0.465%.

Ueda said on Monday the central bank’s inflation forecasts must be “quite strong and close to 2%” in the coming year to consider tweaking yield curve control.

His comments come ahead of a two-day BOJ meeting that kicks off on Thursday, where the board will produce fresh quarterly growth and inflation forecasts.

Market participants expect that the BOJ will not make any changes to policy at the upcoming meeting, while some are still wary of the risk of a surprise, which would follow a policy tweak in December.

Yields on super-long dated bonds rose, with the 20-year JGB yield rising 1 bp to 1.130% and the 30-year JGB yield rising 2 bps to 1.355%.

The 40-year JGB yield rose 2.5 bps to 1.550%.

“Investors were cautions about trading bonds ahead of the BOJ’s policy meeting. Yields on super-long ends must have risen due to some supply and demand issues,” said Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management.

The two-year JGB yield was flat at -0.040% and the five-year yield was unchanged at 0.155%.

Benchmark 10-year JGB futures rose 0.06 yen to 147.77, with a trading volume of 8,638 lots.

(Reporting by Junko Fujita; Editing by Sonia Cheema)

US 3-month T-bill yield jumps 12 bps

April 24 (Reuters) – The yield on the 3-month US Treasury bill jumped in early London trade on Monday as unease about the US debt ceiling kept selling pressure on short-dated bonds sustained.

Investors want to avoid bills that will mature when there is a risk that the US could hit its debt ceiling, which might occur in late July or August.

Legislative standoffs over the debt limit this last decade have been resolved before they could ripple into markets, but investors worry the Republican party’s narrow majority in Congress could make it harder to reach a compromise this time.

The nonpartisan Congressional Budget Office has forecast that the so-called “X-date,” when the government can no longer pay all its bills, would come between July and September.

The 3-month bill yield rose 12 basis points to 5.237%. It hit its highest level since January 2001 at 5.318% last Thursday.

(Reporting by Stefano Rebaudo, editing by Alun John)

PH interagency panel keeps 2023 to 2028 GDP growth targets

MANILA, April 24 (Reuters) – The Philippines maintained its economic growth target for 2023 at 6.0% to 7.0%, a government inter-agency panel said on Monday, citing momentum from increased domestic demand and better labour conditions.

The economy is seen to grow 6.5% to 8.0% for 2024 to 2028, the inter-agency panel known as the Development Budget Coordination Committee (DBCC) announced in a news conference.

The DBCC said it took into consideration the risks posed by geopolitical and trade tensions, a possible global economic slowdown, as well as weather disturbances in the country.

It also expected inflation to register at 5% to 7% this year, returning to within the government’s 2% to 4% target by the fourth quarter, saying it was committed to taking proactive measures to bring inflation down.

Inflation slowed for a second straight month in March to 7.6%.

The DBCC expected the peso to move between 53 and 57 to the dollar this year.

(Reporting by Neil Jerome Morales; Editing by Martin Petty)

S. Korean shares fall to 2-week low on earnings, geopolitical woes

SEOUL, April 24 (Reuters) – Round-up of South Korean financial markets:

** South Korean shares fell for a third straight session on Monday amid geopolitical worries and caution ahead of major company earnings. The Korean won weakened, while the benchmark bond yield fell.

** The benchmark ended down 20.89 points, or 0.82%, at 2,523.51, marking its lowest closing level since April 10.

** South Korea’s key chipmakers and automakers, among others, are scheduled to report their first-quarter results later this week.

** Geopolitical worries grew in local markets after President Yoon Suk Yeol’s remarks last week over tension in the Taiwan Strait, saying that the South Korean government “absolutely opposes” China’s attempt to change the status quo by force.

** “There were profit-taking pressures and some supply-demand issues for certain stocks,” said Park Gwang-nam, analyst at Mirae Asset Securities.

** Five stocks fell nearly 30% to their daily lower limits, including Seoul Citi Gas, Daesung Holdings Co Ltd, Samchully Co Ltd, Sebang Co Ltd and Daol Investment & Securities Co Ltd. There was no clear common cause for the fall.

** Among the index heavyweights, chipmakers, battery makers and online service providers fell but automakers gained. Of the total 933 issues traded, 206 shares rose.

** Foreigners were net sellers of shares worth 38.4 billion won (USD 28.74 million).

** The won ended onshore trade 0.49% lower at 1,334.8 per dollar, after falling as much as 0.67% to hit a near five-month low of 1,337.1.

** In money and debt markets, June futures on three-year treasury bonds KTBc1 rose 0.03 point to 105.05.

** The most liquid three-year Korean treasury bond yield fell by 2.2 basis points (bps) to 3.246%, while the benchmark 10-year yield fell by 3.7 bps to 3.308%.

(USD 1 = 1,336.0100 won)

(Reporting by Jihoon Lee; Editing by Sonia Cheema)

Japan’s Nikkei trims gains as traders eye earnings, BOJ; airlines soar

By Kevin Buckland

TOKYO, April 24 (Reuters) – Japan’s Nikkei share average trimmed some early gains on Monday, as the mood turned more cautious in the afternoon session, with investors casting an eye ahead to corporate earnings and a central bank meeting due later in the week.

Airline ANA Holdings remained a standout winner though after raising profit guidance, with other tourism-related stocks also firm amid optimism over increasing visitor numbers.

The Nikkei .N225 ended the day up 0.1% at 28,593.52 after paring gains in the afternoon session. In the morning it had hit a high of 28,680.65, taking it close to Friday’s eight-month peak of 28,778.37.

The broader Topix .TOPX rose 0.11% to 2,037.34, also well back from the morning’s highs.

Motor-maker Nidec 6502.T rallied 1.11% before headlining the handful of companies reporting earnings on Monday. On Thursday, more than 100 companies report, and that tally doubles on Friday.

The Bank of Japan also sets policy on Friday, with new governor Kazuo Ueda chairing his first meeting. While the consensus is for no change, analysts and investors are wary of surprises, like the unexpected widening of the 10-year bond yield policy band in December.

“It’s very likely that Japanese stock investors will shift to a wait-and-see stance,” said Maki Sawada, a strategist at Nomura Securities. “Moves are likely to be relatively muted.”

Air transport .IAIRL.T was the top performer among the Tokyo Stock Exchange’s 33 industry sectors, rising 2.93%.

ANA Holdings 9202.T gained 3.74%. Peer Japan Airlines 9201.T rose 1.95%.

Rail operators .IRAIL.T also did well amid an improving outlook for tourism income, after figures last week showed an increase in foreign visitors. West Japan Railway Co 9021.T led gains for the sector, rising 2.2%.

Department store operators advanced, including a 1.71% appreciation for Marui Group Co. 8252.T.

The biggest losers on Monday were shippers .ISHIP.T, sliding 3.18%. Among them, Kawasaki Kisen Kaisha 9107.T was the worst performer, dropping 3.92%.

Chip-related stocks also tracked losses for U.S. peers from Friday, with chip-making equipment giant Tokyo Electron 8035.T declining 1.92% and chip-testing equipment manufacturer Advantest 6857.T down 2.32%.

(Reporting by Kevin Buckland; editing by Nivedita Bhattacharjee)

((Kevin.Buckland@thomsonreuters.com;))

Oil prices fall 1% on uncertainty over global outlook, rate hikes

April 24 (Reuters) – Oil prices fell more than 1% on Monday as concerns about rising interest rates, the global economy and the outlook for fuel demand outweighed support from the prospect of tighter supplies on OPEC+ supply cuts.

Brent crude slipped 91 cents, or 1.11%, to USD 80.75 a barrel by 0627 GMT, while US West Texas Intermediate crude was at USD 76.96 a barrel, also down 91 cents, or 1.17% lower.

Both contracts fell more than 5% last week, their first weekly drop in five, as US implied gasoline demand fell from a year ago, fuelling worries of a recession at the world’s top oil consumer.

Weak US economic data and disappointing corporate earnings from the tech sector sparked growth concerns and risk aversion among investors, CMC Markets analyst Tina Teng said. The stabilising US dollar and climbing bond yields are also adding pressure on commodity markets, she added.

Central banks from the United States to Britain and Europe are all expected to raise interest rates when they meet in the first week of May, seeking to tackle stubbornly high inflation.

China’s bumpy economic recovery from COVID-19 also clouded its oil demand outlook, although Chinese customs data showed on Friday that the world’s top crude importer brought in record volumes in March. China’s imports from top suppliers Russia and Saudi Arabia topped 2 million barrels per day (bpd) each.

Still, refining margins in Asia have weakened on record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.

Nevertheless, analysts and traders remained bullish about China’s fuel demand recovery towards the second half of 2023 and as additional supply cuts planned by OPEC+ – the Organization of the Petroleum Exporting Countries and allied producers including Russia – from May could tighten markets.

“Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days, where Brent is likely to find key support around USD 79 a barrel, while for WTI crude support is aligned at USD 75 a barrel,” Sugandha Sachdeva, an independent oil markets expert, said.

In the United States, energy firms last week added oil and natural gas rigs for the first time in four weeks, energy services firm Baker Hughes Co said.

(Reporting by Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by Kenneth Maxwell and Jacqueline Wong)

Oil prices settle higher on optimism about fuel demand in China

April 24 (Reuters) – Oil prices settled higher on Monday, reversing losses as investors grew optimistic that holiday travel in China would boost fuel demand in the world’s largest oil importer.

Brent crude settled up USD 1.07, or 1.3%, at USD 82.73 a barrel while US West Texas Intermediate crude settled up 89 cents, or 1.1%, at USD 78.76.

Last week, both contracts fell more than 5% for their first weekly declines in five as US implied gasoline demand fell from a year earlier.

China’s bumpy economic recovery after the COVID-19 pandemic has clouded the oil demand outlook, though Chinese customs data on Friday showed record volumes of imports in March.

Bookings in China for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries, but the numbers remain far off pre-COVID-19 levels with long-haul airfares soaring and not enough flights available.

“There’s a lot of optimism around Chinese holidays as it relates to jet fuel demand, the first genuine numbers on Chinese demand construction,” said Bob Yawger, director of energy futures at Mizuho.

Supply tightness owing to additional supply cuts planned by the OPEC+ producer group from May could also lift prices.

“Planned output cuts by the OPEC+ alliance and a strong demand outlook from China could provide a fillip to prices in the coming days”, said independent oil analyst Sugandha Sachdeva.

Iraq’s northern oil exports also showed few concrete signs of an imminent restart after a month of standstill, as aspects of an agreement between Baghdad and the Kurdistan Regional Government (KRG) have yet to be resolved, according to four sources.

Refining margins in Asia have weakened on record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.

(Reporting by Laura Sanicola; Additional reporting by Noah Browning in Lodndon, Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by David Goodman and Sharon Singleton)

Funds ignore Wall Street’s resilience, most bearish since 2011

ORLANDO, Florida, April 23 (Reuters) – Hedge funds remain unconvinced by Wall Street’s recovery from the March banking shock and have instead amassed their biggest bet in over a decade that the S&P 500 will fall.

Commodity Futures Trading Commission (CFTC) data for the week ending Tuesday, April 18 show that funds and speculative accounts increased their net short position in S&P 500 index futures by 36,645 contracts to just over 680,000 contracts.

That is the biggest net short position since October 2011 and marks the fourth week in five that funds have increased their bet on weaker US stocks.

A short position is essentially a wager that an asset’s price will fall, and a long position is a bet it will rise. Hedge funds take positions in futures markets for hedging purposes, so the CFTC data is not always reflective of purely directional bets. But it is a pretty good guide.

The latest doubling down from hedge funds comes as the first quarter US earnings season kicks into gear. It has been a mixed bag with almost a fifth of the S&P 500 firms having reported.

Some 76% have posted earnings beats and 65% have registered revenue beats, but estimates were low to begin with.

What’s more, the consensus forecast is still for a 4.7% fall in first-quarter earnings, according to IBES data from Refinitiv, which would confirm an “earnings recession” of two consecutive quarters of earnings contraction.

Earnings are likely to drive market sentiment and direction in the coming week, with ‘mega tech’ firms like Alphabet (GOOGL) and Microsoft (MSFT), as well as Amazon (AMZN), scheduled to report their results.

In some ways, funds’ bearish outlook is justified. The economic data is mixed – Citi’s US economic surprises index last week slid to a two-month low – uncertainty around banking stress persists, and debt ceiling worries are bubbling up.

Goldman Sachs’s equity strategy team led by David Kostin expects the S&P 500 will end the year at 4000, implying a small decline of around 3% from current levels.

But the market refuses to buckle. The S&P 500 has rebounded nearly 10% from the March banking shock lows, and if the options market is any guide, traders are sanguine about the near-term outlook.

The VIX index of implied volatility – the Wall Street “fear index” – last week hit its lowest since November 2021. Not only that, at around 16.7 it is below the long-term average of any time since the index was launched in 1990.

There are plausible explanations for this resilience.

Bank of America’s latest fund manager survey showed US equity allocation in April at a net 34% underweight, up from March but still among the most bearish positions of the past 20 years and 1.5 standard deviation below its long-term average.

Hedge funds are also their most gloomy in years. Perhaps the bearish positioning is simply overdone.

Diane Jaffee, lead portfolio manager at TCW, thinks so. While stocks’ attractiveness relative to bonds has diminished, they still offer better returns.

“Plus you have the potential for earnings growth. Equity investors should be thinking in multiple years, not just this year,” Jaffee said.

(By Jamie McGeever in Orlando, Florida; Editing by Christopher Cushing; The opinions expressed here are those of the author, a columnist for Reuters.)

Oil rises but post weekly loss as economic uncertainty weighs

HOUSTON, April 21 (Reuters) – Oil prices edged higher on Friday on strong economic data in the euro zone and Britain, but futures fell for the week as interest rate and demand uncertainty weighed.

Brent futures settled up 56 cents at USD 81.66 per barrel. US West Texas Intermediate crude (WTI) rose 50 cents to USD 77.87 per barrel.

Brent posted a weekly loss of 5.4%, while WTI fell 5.6%.

Both crude benchmarks slid by more than 2% on Thursday – to their lowest since the unexpected announcement in early April of production cuts by some OPEC countries – on recession fears and swelling US gasoline inventories.

Survey data from the euro zone and Britain lifted oil prices on Friday.

The euro zone economic recovery has unexpectedly gathered pace this month as the bloc’s dominant services industry saw already-buoyant demand rise, more than offsetting a deepening downturn in manufacturing, surveys showed.

“It looks like the economy is rebounding from a feeble winter at the moment, but manufacturing weakness remains a concern and dampens the upturn,” ING economics said in a note.

British businesses also reported a bounce in activity and the slowest input cost inflation in more than two years, an industry survey showed.

In India, refiners’ crude oil processing stayed near record peaks in March, provisional government data showed, catering to solid seasonal demand in the world’s third biggest oil consumer.

The prospect of tighter supply added support, with analysts expecting draws from inventories from next month, as a result of OPEC’s reduced output targets and rising Chinese demand.

“The foreseeable tightening of supply is likely to push prices up in the medium term,” Commerzbank said in a note.

Oilfield services giant SLB (SLB) beat Wall Street estimates for first-quarter profit, as elevated crude prices and tight supplies increased demand for its services.

However, economic uncertainty and the prospect of rising interest rates continued to hang over oil markets.

Uncertainty over demand, especially for the upcoming summer driving season, continues to weigh on traders’ minds, said Andrew Lipow, president of Lipow Oil Associates in Houston.

“The market is still under pressure with concerns about demand,” Lipow said.

The US Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates when they meet in the first week of May.

In US supply, US energy firms this week added oil and natural gas rigs for the first time in four weeks, energy services firm Baker Hughes Co BKR.O said.

The oil rig count, an early indicator of future output, rose three to 591 in the week to April 21.

Money managers raised their net long US crude futures and options positions by 11,736 contracts to 199,622 in the week to April 18, the US Commodity Futures Trading Commission (CFTC) said.

(Reporting by Erwin Seba in Houston; additional reporting by Stephanie Kelly, Rowena Edwards, Yuka Obayashi and Jeslyn Lerh; Editing by Marguerita Choy, Alexander Smith and Barbara Lewis)

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