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MANILA, Oct 5 (Reuters) – The Philippine government has launched a three-tranche, benchmark-sized bond issue denominated in US dollars, National Treasurer Rosalia de Leon said on Wednesday.
The bonds have tenures of five years, 10.5 years and 25 years.
(Reporting by Enrico Dela Cruz)
NEW YORK, Oct 4 (Reuters) – Investors suffering through a bruising year for markets are hoping that recent signs of wobbling economic growth will force the Federal Reserve and other global central banks to take their foot off the gas in the fight against inflation, sparking sharp rebounds in stocks and bonds.
The S&P 500 is up nearly 6% over the last two days, following a brutal September in which it fell 9.3% alongside declines in other global equity benchmarks. Yields on US Treasuries, which move inversely to prices, have plummeted by 33 basis points in October from multi-year highs hit last month.
Investor expectations of how high the Fed will raise rates in its battle against inflation have slipped in recent days, amid signs that growth in the US may finally be slowing. Investors in the futures markets now expect the fed fund rate to peak at 4.5% next year, compared to the expected peak of about 4.7% they were pricing in last week.
“The markets are sniffing out a blink by the Fed,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “If they pause here, not only does the rate pressure suddenly drop but maybe you end up with a mid-cycle slowdown, rather than a recession.”
Markets have rallied on the hopes of a Fed pivot several times this year only to reverse and crumble to fresh lows, making investors wary of the current bounce. This time around, a series of weaker-than-expected data on manufacturing and job openings in the United States are among the factors fueling hopes that weakening growth will push the Fed to slow its market-punishing rate hikes.
Some investors have also taken Tuesday’s smaller-than-expected rate increase from Australia’s central bank and a decision by the Britain’s new government to scrap planned tax cuts as signs that governments and monetary authorities are being increasingly responsive to signs of weakening growth and market instability.
“There is a growing sense that financial markets are showing sufficient stress as to warrant a collective pivot away from the global trend toward tighter policy,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
Plenty of market participants are skeptical the rebounds in stocks and bonds will last. Mark Haefele, chief investment officer at UBS Global Wealth Management, attributed the stock rebound to “oversold” conditions in the S&P 500, exacerbated by month-end rebalancing by money managers at the end of September that drove stocks lower.
The sentiment was shared by Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions, who believes the bounce was helped by bearish investors covering their positions after September’s deep declines.
“Toward the end of last month sentiment got pretty bearish and it doesn’t take much to spook some of these guys to come in and cover their positions,” he said.
Analysts at BofA Global Research on Tuesday pointed out that retail traders have shown few signs of capitulation, one signal they say would represent a potential market bottom. Meanwhile, the Cboe Volatility Index .VIX, known as Wall Street’s fear gauge, has not climbed to levels that have marked past turning points in past sell-offs.
“It’s not clear to me that you’ve seen panic yet,” said Ashwin Alankar, head of Global Asset Allocation at Janus Henderson Investors. “Until you see panic it’s not the best time to start adding risk to a portfolio at a rapid clip.”
The signs of softening in the labor market shown by JOLTS data, meanwhile, may not be enough for the Fed to feel comfortable pausing in its pace of rate hikes, analysts at Capital Economics wrote on Tuesday.
While the data “won’t prevent further aggressive interest rate hikes in the near term … it supports our view that inflation will drop back more quickly than Fed officials expect,” they wrote.
(Reporting by David Randall; Additional reporting by Davide Barbuscia; Editing by Ira Iosebashvili and Josie Kao)
Oct 5 (Reuters) – Genuine turning point, or classic bear market rally?
World markets continue to rip higher as the dollar, bond yields and Fed interest rate expectations decline, confounding even the biggest optimists who had called for a positive start to the fourth quarter.
The strength of the turnaround suggests the turmoil in recent weeks might have been related in part to quarter-end factors. Equally, the strength of the current whoosh might simply be a bout of short covering to claw back some of this year’s losses.
According to Goldman Sachs, the median S&P 500 peak-to-trough decline in past bear markets has been 34%. That would coincide with the 3400 area from its January peak of around 4800. Friday’s low was just below 3600, down 25% from the high.
By this measure, Wall Street has further to fall before putting in the definitive bottom. It’s worth bearing in mind that bear market rallies tend to be pretty rapid, ending almost as quickly as they started.
Tuesday’s “risk-on” rally was widespread. The S&P 500 recorded its strongest two-day rise – more than 5% – since March 2020, and emerging market bonds had their best day since March this year.
US job openings data fueled hopes that the Fed will soon take its foot off the tightening pedal, Australia’s central bank only raised rates by 25 basis points and the dollar slumped more than 1% to post its longest losing streak – five days – in over a year.
It may turn out to be a bear market rally, but for now, investors are enjoying the ride.
Key developments that could provide more direction to markets on Wednesday:
Australia PMIs (September)
South Korea inflation (September)
Euro zone, UK, US PMIs (September)
US services ISM (September)
Fed’s Bostic speaks
(Reporting by Jamie NcGeever in Orlando, Fla. Editing by Josie Kao)
NEW YORK, Oct 4 (Reuters) – The yield on the benchmark US 10-year Treasury declined for a second straight day on Tuesday, after a surprise move by Australia’s central bank to slow its pace of rate hikes and US data showed job openings fell in August.
The Reserve Bank of Australia raised interest rates by a small-than-anticipated 25 basis points, noting they had already risen substantially but further tightening was also still necessary. Markets had been largely expecting a hike of 50 basis points.
The yield on 10-year Treasury notes was down 3.2 basis points to 3.619%.
Economic data showed job openings in the United States fell to 10.053 million in August, the most in nearly 2-1/2 years, short of the 10.775 million analysts’ estimated and a drop from the 11.17 million in July. A cooling of the labor market is one of the ingredients the US Federal Reserve is seeking to help ease inflationary pressures.
“The market is desperately looking for the end of the rate tightening cycle, or to be able to position a point on the horizon to focus on and unfortunately I don’t think the market has it,” said George Bory chief investment strategist for fixed income at Allspring Global Investments in Connecticut.
“We are looking for that and we will kind of attach some hope to almost anything that will help anchor that position, the reality is the Fed is determined, they want to get inflation down and to do that they need validation from the data.”
The yield on the 30-year bond was down 2.2 basis points at 3.684%.
Investors will see a host of data on the labor market this week, highlighted by Friday’s US payrolls report. Signs of softening in the jobs data would likely be welcomed by investors as it could raise expectations the US Federal Reserve may slow its own pace of interest rate hikes.
Recent comments from Fed officials have been in sync as they have vowed to take aggressive measures in hiking interest rates to combat rising inflation even after three straight hikes of 75 basis points.
On Tuesday, San Francisco Federal Reserve Bank President Mary Daly said the Fed needs to deliver further interest rate hikes and then keep restrictive policies in place until inflation gets back down to the central bank’s 2% target.
In addition, Fed Governor Philip Jefferson said inflation was the most serious problem the Fed is facing, and could take some time to address.
A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as a reliable indicator of recession when inverted, was at -48.2 basis points, up from -57.85 hit two weeks ago.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 0.6 basis points at 4.099%.
The break-even rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.334%, after closing at 2.255% on Monday.
The 10-year TIPS breakeven rate was last at 2.231%, indicating the market sees inflation averaging 2.2% a year for the next decade.
(Reporting by Chuck Mikolajczak; Editing by Emelia Sithole-Matarise and Chizu Nomiyama)
NEW YORK/LONDON, Oct 4 (Reuters) – The dollar slid against major currencies on Tuesday as the yield on the benchmark US 10-year Treasury fell after Australia’s central bank surprised investors with a smaller-than-expected interest rate hike, with the euro climbing more than 1%.
The Australian dollar was down 0.2% at USD 0.6503, dragged down after the move by the Reserve Bank of Australia, which said rates had increased substantially in a short period of time.
The euro was last up 1.3% at USD 0.9848, recovering from its 20-year low of USD 0.9528 on Sept. 26, while sterling was up 0.8% at USD 1.1409, off a record low of USD 1.0327 also hit Sept. 26.
A calmer British government bond market was a relief for the pound after recent government-inspired turmoil. In a statement on Monday, the Bank of England reaffirmed its willingness to buy long-dated gilts and the head of Britain’s debt management office, overseeing the bond market, told Reuters in an interview the market was resilient.
The moves in the dollar and yields appear to partially reflect market participants’ views on the outlook for interest rates, some strategists said.
“We’re seeing a drop in interest rate expectations across the financial markets on the basis of Reserve Bank of Australia’s surprise smaller-than-expected hike,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
“That has sort of had a canary in the coal mine effect from market participants globally. People are ratcheting down what they expect from the Federal Reserve and other central banks and that’s really compelling a drive out of the dollar and into risk sensitive assets.”
The yield on 10-year Treasury notes was down 6.6 basis points to 3.585%.
The Fed’s aggressive push to raise interest rates and the recent steady climb in US yields have helped to support the dollar’s sharp gains this year.
Elsewhere, the dollar was down 0.1% against the Japanese yen at 144.45 yen, keeping below 145 after briefly popping above that level on Monday for the first time since Japanese authorities intervened to support their currency on Sept. 22.
Japanese finance minister Shunichi Suzuki repeated on Monday that authorities stand ready for “decisive” steps in the foreign exchange market if “sharp and one-sided” yen moves persisted.
(Additional reporting by Kevin Buckland in Toyko and Alun John in London; Editing by Chizu Nomiyama and Andrea Ricci)
Oct 4 (Reuters) – Gold prices rose over 1% to a three-week peak on Tuesday, as the dollar and US Treasury yields retreated, with investors hoping that the US Federal Reserve could adopt a less aggressive approach to rate hikes.
Spot gold gained 1.5% to USD 1,723.99 per ounce by 2:17 p.m. EDT (1817 GMT), its highest since Sept. 13.
US gold futures climbed 1.7% to USD 1,730.50.
Benchmark US 10-year Treasury yields eased, while the dollar extended its decline, making gold cheaper for other currency holders.
“The market is kind of pricing in that the Fed is going to back off here a little bit and that’s why you’re seeing this move back up in gold and silver,” said Bob Haberkorn, senior market strategist at RJO Futures.
Looking ahead, US non-farm payrolls data due on Friday could offer more clarity on the Fed’s policy tightening.
“If the jobs data comes out weaker-than-expected, gold will rally. If it comes out much stronger, the market might interpret that as well, the Fed can keep going here with rates,” Haberkorn added.
Gold registered its biggest daily percentage gain since March on Monday. However, rising US rates increase the opportunity cost of holding zero-yield bullion.
“Gold is not out of the woods yet, but at least we’ve seen a very strong rebound. The first move has been driven by short covering,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Gold-supplying banks have cut back shipments to India ahead of major festivals in favour of focusing on China, Turkey, and other markets where better premiums are offered, three bank officials and two vault operators told Reuters.
Spot silver rose 1.2% to USD 21.01 per ounce, a more than three-month high, following its best day since 2008 in the previous session.
Platinum gained 2.8% to USD 928.00, and palladium XPD= climbed 3.9% to a five-month high of USD 2,306.71.
(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Uttaresh V, Shailesh Kuber and Krishna Chandra Eluri)
MANILA, Oct 4 (Reuters) – The Philippine central bank said on Tuesday it was taking steps to manage any disruption in the financial market, and urged participants not to take advantage of a peso currency hovering at record lows against the dollar.
The peso closed at a record 59 to the greenback on Monday, taking its year-to-date decline to 13%, the most in Southeast Asia.
Policymakers have attributed the decline mainly to the dollar’s strength.
“We ask those who have the means not to take undue advantage of changing market conditions,” the Bangko Sentral ng Pilipinas said in a statement.
“This does not help the Philippine peso; it does not help the Philippines. What we can do is to bring all transactions into an organised and accessible formal market that offers consumer protection.”
(Reporting by Karen Lema, Editing by Ed Davies, Martin Petty)
Oct 4 (Reuters) – Foreigners resumed selling in Asian equities ex-China stocks in September as investors were deterred by U.S. interest rate hikes, a firmer greenback and a weaker regional growth outlook.
Data from stock exchanges in South Korea, India, Taiwan, the Philippines, Vietnam, Indonesia, and Thailand showed that foreigners sold equities worth a net $8.83 billion last month – their first monthly selling since June.
The regional equities have so far faced total outflows of $69.7 billion in the first three quarters of the year, a massive jump in outflows of $47.63 billion faced in 2008, when the global financial crisis occurred.
Last month, the U.S. Federal Reserve raised its benchmark interest rate by 75 basis points, marking the third such hike in a row. Analysts expect the U.S. central bank to keep hiking rates to tame rising inflationary pressures.
The region grapples with mounting inflationary pressures, interest rate hikes, and slowing economic growth, said Mark Haefele, chief investment officer, UBS Global Wealth Management, and added that aggressive U.S. rate hikes have also hurt the region’s currencies and its export markets.
Goldman Sachs cut the region’s 2022 and 2023 EPS growth by 2 percentage points (pps) and 3 pps respectively at the end of last month, citing the negative impact of rising rates, a stronger dollar, and slower growth on earnings.
Outflows from tech-reliant South Korea and Taiwan last month jumped to a three-month high of $1.8 billion and $5.3 billion, respectively.
India and Thailand witnessed outflows worth $903 million and $653 million, respectively, after each seeing inflows in the previous two months.
Foreigners were also net sellers of equities in the Philippines and Vietnam markets last month. On the other hand, Indonesian equities gained small inflows of $209 million.
“The cloudy outlook on economic conditions and firm policy stance from the Fed, risk sentiments may still lean towards some caution, which may lead to a lukewarm inflow for Asian equities in the near term at best,” said Yeap Jun Rong, a market strategist at IG.
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sherry Jacob-Phillips)
LONDON, Oct 4 (Reuters) – Britain’s bond market is undergoing “a major repricing”, but should comfortably absorb the extra 62 billion pounds (USD 69 billion) of debt announced after finance minister Kwasi Kwarteng’s Sept. 23 mini-budget, the head of the UK Debt Management Office (DMO) said on Monday.
Robert Stheeman – the man tasked with overseeing Britain’s 2.1-trillion-pound government bond market – saw a parallel between the high volatility over the past 10 days and that in March 2020 early in the COVID-19 pandemic, when the Bank of England also intervened to calm markets.
But overall the situation in recent days felt different, as bond dealers had generally been better able to keep trading, “albeit in very difficult conditions”, compared with early 2020, Stheeman told Reuters in an interview.
Ten-year British government bonds recorded their biggest calendar-month fall since at least 1957 in September, as concerns about Kwarteng’s unfunded 45 billion pounds of tax cuts added to fears of a sharp rise in interest rates by the Bank of England (BoE) and other major central banks.
Ten-year yields rose to their highest since 2008 on Sept. 28 at 4.582%, up 70 basis points from before Kwarteng’s mini-budget. They were just under 4% on Monday.
“Gilts and other sovereign bond markets are all having to undergo some major repricing,” Stheeman said.
“There are so many uncertainties … in terms of not just the fiscal picture, but the potential monetary policy response. That is what is causing … a very large part of the market volatility,” he added.
The DMO increased its 2022/23 financing target by 72 billion pounds to 234 billion pounds after Kwarteng’s mini-budget, 62 billion pounds of which would be funded by gilts.
“I am confident that it can be digested reasonably smoothly,” Stheeman said.
British government bond prices rallied on Monday after Kwarteng announced a U-turn on one of his flagship measures, saying he would no longer scrap the top rate of tax paid by the highest 1% of earners.
But Stheeman said the market was more focused on the government’s broad fiscal stance, and crucially how that would affect the pace at which the BoE will raise rates.
BoE Chief Economist Huw Pill last week warned the Bank would probably need to make a significant adjustment to interest rates on Nov. 3, when it is next scheduled to make a policy decision. The next day, the BoE stepped in to buy billions of pounds of 20- and 30-year gilts to stem a market slide.
Stheeman – whose wife sits on a BoE committee involved with the decision – said the central bank’s purchase announcement had come as a “major surprise”, in the middle of a DMO operation to sell 4.5 billion pounds of government debt.
While the timing of the announcement may have made life trickier for bond dealers, Stheeman said its unexpected nature did highlight the BoE’s independence.
CLIFF-EDGE FOR GILTS?
The BoE has said it will stop buying bonds on Oct. 14 – long enough, it believes, for pension funds hit by falling bond prices to get their houses in order – and plans to restart its postponed gilt sales programme on Oct. 31.
Asked if he was worried about these potential cliff edges, Stheeman said: “I am not unduly anxious. I think it is in the nature of the market in which we operate, that there is always potential for uncertainty, and that clearly applies now.”
Failed auctions, where the DMO is unable to raise the amount of money it is seeking on a given day, could never be ruled out, he added. The last was in 2009.
Most of the increase in debt issuance over the rest of the financial year will come from short-dated, and to a lesser extent medium-dated, gilts. Stheeman said this reflected greater liquidity in that part of the market.
Wide bid-offer spreads for gilts – which on Monday were around 10 basis points for two-year gilts GB2YT=TWEB, according to Tradeweb data – would hopefully narrow as market volatility reduced, Stheeman said.
Regulators also needed to look at how liability-driven investment (LDI) funds in the pension industry used derivatives, he added.
(USD 1 = 0.8929 pounds)
(Reporting by David Milliken; Editing by Mark Potter)
MANILA, Oct 4 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of re-issued 2025 T-bonds on Tuesday:
* BTr fully awards PHP 22.85 billion (USD 388.61 million) offer
* Tenders total PHP 39.144 billion
* Avg yield 5.746%
* Bonds were originally issued on April 12, 2018
(USD 1 = PHP 58.80)
