Britain’s BoE doubles potential bond buy-backs as emergency plan nears end

LONDON, Oct 10 (Reuters) – The Bank of England sought to ease concerns about this week’s expiry of its program designed to calm turmoil in the government bond market, announcing new safety-net measures including a doubling of the maximum size of its debt buy-backs.

Finance minister Kwasi Kwarteng last month sparked a bond rout with plans for unfunded tax cuts, prompting the BoE to say on Sept. 28 it would buy up to 5 billion pounds (USD 5.53 billion) a day of gilts of at least 20 years duration until Oct. 14.

So far, the BoE has bought far less than the minimum daily limit, but on Monday it said it was taking further steps to ensure the scheme concludes smoothly.

“In the final week of operations, the Bank is announcing additional measures to support an orderly end of its purchase scheme,” the British central bank said in a statement.

Although the maximum auction size was raised to 10 billion pounds in Monday’s operation the BoE bought only 853 million pounds’ worth of debt.

That left its total of bonds acquired since the launch of the emergency program at less than 6 billion pounds, compared with the 50 billion pound maximum it could have bought.

The BoE said in its statement earlier on Monday that it was prepared to deploy unused purchasing capacity in the remaining auctions this week.

The BoE also said it would launch a temporary expanded collateral repo facility to help banks ease liquidity pressures facing client funds caught up in the turmoil, which threatened pension funds.

The liquidity insurance operations would run beyond the end of this week and would accept a wider range of collateral than usual, including corporate bonds.

In a third move, the BoE said it was prepared to support further easing of liquidity pressures facing liability-driven investment funds through its regular Indexed Long Term Repo operations each Tuesday.

The sharp sell-off in British government bonds after Kwarteng’s “mini-budget” sparked a scramble for cash by Britain’s pension funds which had to post emergency collateral in LDIs.

In a move aimed at calming investors’ nerves, Kwarteng said on Monday he would bring forward his medium-term fiscal plan, including an explanation of how the tax cuts will be paid for, to Oct. 31 from Nov. 23, with independent budget forecasts to be published the same day.

The earlier date will allow the BoE to understand the government’s tax and spending plans before it announces its next interest rate decision on Nov. 3.

“You have lots of risk events coming,” Pooja Kumra, senior European rates strategist at TD Securities, said. “Markets will be looking at each and every auction.”

Yields on British 20- and 30-year gilts jumped by nearly 30 basis points on Monday, approaching their levels during the worst of the market rout triggered by Kwarteng’s mini-budget and adding to a recent run of daily increases.

Antoine Bouvet, a strategist at ING, said low take up of the BoE’s facility so far suggested that risk reduction by pension funds had been limited to date, and the central bank wanted to show it could deploy more support.

“The closer we get to Friday the more gilts will sell off,” Bouvet said. “The bigger picture here is that the functioning of the gilt market is still impaired.”

(USD 1 = 0.9035 pounds)

(Additional reporting by Tommy Wilkes, Harry Robertson, Muvija M and Sachin Ravikumar; Writing by William Schomberg; Editing by Catherine Evans)

Philippines partially awards 91-day, 182-day T-bill offers

MANILA, Oct 10 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTr awards 1.27 billion pesos ($21.53 million) of 91-day T-bills vs 5 billion pesos offer at 3.819% avg yield

* BTr awards 2.695 billion pesos of 182-day T-bills vs 5 billion pesos offer at 4.415% avg yield

* BTr rejects all bids for 364-day T-bills

* Details are on the BTr’s website www.treasury.gov.ph

($1 = 58.99 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Ed Davies)

Oil falls as investors take profit amid China demand concerns

SINGAPORE, Oct 10 (Reuters) – Oil prices fell on Monday, snapping five days of gains, as investors took profits after a report on slowing economic activity in China, the world’s biggest crude importer, re-ignited concerns about falling global fuel demand.

Brent crude futures for December settlement fell by as much as 1.1%, and was last down 39 cents, or 0.4%, at USD 97.53 a barrel by 0645 GMT.

West Texas Intermediate crude for November delivery declined by as much as 1.1% and was last at USD 92.27 a barrel, down 37 cents, or 0.4%.

Services activity in China during September contracted for the first time in four months as COVID-19 restrictions hit demand and business confidence, data showed on Saturday.

The slowdown in the economy of China, the world’s second-largest oil consumer after the US, adds to growing concerns about a possible global recession triggered by numerous central banks raising interest rates to combat high inflation rates.

“Oil … is getting hit with the triple whammy of China’s economic weakness, U.S. monetary policy tightening and Biden administration SPR intervention,” Stephen Innes, managing director at SPI Asset Management, said in a note.

Innes was referring to the possibility of additional releases from the US Strategic Petroleum Reserve next month in response to the decision last week by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, to lower their output target by 2 million barrels per day.

Brent and WTI posted their biggest weekly percentage gains since March after the reduction was announced.

The OPEC+ cuts, which come ahead of a European Union embargo on Russian oil, will squeeze supply in an already tight market. EU sanctions on Russian crude and oil products will take effect in December and February, respectively.

“The cut is clearly bullish,” ING analysts said in a note.

“However, there is obviously still plenty of other uncertainty in the market, including how Russian oil supply evolves due to the EU oil ban and G-7 price cap, as well as the demand outlook given the deteriorating macro picture.”

Analysts at banks and brokerages have raised their crude price forecasts and expect Brent to rise above $100 a barrel in the coming months.

Despite the promised cuts in output, Saudi Arabian state oil company Saudi Aramco has told at least five North Asian customers they will receive full contract volumes of crude oil in November, according to sources with knowledge of the matter.

That would indicate little change in the physical supply of oil at least to Asian buyers of crude from Saudi Arabia, who as OPEC’s biggest producer will assume a large portion of the announced reductions.

Other signs of slowing demand emerged from India, the world’s third-largest oil user. Government data on Friday showed that fuel demand in September fell to the lowest since November and was down 3.6% from August.

(Reporting by Florence Tan and Emily Chow; Editing by Jacqueline Wong and Christian Schmollinger)

Oil falls by nearly 2% as recession fears outweigh tight supply prospects

NEW YORK, Oct 10 (Reuters) – Oil prices sank by nearly 2% on Monday, after five straight sessions of gains, as investors worried that economic storm clouds could foreshadow a global recession and erode fuel demand.

Brent crude futures settled at USD 96.19 a barrel, down USD 1.73, or 1.8%. West Texas Intermediate crude settled at USD 91.13 a barrel, losing USD 1.51, 1.6%. Both benchmarks had risen over the previous week largely on expectations of tightening global supply.

Oil prices fell amid comments from US Federal Reserve officials about rising interest rates and their effect on the economy.

Fed Vice Chair Lael Brainard said the economy is starting to feel more restrictive monetary policy, but the full brunt of the central bank’s interest rate hikes will not be apparent for months.

Brainard’s comments followed remarks by Chicago Fed President Charles Evans that there was a strong consensus at the Fed to raise the target policy rate to around 4.5% by March and hold it there.

“There’s more of the doom and gloom from those folks and what they’re going to do to the economy, because they’re not so convinced they have inflation under control, and that’s the macro play that’s weighing on oil,” said John Kilduff, partner at Again Capital LLC in New York.

Oil prices also struggled under a strengthening US dollar, which rose for a fourth session. A stronger dollar makes crude more expensive for non-American buyers.

The prospect of tightening OPEC+ oil supplies limited declines in prices. The Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, decided last week to lower their output target by 2 million barrels per day.

But signs that the group’s de facto leader, Saudi Arabia, will continue to serve Asian customers at full levels lowered expectations of the cuts’ impact.

Saudi Aramco has told at least seven customers in Asia they will receive full contract volumes of crude oil in November ahead of the peak winter season, several sources with knowledge of the matter said.

“OPEC+’s decision… will have a muted impact on the oil supply market as actual output cuts will be smaller,” Fitch Ratings said, noting that collectively the group was already producing less than its previous quotas.

Brent and WTI posted their biggest weekly percentage gains since March after the reduction was announced.

However, the cut spurred a flurry of activity in the options market – but with more US bettors opting for a bearish stance, data from CME Group showed.

Concerns over still relatively robust demand as the pandemic has eased meeting potentially scarce supply have been deepened as the European Union late last week endorsed a G7 plan to impose a price cap on Russian oil exports.

The complicated new sanctions package could end up shutting in considerable supplies of Russia crude, analysts have warned.

Meanwhile, services activity in China during September contracted for the first time in four months as COVID-19 restrictions hit demand and business confidence, data showed on Saturday.

(Additional reporting by Noah Browning, Florence Tan and Emily Chow; Editing by Mark Porter and Marguerita Choy)

Gold hits one-week low as solid US data fans rate-hike fears

Oct 10 (Reuters) – Gold prices fell to a one-week low on Monday, as solid US jobs data boosted expectations that the Federal Reserve will continue to deliver oversized interest rate hikes.

Spot gold was down 0.5% at USD 1,686.55 per ounce, as of 0623 GMT, after hitting its lowest since Oct. 3. US gold futures were down 0.8% at USD 1,695.70.

The dollar index was steady after touching a one-week high on Friday. A stronger greenback makes gold costlier for buyers holding other currencies.

“Gold prices are taking their cue from the build-up in rate-hike expectations from last week, brought on by the hotter-than-expected US job report,” IG market strategist Yeap Jun Rong said, adding that gold prices seemed to remain locked in a downward trend for now.

Data showed on Friday US job growth slowed moderately in September while the unemployment rate dropped, signalling a resilient economy and dousing hopes of a Fed pivot anytime soon.

Investors will now focus on the US inflation data due later this week. Headline consumer price inflation is seen slowing a touch to an annual 8.1%, but the core measure is forecast to accelerate to 6.5% from 6.3%.

While gold is often seen as a hedge against inflation, rising US interest rates increase the opportunity cost of holding the non-yielding gold.

Gold prices have declined more than USD 350 since surging past the USD 2,000-mark in March, amid aggressive US monetary policy tightening.

Spot gold is expected to fall into a range of USD 1,660 to USD 1,674 per ounce, as it has more or less broken a support at USD 1,689, according to Reuters technical analyst Wang Tao.

Holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, fell by 2.03 tonnes on Friday, marking its biggest outflow since late September.

Spot silver shed 1.9% to USD 19.73 per ounce after hitting a one-week low. Platinum fell 0.6% to USD 906.90, while palladium inched 0.1% lower to USD 2,179.49.

(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)

Philippines energy chief: 2023 power supply conditions look ‘difficult’

MANILA, Oct 10 (Reuters) – The Philippines’ energy minister said on Monday the country’s power supply situation next year is likely to be difficult, with some hydro plants expected to be unable to deliver electricity.

Energy Secretary Raphael Lotilla, in a forum organized by the Economic Journalists Association of the Philippines, also said he was encouraging the increased use of renewable sources of energy, which could help ease the impact of high fuel prices.

The Southeast Asian country has sufficient power supply for the rest of the year, but Lotilla did not rule out “yellow alerts” – which are issued by his department whenever reserves are thin and thus could potentially cause outages.

The Philippines remains dependent on fossil fuels for electricity generation, but Lotilla has sought to ramp up support for renewables.

“In 2023 the situation is a bit difficult especially in the summer months. The scenario…shows several yellow alerts and possible red alerts in 2023,” he said. Red alerts are issued when supply is insufficient to meet demand.

(Reporting by Enrico Dela Cruz, Neil Jerome Morales and Karen Lema; Editing by Kim Coghill and Ed Davies)

Dollar climbs as US jobs report is stronger than expected

NEW YORK, Oct 7 (Reuters) – The US dollar strengthened against major currencies on Friday after US data showing employers hired more workers than expected in September, suggesting the Federal Reserve will likely stick to its aggressive tightening policy for now.

The dollar reversed early losses against the Japanese yen and was last up 0.2% at 145.42 yen. The dollar hit a 24-year peak of 145.90 yen last month, which had prompted an intervention by Japanese authorities to shore up the fragile yen.

The euro fell against the dollar, extending losses after the US jobs report, and was last down 0.6% at USD 0.9735.

“Any sign of US economic weakness will weigh heavily on the dollar, but it certainly didn’t come with nonfarm payrolls,” said Adam Button, chief currency analyst at ForexLive in Toronto.

Nonfarm payrolls increased by 263,000 jobs last month, the Labor Department said in its closely watched employment report. Data for August was unrevised to show 315,000 jobs added as previously reported. Economists polled by Reuters had forecast 250,000 job gains, with estimates ranging from as low as 127,000 to as high as 375,000.

Overnight, a number of Fed officials reinforced the view that the central bank is nowhere near finished with raising rates as it seeks to tame inflation, and interest rates are expected to go up further.

US inflation data, due next week, will be watched closely as well and could prove influential in setting investors’ expectations for the Fed, according to strategists.

The US central bank, in an effort to tame inflation, has hiked its policy rate from near-zero at the beginning of this year to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.

A US dollar index which measures the greenback against a basket of currencies was last up 0.6% and hit its highest in a week. The index is up about 18% for the year so far.

Sterling was down 0.9% at USD 1.1060, having fallen 1.4% overnight. It jumped earlier this week, after the British government reversed a planned cut to the highest rate of income tax.

The dollar also gained against China’s offshore yuan Friday, and was last up 0.7% at 7.1313.

(Additional reporting by Amanda Cooper in London and Rae Wee in Singapore; Editing by Shri Navaratnam, Ana Nicolaci da Costa, William Maclean, Jonathan Oatis and Cynthia Osterman)

US yields climb after jobs report keeps Fed hikes intact

NEW YORK, Oct 7 (Reuters) – The yield on the benchmark US 10-year Treasury note rose on Friday, after a solid report on the labor market largely extinguished any remaining hopes the Federal Reserve would alter its path of aggressive interest rate hikes as it seeks to combat inflation.

Nonfarm payrolls increased by 263,000 jobs last month, the Labor Department said in its closely watched employment report on Friday, above the 250,000 estimate of economists polled by Reuters. The unemployment rate fell to 3.5% from the 3.7% in the prior month.

Expectations the Fed will raise interest rates by 75 basis points (bps) increased following the data as fed funds futures implied as much as a 92% chance the policy rate will be increased to a 3.75% to 4% range at its November meeting, up from the 85% before the data release.

“Probably there were some people out there hoping for a weaker number that could set the stage for a Fed pivot. I’m sure they were disappointed,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in Charlotte, North Carolina.

“We’ve been through the ‘Fed’s going to pivot and pause’ thing enough times now that hopefully there’s not too many people betting on that given the Fed’s comment. You could argue that hope springs eternal but it was dashed once again.”

The yield on 10-year Treasury notes was up 6.4 basis points to 3.888%. The yield was on track for its tenth straight weekly rise, its longest such streak since 1994.

Treasury yields have been sensitive this week to any signs the labor market might be slowing in hopes it would give the US Federal Reserve room to pivot to a less hawkish policy stance and slow its rate of interest rate hikes after three straight increases of 75 basis points.

The yield on the 30-year Treasury bond US30YT=RR was up 5.1 basis points to 3.844%.

But Fed officials have been consistent in recent comments that the central bank will take aggressive measures in hiking interest rates to combat rising inflation, raising concerns among investors it could tilt the economy into a recession.

New York Federal Reserve President John Williams said on Friday the Fed has more work to do to lower inflation and rebalance economic activity in a more sustainable way, while Minneapolis Federal Reserve Bank President Neel Kashkari said “inflation is much too high.”

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 a recession when inverted, was at a negative 42.5 basis points, up from the negative 57.85 hit on September 22.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 6 basis points at 4.310%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.423%, after closing at 2.352% on Thursday.

The 10-year TIPS breakeven rate was last at 2.273%, indicating the market sees inflation averaging 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak, additional reporting by Sinéad Carew; Editing by Nick Zieminski)

Dollar’s 20-year highs doable after decent jobs data if CPI supports

Aug 10 (Reuters) – The dollar index rose on Friday after firm US employment data sent Fed rate hike expectations back toward September’s highs, but the US currency might wait for next Thursday’s CPI to confirm that view before making a run at September’s 20-year 114.78 peak.

The index surpassed the 50% Fibo of its 114.78-110.05 Sept. 28 to Oct. 4 at 112.41, a retreat triggered by BoE intervention to arrest financial market distress that had been boosting the haven dollar.

The 61.8% Fibo at 112.97 and Sept. 29 high at 113.79 are the next hurdles. Friday’s 111.94 low by Wednesday’s initial recovery high and the cleared 38.2% Fibo at 111.75/85 is support.

EUR/USD, the index’s majority component, broke its analogous 50% Fibo support at 0.9764 after failed attempts to retake parity this week as German economic data deteriorates nL8N3181GL and EU leaders squabble over energy.

Two-year bund-Treasury yield spreads fell with the ECB seen further behind fighting inflation than the Fed and now dealing with an OPEC+ oil output cut. But big ECB rate hikes are seen as more dangerous for wobbling euro zone economies.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold drops as US jobs data fans hefty Fed rate-hike bets

Oct 7 (Reuters) – Gold prices fell on Friday, after a better-than-expected US jobs report cemented expectations the Federal Reserve would implement steep interest rate hikes.

Spot gold was down 0.6% at USD 1,700.03 per ounce, as of 12:37 p.m. EDT (1802 GMT). Prices have risen about 2.4% so far this week.

US gold futures settled 0.7% lower at USD 1,709.30.

“The market is looking at the stronger-than-expected payrolls report as further impetus for the Fed to raise yet another 75 bps at the early November meeting,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

“If bullion doesn’t hold support at USD 1,690, it could retest USD 1,660 level. Market will be now be focused on key inflation data next week, as well as the Fed minutes.”

Data showed US employers hired more workers than expected in September, while the unemployment rate dropped to 3.5%.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Following the data, the dollar firmed against its rivals, making gold more expensive for other currency holders. Benchmark US Treasury yields US10YT=RR also climbed.

“Gold traders once again are deciding to focus more on Fed policy and less on the geopolitics that might prompt some safe-haven demand,” said Jim Wyckoff, senior analyst at Kitco Metals.

Meanwhile, physical gold prices flipped to a discount in India this week as elevated local rates amid a dive in the rupee dampened festive demand, with higher prices playing spoilsport across other Asian hubs as well.

Silver eased 2.3% to USD 20.21 per ounce, but was on track for its biggest weekly rise since late-July, up about 6.3% so far.

Platinum dipped 0.7% to USD 915.44, but was still headed for its best week since June 2021. Palladium dropped 3.1% to USD 2,191.17.

(Reporting by Brijesh Patel and Bharat Govind Gautam in Bengaluru; Editing by Jonathan Oatis, Shailesh Kuber and Krishna Chandra Eluri)

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