2025-07-28 05:07

QT pace seen slowing to 75 billion pounds from 100 billion Faster QT risks pushing UK government borrowing costs higher BoE gilt sales still to rise as fewer bonds mature in 2026 Economists hope for clarity on BoE's long-term QT goals BoE gilt holdings down by a third from 875 billion pound peak LONDON, July 28 (Reuters) - The Bank of England is expected to soon slow the pace at which it shrinks its 558 billion-pound ($754 billion) holdings of government bonds, and economists hope next week will shed some light on its longer-term goals for the stockpile. Alongside a predicted quarter-point interest rate cut to 4%, the BoE's Aug. 7 policy statement will assess the past year's quantitative tightening, or QT, before policymakers decide in September on the pace of bond sales for the following 12 months. Sign up here. There is greater uncertainty over QT than usual due to recent bond market ructions and because liquidity in Britain's financial system is approaching a balanced level for the first time since before the 2008 financial crisis. Adding to the mix is political pressure over the hefty losses the BoE has made when selling bonds. "The official view from the Bank ... is that they see this as an operation that works almost in the background. But clearly it has come to their attention that they are not operating in a vacuum," said Peter Schaffrik, global macro strategist at RBC. Unlike other big central banks, the BoE's QT programme involves bond auctions as well as letting existing holdings mature. Over the past year, it has sold 13 billion pounds of gilts and let 87 billion pounds mature. Keeping up that 100 billion-pound pace for the next 12 months would require it to sell a record 51 billion pounds though, due to fewer redemptions. Schaffrik said market conditions had changed since it last sold close to 50 billion pounds of gilts, however, which was in the year to September 2024. "The market would probably take it quite negatively if they sold such a large amount," Schaffrik said. The BoE itself has said its sales so far have barely pushed up government bond yields. A BoE survey published in May showed investors mostly expected QT to slow to a yearly 75 billion-pound pace from September and to 50 billion in 2026-27 before active sales effectively end in 2028. EARLY END TO BOND SALES? One outlier is BNP Paribas' Europe economist Dani Stoilova, who expects the BoE to stop gilt sales from October onward to avoid impacting the market. British 30-year government bond yields hit their highest levels since 1998 in April after President Donald Trump's tariff bombshell rocked the markets and the BoE had to postpone a bond sale. Despite four BoE rate cuts over the past year, the difference between five- and 30-year gilt yields has doubled to 1.4 percentage points and the 2/10-year yield curve has steepened to 0.75 percentage points from near zero. "Active QT has never been done in this environment where Bank Rate has been falling. And so there is the potential that there are interaction effects that haven't been caught," Stoilova said. Last week BoE Governor Andrew Bailey said QT was not to blame for higher government borrowing costs. "We do need to look, however, at the interaction of those yield curve movements with the QT programme and with market functioning and with monetary policy impact," he said. The BoE might focus more on shorter-dated gilt sales or even halt sales of gilts with a maturity of 20 years or longer, former Monetary Policy Committee member Michael Saunders said. Equally, the BoE could decide that extra rate cuts are a better option, or that there is little it can do to offset the steeper yield curve, said Adam Dent, chief UK rates strategist at Santander CIB. "We believe that QT is only responsible for a small part of the steepness, so trying to use QT to control the slope should also have little lasting effect," he said. LONG-TERM PLANS UNCLEAR The BoE has said little about its long-term plans for its gilts. One of Bailey's original reasons for QT - which drains money from the financial system - was to lower banks' reserve holdings from excess levels. Reserves stand at around 680 billion pounds, well above the 385-540 billion-pound range bankers gave to the BoE as an estimate of the system's preferred minimum range of reserves. Once reserves hit this minimum level, the BoE might still see financial or market stability reasons to keep selling gilts and require banks to make greater use of its repos. But growing take-up of the BoE's repo operations - where banks temporarily borrow money from the BoE - suggests the floor could be nearer than the BoE thinks. "They could slow things down or feel their way to that level," Schaffrik said, noting the BoE had never given a steer on its ideal position. "But everything indicates they want to go quite a bit below it." https://www.reuters.com/world/uk/bank-england-poised-slow-qt-after-rise-yields-2025-07-28/

2025-07-28 05:02

MUMBAI, July 28 (Reuters) - The Indian rupee nudged higher in early trading on Monday, aided by improved risk appetite, but gains were restricted by dollar demand related to importers' month-end payments and from foreign banks. The rupee was at 86.4675 against the U.S. dollar as of 10:20 a.m. IST, up slightly from its close at 86.5150 in the previous session. Sign up here. The local currency has weakened about 0.8% over July so far, hit by outflows from local equities alongside uncertainty about the timing of a U.S.-India trade deal, even as economies such as the European Union, Japan, Indonesia and Vietnam secured deals. Over the weekend, the U.S. struck a framework trade agreement with the EU, imposing a 15% import tariff on most EU goods. The EU also plans to invest some $600 billion in the United States and dramatically increase its purchases of U.S. energy and military equipment, President Donald Trump said on Sunday. The euro strengthened slightly against the dollar after the deal was announced. Meanwhile, the dollar index was little changed at 97.6 on the day while Asian currencies were trading mixed. The rupee is likely to hold an 86.38-86.57 range on Monday and trade with a slight depreciation bias, a trader at a state-run bank said. India's benchmark equity indexes, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab, nudged higher on Monday but are nursing losses of over 2.5% each on the month so far, troubled by tepid quarterly earnings and foreign portfolio outflows. A lack of strong foreign inflows, the Reserve Bank of India's ongoing unwinding of short forward dollar positions, and a quiet return to FX reserve accumulation have all weighed on the rupee, said Amit Pabari, managing director at FX advisory firm CR Forex. https://www.reuters.com/world/india/rupees-modest-uptick-runs-into-dollar-bids-importers-foreign-banks-2025-07-28/

2025-07-28 04:48

Fed, Bank of Japan expected to hold rates steady this week Ethereum stands at highest since December 2024 China faces August 12 deadline for U.S. trade pact TOKYO, July 28 (Reuters) - The euro edged higher on Monday after news of a framework trade pact stuck between the United States and the European Union, the latest in a flurry of deals to avert a global trade war, while central bank meetings in the US and Japan also come into focus. Meeting in Scotland on Sunday, U.S. President Donald Trump and European Commission President Ursula von der Leyen said the deal provided for an import tariff of 15% on EU goods, half the rate Trump had threatened from August 1. Sign up here. The euro stood at $1.1753 , up 0.1% after initially rising 0.3%. The common currency strengthened 0.2% to 173.64 yen , climbing for a fifth straight session to a fresh one-year high. As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days. "It could be a positive week, just purely from the fact that now we know the rules of the game, if you like," Rodrigo Catril, senior currency strategist at National Australia Bank, said on a bank podcast. "Now that there is more clarity, you would think that not only in the United States, but around the globe, there will be a little bit more willingness to look at investment, to look at expansions, and to look at where the opportunities are." Still, a detailed trade deal between the two biggest economies remains elusive, though senior negotiators from the United States and China are set to meet in Stockholm on Monday. The dollar was little changed at 147.65 yen . The dollar index , which tracks the greenback against major peers, was flat at 97.582. Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves. Trump said the EU planned to invest about $600 billion in the United States and dramatically step up purchases of American energy and military equipment. The pact is similar to one forged with Tokyo negotiators last week for Japan to invest some $550 billion in the United States and a 15% tariff imposed on its cars and other imports. Many in Europe will still see the baseline 15% tariff as too high, versus initial the bloc's hopes of a zero-for-zero tariff deal. The deal's investment provision will draw capital flows out of Europe, strengthening the dollar overall against the euro, said Shoki Omori, chief desk strategist at Mizuho Securities. "Taken together, weaker relative growth prospects and a deteriorating balance of payments argue for a gradual depreciation of EUR/USD once the initial relief fades, notwithstanding the overnight uptick," he said. China faces an August 12 deadline for a durable trade pact with the United States. The two are expected to extend their tariff truce by three more months at the , the South China Morning Post newspaper said on Sunday, citing people familiar with the matter. Shares and other risk-sensitive assets were supported ahead of a packed week of corporate results. Quarterly results are due in coming days from Apple, Microsoft, Amazon and Facebook parent Meta Platforms META.O , opens new tab, four of the whose stocks heavily influence benchmark indexes. In cryptocurrencies, ethereum ETH= , opens new tab jumped 1.5% and reached as high as $3,905.79, the most since December 2024. The U.S. dollar advanced on Friday, bolstered by solid economic data that suggested the Federal Reserve could take its time in resuming interest rate cuts. Sterling traded at $1.3443 , nearly unchanged. The Australian dollar fetched $0.6568 , while New Zealand's kiwi dollar was at $0.6014 , both little changed. https://www.reuters.com/world/middle-east/euro-rises-after-us-eu-agree-tariff-deal-2025-07-28/

2025-07-28 02:45

MUMBAI, July 28 (Reuters) - The Indian rupee is expected to open little changed on Monday, with any support from improved risk sentiment after a trade deal between the European Union (EU) and the U.S. likely to be capped by persistent foreign portfolio outflows. The 1-month non-deliverable forward indicated the rupee will open in the 86.48-86.51 range versus the U.S. dollar, compared with Friday's close of 86.5150. Sign up here. Global stocks rose and the euro firmed after the weekend deal between the EU and the U.S., which set the import tariff on most EU goods at 15% - half the rate initially threatened. Asian currencies traded mixed, while the dollar index was at 97.6. The U.S.-EU trade pact is expected to reduce trade-related uncertainty in a week dominated by central bank policy decisions and the U.S.'s August 1 deadline for trading partners to strike deals. Washington has already signed similar framework accords with Britain, Japan, Indonesia and Vietnam. Meanwhile, India's trade minister told Reuters last week that the country is also hopeful of reaching a deal with the U.S. that includes "special and preferred treatment". Alongside these, monetary policy meetings in the U.S., Japan and other economies will be in focus this week. While the Federal Reserve is widely expected to keep rates unchanged, ANZ said it will watch for "tweaks to the language" in the Fed's statement and Chair Jerome Powell's comments for clues on possible rate cuts in September. Over the week, traders expect the rupee to hover between 86.20 and 86.80-86.90, with a slight depreciation bias given the persistent outflows from local stocks. Foreign investors have net sold Indian equities worth about $750 million so far in July, reversing three months of inflows. KEY INDICATORS: ** One-month non-deliverable rupee forward at 86.63; onshore one-month forward premium at 13.25 paise ** Dollar index at 97.67 ** Brent crude futures up 0.4% at $68.7 per barrel ** Ten-year U.S. note yield at 4.39% ** As per NSDL data, foreign investors sold a net $231.1mln worth of Indian shares on July 24 ** NSDL data shows foreign investors sold a net $55.2mln worth of Indian bonds on July 24 https://www.reuters.com/world/india/risk-boost-us-eu-trade-deal-little-help-rupee-outflows-persist-2025-07-28/

2025-07-28 01:31

MUMBAI, July 28 (Reuters) - The Indian rupee and government bonds will react to a host of cues this week, including a U.S. Federal Reserve policy decision and the August 1 reciprocal tariff deadline, which is likely to keep traders cautious. The rupee closed at 86.5150 against the U.S. dollar on Friday, down 0.4% on the week, as foreign portfolio outflows and uncertainty over a U.S.-India trade agreement kept sentiment tepid. Sign up here. While the Fed is widely expected to keep rates unchanged on Wednesday, investors will pay close attention to commentary from Fed Chair Powell to gauge the outlook for U.S. policy rates. "As long as the jobs picture holds up, firmer inflation may well delay the restart of the Fed easing cycle and provide the dollar with a lift this summer," ING said in a note. Later in the week, data on the U.S. labour market will be in focus alongside an inflation print to gauge how tariffs are affecting the world's largest economy. Meanwhile, the deadline to strike trade deals with the U.S. elapses on August 1. Over the weekend, the United States and the European Union announced a deal, which will result in a 15% tariff on EU goods, half what Trump had threatened to impose from August 1. Japan and the European Union have reached agreements with U.S., alongside others such as Indonesia and Vietnam, even as India's negotiations have appeared to run into roadblocks over key sectors such as dairy and agriculture. Traders reckon that the rupee will continue to hold a slightly bearish bias and hover in a 86.30-87 range in the near term. Heightened risk of "news-led price action" should prompt speculators to keep positions small with tight stop-losses, a trader at a foreign bank said. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield , which settled last week at 6.3505%, is expected to move in a range of 6.31% to 6.38%. Apart from the Fed guidance, focus will also remain on expectations about any potential rate cut in the RBI's upcoming policy decision, due on August 6. A plunge in India's retail inflation to a more-than-six-year low in June, along with expectations that it will slip to a record low in July, has led to increased talks of a rate cut, with some even expecting action next week. The central bank slashed its key interest rate by a steeper-than-expected 50 bps last month and changed its policy stance to "neutral" from "accommodative", which had fueled speculation that the rate cut cycle may be over. Banks will also gauge the liquidity situation and movement in overnight rates after a volatile last week, which saw rates rising beyond the Marginal Standing Facility rate. Foreign investors have been on the buying side, with net purchases of over 100 billion rupees in the last five weeks, as bets of at least one more rate cut have risen. India's fundamental story remains intact. Inflation is under control and fiscal health is in check, and India is one of the large benchmark weights within the JPMorgan emerging market debt index, said Jean‑Charles Sambor, head of emerging markets debt at TT International Asset Management. "We think that fundamentals will remain very attractive for foreign investors." KEY EVENTS: India ** June fiscal deficit - July 28, Monday (3:30 p.m. IST) ** June industrial output - July 28, Monday (4:00 p.m. IST)(Reuters poll - 2.4%) ** July HSBC manufacturing PMI - August 1, Friday (10:30 a.m.) U.S. ** July consumer confidence - July 29, Tuesday (7:30 p.m. IST) ** April-June GDP advance - July 30, Wednesday (6:00 p.m. IST) ** Federal Reserve monetary policy decision - July 30, Wednesday (11:30 p.m. IST)(Reuters poll - rates unchanged) ** Initial weekly jobless claims for week to July 21 - July 31, Thursday (6:00 p.m. IST) ** June personal consumption expenditure index, core PCE index - July 31, Thursday (6:00 p.m. IST) ** July non-farm payrolls and unemployment rate - August 1, Friday (6:00 p.m. IST) ** July S&P Global manufacturing PMI final - August 1, Friday (7:15 p.m. IST) ** July ISM manufacturing PMI - August 1, Friday (7:30 p.m. IST) ** July U Mich sentiment final - August 1, Friday (7:30 p.m. IST) https://www.reuters.com/world/india/indian-rupee-bond-markets-cautious-week-dominated-by-fed-tariffs-2025-07-28/

2025-07-28 00:19

HONG KONG, July 28 (Reuters) - CK Hutchison (0001.HK) , opens new tab said on Monday it wants a major Chinese strategic investor to join the consortium bidding for its $22.8 billion ports business, after media reports that state-owned China COSCO Shipping Corp may join the group. In a statement, CK Hutchison said changes to the consortium's composition and the structure of the transaction will be necessary for the deal to secure regulatory approvals, and that it will allow as much time as needed to achieve those. Sign up here. The announcement comes as a 145-day exclusivity period for talks between CK Hutchison and the original bidding consortium - led by BlackRock (BLK.N) , opens new tab and Gianluigi Aponte's MSC - expired on Sunday. The deal, which includes two ports near the strategically crucial Panama Canal, has become highly politicised as tension escalates between China and the United States. Beijing views the potential sale as a threat to its interests, seeing the BlackRock-led consortium as a proxy for growing American influence in a region China considers economically and geopolitically significant. The outlook for the deal has grown increasingly uncertain in recent days, with sources telling Reuters that COSCO - a key player in China's global maritime ambitions - is exploring a role in the bid. https://www.reuters.com/markets/commodities/ck-hutchison-eyes-chinese-bidding-partner-228-billion-port-sale-2025-07-27/