2025-06-11 18:27

BENGALURU, June 11 (Reuters) - U.S. Treasury yields are set to decline further according to bond strategists who are clinging to expectations the Federal Reserve resumes cutting interest rates after pausing for more than half a year even as dealers are set to underwrite a deluge of new supply. A slight majority now expect another sell-off in longer-dated bonds, the maturities most at risk, by the end of this month. Sign up here. Concerns that President Donald Trump’s tax-cut and spending bill will add trillions of dollars to an already-staggering $36.2 trillion debt pile by 2034, along with tariff brinkmanship already have many holders of U.S. assets scrambling for the exit. The rising "term premium" – what investors demand as compensation for holding longer-dated debt – leaves the market more vulnerable, particularly among foreign investors, ahead of upcoming Treasury bond auctions. "The amount of debt we need to issue keeps rising and there doesn't appear to be anyone in Washington on either side that really has a plan to bring down deficits and address our fiscal situation," said Collin Martin, fixed income strategist, Schwab Center for Financial Research. "That'll weigh on the long end of the curve where we need to see yields rise a bit to attract that marginal buyer." Global sovereign bond yields have mostly risen in tandem over the past two months. A rapid sell-off in benchmark U.S. 10-year Treasuries in April pushed the yield up around 60 basis points. That yield, which rises when prices fall, has since steadied, oscillating around 4.50%. Median forecasts from nearly 50 bond strategists in a June 6-11 Reuters survey, most from dealers and sell-side firms, predicted the 10-year yield would decline a modest 13 bps to 4.35% in three months and to 4.29% in six from its current 4.48%. Despite predicting a decline, more than half upgraded their forecasts from a May survey with many flagging the risk of yields moving higher. "The 10-year will probably trade range-bound for a while between 4-4.50% and maybe even rise a little bit further, particularly given deficit concerns. The yield curve should continue to steepen as short-term yields drift gradually lower as the Fed cuts rates one or two more times by year-end," Schwab's Martin added. The more interest rate-sensitive 2-year yield was forecast to decline a slightly steeper 17 bps to 3.85% in three months and to 3.73% by end-November, the survey showed. Most economists polled by Reuters predict two or fewer rate cuts this year while rate futures are currently pricing two. An ongoing auction for three-year Treasury notes has been met with somewhat tepid demand though markets will be paying closer attention to sales of longer-dated 10- and 30-year bonds this week. "Given recent market behavior and the pressure we've seen on yields, it seems the long end of the yield curve is most susceptible to a supply-demand imbalance leading to higher rates," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management. "There has been some disruption at the long end of the curve and the 30-year Treasury bond supply is the biggest question mark for the week in light of all the supply that is hitting. But that isn't to say threes and 10s are going to be necessarily easy either." A Reuters survey of foreign exchange strategists conducted last week showed a near-90% majority expecting a decline in demand for dollar-denominated assets this year with Europe widely slated to be the biggest beneficiary. "On the bond side European investors who are looking at the U.S. market would normally hedge currency risk, but that's become very expensive. So on a hedged basis, Treasuries are just not very attractive to European investors anymore," said Chris Iggo, CIO of AXA IM Core, AXA Investment Managers. "There's been a lot of talk about defence spending and infrastructure but you know 'Show me the money!' - we haven't really seen the opportunity set increased massively just yet." https://www.reuters.com/business/hopes-fed-rate-cuts-keep-us-treasury-yield-views-low-ahead-supply-deluge-2025-06-11/

2025-06-11 17:11

BUENOS AIRES/NEW YORK, June 11 (Reuters) - Argentine traders cheered on Wednesday a court's political ban on populist former President Cristina Fernandez de Kirchner, a powerful but divisive politician who often clashed with investors and creditors. The country's Supreme Court on Tuesday upheld a ruling against the former president, who was sentenced to six years in prison and banned from holding public office for fraud, rejecting an appeal by the leader of the Peronist opposition. Sign up here. "All investors fear a return to Kirchnerism. A future without Cristina.... clears the outlook," said Mariano Sardans of local financial firm FDI Gerenciadora de Patrimonios, citing high-spending, interventionist policies under the Peronists. "The specter that always looms over investors is Kirchnerism and Argentina's falling back into policies of that nature." Current market-friendly libertarian President Javier Milei has been well received by investors, helping boost equities and bonds since he took office in late 2023, ushering in tough austerity and a "zero deficit" drive. Legislative elections in October are seen as a test of his popularity. A positive result in those ballots will help ensure the success of some of his investor-friendly reforms. Fernández, the government's strongest opposition figure, will now be barred from running for a seat she sought in Buenos Aires Province. Sovereign dollar bonds were trading slightly higher on the day while the benchmark S&P Merval stock index (.MERV) , opens new tab fell over 1% after rising more than 4% on Tuesday. Other analysts were more cautious, warning about tough economic challenges ahead, including rebuilding foreign exchange reserves. "The impact on the market will most likely be limited, since the Supreme Court's ruling doesn't solve Argentina's macroeconomic problems," said Roberto Geretto, an economist at local firm Adcap. https://www.reuters.com/business/finance/argentine-market-traders-cautiously-cheer-future-without-cristina-2025-06-11/

2025-06-11 16:16

WASHINGTON, June 11 (Reuters) - U.S. Treasury Secretary Scott Bessent said that the Republican tax and spending bill under consideration will prevent hundreds of billions of dollars of corporate tax payments from going to foreign governments. Bessent told a U.S. House of Representatives Ways and Means Committee hearing that the Biden administration "chose to outsource American sovereignty on tax matters," and the so-called One Big Beautiful Bill Act tax bill would deter countries from collecting revenues from U.S. companies through the "Pillar Two" global minimum corporate tax. Sign up here. "The U.S. tax system will stand next to what is called Pillar Two, and other countries are welcome to relinquish their fiscal and tax sovereignty to other nations," Bessent said. "The United States will not so this bill will allow us to prevent our corporate revenues from being drained into foreign treasuries, and that is in the hundreds of billions of dollars." The Republican bill contains a proposed tax, known as Section 899, that applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years but has raised concerns over the attractiveness of U.S. investments. https://www.reuters.com/world/us/bessent-says-republican-tax-bill-will-reclaim-us-corporate-tax-sovereignty-2025-06-11/

2025-06-11 15:34

Trump calls on Fed to cut rates again Trump's call follows release of CPI data Fed officials on track to hold rates steady at next week's policy meeting June 11 (Reuters) - U.S. President Donald Trump reiterated his call for the Federal Reserve to push through a major rate cut in the wake of the release of new data Wednesday on consumer inflation. Trump called the May Consumer Price Index a “great” number and wrote on Truth Social that the “Fed should lower one full point. Would pay much less interest on debt coming due. So important!!!" Sign up here. The May CPI showed a modest increase in inflation relative to a year ago, as many forecasters expect price pressures to accelerate due to the president’s massive increase in import taxes on a wide range of goods. The overall CPI for last month rose by 2.4% relative to May 2024, a touch above the April year-over-year reading, while the CPI stripped of food and energy costs was up by 2.8% over the same time period. The CPI readings arrive ahead of a Fed policy meeting next week where officials are virtually certain to keep the central bank’s interest rate target range fixed at between 4.25% and 4.5%. Fed officials have signaled they are in a wait-and-see mode right now as the chaotic nature of the Trump administration’s trade policy has made it very hard to know what lies ahead for the economy. A wide range of economists, as well as Fed officials, believe the tariffs will increase inflation while lowering growth and depressing employment. Some of those risks have moderated as Trump has backed away from some of the most draconian tariffs. The main question facing the Fed is whether the tariffs will drive a one-time price increase that can be ignored, or create something more persistent. A recent report from the New York Fed showed factory and service firms passing through a notable amount of tariffs. But at the same time, a separate New York Fed report released on Monday showed the public has become less worried about future inflation, which could reduce the risk of an enduring increase in price pressures. Following the CPI data release, futures markets increased odds the central bank will lower rates at its September meeting. Citibank economists said the CPI data “should give Fed officials further confidence that underlying inflation has been easing more rapidly this year ahead of upside risks from tariffs, and that the risk of more persistent inflation resulting from tariffs is low.” They added “we continue to pencil in 125 basis points of consecutive rate cuts from the Fed starting in September.” Other economists, however, were more cautious about the longer-run outlook for inflation. Skanda Amarnath, executive director of Employ America, said “we are likely to see a material acceleration in goods inflation and electricity inflation later this summer, both of which threaten to keep interest rates higher for longer and raise recession risk as a result.” Trump’s call for a full percentage point interest rate cut advocates for a policy action central bankers usually reserve for economic emergencies. The president has been pressing for easier monetary policy for some time even as Fed officials have shrugged off his commentary. Trump’s comment on how a Fed rate cut would lower government interest payments alludes to the massive bill high short-term interest rates have imposed on government borrowing. That said, the Fed is mandated by Congress to set interest rates to keep inflation low while promoting maximum sustainable job growth. The Fed is not charged with managing government borrowing costs and officials have said that is not a factor in how they deliberate on the future of interest rate policy. https://www.reuters.com/world/us/trump-says-fed-should-lower-rates-by-one-full-point-2025-06-11/

2025-06-11 15:28

BRASILIA, June 11 (Reuters) - Brazil's Finance Minister Fernando Haddad said on Wednesday the country needs to push ahead with measures under consideration in Congress to ensure the current growth cycle in Latin America's largest economy is sustainable. Haddad made his remarks during a hearing in the lower house of Congress after Speaker Hugo Motta said earlier on Wednesday the government's proposal to roll back a controversial tax hike on some financial transactions faces resistance from lawmakers. Sign up here. On Sunday, Haddad proposed offsetting the revenue loss from the scaled-back financial transactions tax with higher taxes on online betting, private credit instruments and financial institutions. "We need to understand that presenting solutions focused on increasing revenue, without cutting spending, does not work," Motta added in a post on the X social media site. During his opening remarks at the hearing, Haddad noted that leftist President Luiz Inacio Lula da Silva's government is delivering average annual economic growth of 3%, but said it is necessary to "keep advancing with the economic measures being addressed to this House" to ensure the growth cycle continues. "There is no reason we can't continue to grow, but we must have the courage to face certain taboos," Haddad added. He also said the government has been expressing to Congress its concerns over certain spending trends, many of which are being honored by the Lula administration despite not having been initiated by it, such as rising expenditures related to the Fundeb education fund. Haddad argued it is better to correct distortions in the current tax system than to simply raise tax rates. He also defended an income tax reform bill sent to Congress that proposes higher exemptions for the middle class and a boost in taxation of wealthier people. https://www.reuters.com/world/americas/brazils-finance-minister-urges-lawmakers-back-economic-agenda-2025-06-11/

2025-06-11 14:40

Finance Minister Haddad aims for 10% cut in most tax expenditures New single income tax rate of 17.5% proposed for financial investments Reform aimed at shoring up public finances BRASILIA, June 10 (Reuters) - Brazil's Finance Ministry does not plan on targeting income tax benefits for individuals in a broad reform of tax breaks to shore up public finances, two ministry officials told Reuters. The officials, who spoke on condition of anonymity because the measures are still being prepared, said the package will preserve all existing deductions for individuals in their income tax filings - such as those for health and education expenses. Sign up here. Exemptions for retirees over the age of 65 and individuals with serious illnesses will also be left untouched, they said. This year's federal budget projects 544 billion reais in total tax benefits, but politically sensitive exemptions and deductions for individuals account for 91.7 billion reais, or about 17% of the total. Finance Minister Fernando Haddad said that the government aims to pass a bill that would cut most tax expenditures by at least 10%, effectively excluding from the review benefits tied to the Manaus Free Trade Zone and the "Simples" tax regime for small businesses. Under former President Jair Bolsonaro, a 2021 constitutional amendment mandated a reduction in tax benefits but did not specify how such reductions would be achieved in subsequent legislation, rendering the measure largely ineffective. Now President Luiz Inacio Lula da Silva's government aims to lay out clear rules on which tax benefits would be affected and the methods for reducing each, one of the sources said. If a benefit grants a presumed tax credit, the taxpayer would retain 90% of the credit instead of 100%. If the benefit is a full exemption, the applicable tax rate would become 10%, the source added. "Once this bill is approved, it would allow these benefits to be automatically reduced starting next year," the source said, adding that the measure would be an important tool to help balance public accounts. Haddad has stressed that the government would maintain ongoing talks with Congress to finalize the proposal. TAXING FINANCIAL INVESTMENTS Separately, the government has announced that it will issue an executive order to raise some taxes in order to roll back a controversial decree that increased the IOF tax rate on certain financial transactions. The package includes the creation of a single income tax rate of 17.5% for all types of financial investments, including stocks and bonds - except for currently exempt instruments, which would be taxed at 5%. According to one source, the current tiered structure, which ranges from 15% to 22.5% depending on asset class and holding period, distorts investor behavior by encouraging certain asset choices over others. The source also stressed that the flat rate will allow taxpayers to offset gains and losses across their investment portfolio when filing annual tax returns. Any excess tax payments would be refunded based on the net gains for the year. https://www.reuters.com/world/americas/brazil-spare-individual-tax-breaks-fiscal-package-sources-say-2025-06-11/