2025-12-09 22:48

TOKYO, Dec 10 (Reuters) - Markets are increasingly worried about Japan's "tail risk" of slipping into a negative spiral, where monetary tightening lags inflation and a weak yen pushes prices higher, the markets chief at top lender Mitsubishi UFJ Financial Group (8306.T) , opens new tab said. Markets have priced in a 90% chance of a rate hike by the Bank of Japan this month, shifting attention to how the central bank signals its longer-term policy path. Sign up here. MUFG is among top Japanese players in the foreign exchange market and the largest owner of Japanese government bonds among major banks. "If the BOJ fails to anchor expectations for further rate hikes beyond the next and the government boosts spending to appease voters frustrated with inflation, the yen could weaken further," Hiroyuki Seki, the head of MUFG's Global Markets Business Group, told Reuters in an interview. "That could re-accelerate import costs, creating a negative spiral of inflation and currency depreciation," he said. Despite narrowing interest rate differentials with the United States, the yen has remained weak around 155 per dollar, partly reflecting market expectations that Prime Minister Sanae Takaichi's reflationary stance could limit further BOJ tightening. Seki stressed that eliminating Japan's extremely low real interest rates was essential. "The BOJ needs to move early and steadily toward monetary normalization to preempt a vicious cycle where insufficient tightening allows yen depreciation to push inflation even higher," he said. Beyond the potential December hike, Seki expects the BOJ to follow a gradual normalization path, raising rates by 25 basis points roughly every six months, provided economic and price trends evolve in line with the central bank's projections. The so-called terminal rate - the level at which the tightening cycle is expected to end - is projected at 1.25%-1.5% by mid-2027, though risks are skewed higher if inflation proves sticky, he said. The BOJ has released estimates suggesting Japan's nominal neutral interest rate - one that neither cools nor overheats the economy - lies somewhere between 1% and 2.5%. On MUFG's Japanese government bond strategy, Seki said the bank has been cautiously rebuilding positions since the benchmark 10-year yield rose above 1.65%. "If the yield exceeds 2%, we plan to accelerate the pace of rebuilding, mainly on 10-year bonds, in line with higher interest rates," he said. MUFG has substantial capacity for purchases given its currently restrained risk exposure, he added. https://www.reuters.com/sustainability/sustainable-finance-reporting/markets-anxious-over-japans-risk-negative-spiral-top-bank-mufg-exec-says-2025-12-09/

2025-12-09 22:07

ORLANDO, Florida, Dec 9 (Reuters) - U.S. stocks, bonds and the dollar held relatively steady on Tuesday as investors braced for the Federal Reserve's policy decision on Wednesday, while surprisingly hawkish remarks from Australia's central bank governor rocked markets there. More on that below. In my column today, I look at a potential wild card from the Fed on Wednesday - large-scale bill purchases of $45 billion a month to make sure bank reserves remain ample and there is no risk of a repo market freeze and spike in interbank rates like there was in September 2019. Sign up here. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Today's Talking Points * Global rate hawks show their talons ... The signals from major central banks are, by and large, becoming more hawkish, with RBA Governor Michele Bullock and ECB Board Member Isabel Schnabel this week becoming the latest policymakers to signal an end to the global easing cycle is in sight. A "hawkish cut" from the Fed on Wednesday is widely expected too. If delivered, U.S. and other bond yields could accelerate their recent upswing and break into new, higher ranges, laying the ground for more volatile markets going into the new year. * ... U.S. security hawks show theirs Shares in Nvidia reversed a 2% rise in pre-market trading and closed lower on Tuesday, following strong opposition to the Trump administration's decision to allow Nvidia to ship its second-most advanced AI chip to China. President Donald Trump said on Monday he would allow H200 sales to China. The U.S. would collect a 25% fee on such sales, and AMD and Intel would get approval to sell similar chips there too. But China hardliners and Democratic lawmakers slammed the move, saying Beijing could harness the technology to supercharge its military and ultimately bankrupt and replace Nvidia. * Duration elation The U.S. Treasury's $39 billion sale of 10-year bonds on Tuesday was a reminder that appetite for U.S. sovereign debt remains strong and widespread across the investor base. At the right price, of course. According to Exante Data, the bid-to-cover ratio of 2.55 was among the highest of the past 50 auctions. End-user demand, which combines both indirect and direct bids, was also well above average - the 10-year yield's spike this week to a three-month high of 4.19% was clearly deemed attractive. Fed could surprise market with T-bill buying binge The Federal Reserve is widely expected to trim interest rates on Wednesday, but if Chair Jerome Powell wants to give markets an added holiday surprise, here's one option: about $45 billion of monthly short-term bill purchases. That's the out-of-consensus call from Bank of America's rates strategists. They agree that a quarter-percentage-point reduction in the Fed funds target range to 3.50%-3.75% is likely. They also reckon the Fed will announce it will start buying large quantities of Treasury bills in January to maintain "ample" reserves in the banking system and avert the kind of liquidity crunch that froze money markets in September 2019. Bank reserves peaked at $4.27 trillion in 2021, and have recently fallen as low as $2.83 trillion. To be clear, these so-called "Reserve Management Purchases" (RMP) would not be quantitative easing. That refers to central bank purchases of government bonds to lower longer-dated yields and stimulate lending. Crucially, QE is usually conducted in an economy where deflation is a greater threat than inflation, and when interest rates are at or near zero. The RMP operation that BofA envisages doesn't meet any of these criteria. It would be designed to manage money market liquidity, ensuring the plumbing of the interbank market doesn't suddenly clog up and imperil the functioning of the financial system. However, the Fed would leave itself open to accusations from its raft of critics that, regardless of the name, this is just the latest wave of money-printing madness that could accelerate the march towards higher inflation and currency debasement. But given ongoing concern about tightening liquidity in the repo market and a sharp rise in Treasury bill issuance by President Donald Trump's administration, this is a holiday gift that both markets and the White House might be glad to receive. 'CERTAINTY AND CONFIDENCE' This plan wouldn't come out of left field. Most Fed-watchers already expect the central bank to begin buying bills in the first half of next year, and the Fed has already announced in October that it will redirect proceeds from its maturing mortgage-backed securities (MBS) into bills. Analysts estimate MBS reinvestments will amount to around $15 billion a month. But BofA's call is notable both for the timing and the size of the predicted purchases. The $45 billion haul would be on top of the MBS reinvestments, meaning the Fed would soon be buying around $60 billion of bills a month. This will provide market participants with "certainty and confidence" that reserves will remain "ample", according to BofA rates strategist Mark Cabana, who previously worked on the New York Fed's trading desk. No one knows exactly how low reserves can get before triggering a liquidity crisis and a spike in interbank borrowing costs. But in September 2019 it was around $1.4 trillion, which was roughly 6.5% of GDP at the time. Padhraic Garvey at ING also reckons the Fed could announce it will increase bank reserves by adding to the MBS roll-off bill purchases. As Garvey notes, if the Fed wants to keep the balance sheet steady as a share of GDP, it will ultimately have to re-expand at the same pace as nominal GDP growth. So if nominal GDP is growing at 3-5%, bank reserves would need to increase at that rate, which would equate to the Fed buying around $20-30 billion of bills per month. THE FED'S SHRINKING BALANCE SHEET The Fed certainly has room to expand its balance sheet, especially at the ultra-short end of the maturity spectrum. The central bank's balance sheet stands at around $6.5 trillion, down from a peak of $9 trillion in 2022. As a share of GDP, which is the more relevant measure, it is now around 22%, down from a peak of 35% also in 2022, and the smallest it's been since April 2020. Perhaps more importantly, bills only account for around 16% of the Fed's balance sheet, roughly the same level as just before the repo market crisis of September 2019. Another 25-basis-point rate cut on Wednesday would be a surprise to no one. If there are any fireworks from the Fed's policy decision, they are more likely to be on the balance sheet. What could move markets tomorrow? Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias. https://www.reuters.com/world/china/global-markets-trading-day-graphic-2025-12-09/

2025-12-09 21:48

HOUSTON, Dec 9 (Reuters) - Oil major Shell (SHEL.L) , opens new tab said output at two of its offshore platforms in the U.S. Gulf of Mexico has been temporarily shut due to a shutdown of the Hoover Offshore Oil Pipeline System (HOOPS). The top producer in the U.S. Gulf said it expects its Whale and Perdido platforms, which were shut in on Monday night, to resume production by the end of Tuesday. Sign up here. Whale was producing about 90,000 barrels per day (bpd), while Perdido's output stood at around 57,000 bpd in September, market analytics firm Energy Aspects estimated. Whale has a production capacity at peak rates of about 100,000 boepd, while Perdido's stands at around 125,000 boepd, Shell said, declining to provide current output figures. Prices for Southern Green Canyon, a crude oil grade produced in the region, strengthened 40 cents on Tuesday to a discount of $2.45 to U.S. West Texas Intermediate crude. Exxon Mobil (XOM.N) , opens new tab, the operator of the HOOPS pipeline, did not immediately respond to a request for comment. The pipeline system carries oil from offshore fields south of Galveston, Texas, to near Freeport, Texas. https://www.reuters.com/business/energy/shell-says-output-two-gulf-mexico-offshore-platforms-temporarily-shut-2025-12-09/

2025-12-09 21:31

WASHINGTON, Dec 9 (Reuters) - The top U.S. watchdog agency for consumer financial protection said Tuesday it will issue "interim" regulations governing open banking and consumer data rights because it expects to run out of money before completing a process now underway to rewrite Biden-era rules. The agency, which President Donald Trump and other top officials have said should be dismantled, is currently in the process of rewriting regulations adopted last year to govern consumers' control over the sharing of their personal data between banks and the burgeoning financial app and digital currency sectors. Sign up here. However the White House has refused to fund the agency and the CFPB has said in court cash on hand could be exhausted in weeks . Lawyers representing non-profits and unionized agency staff have nevertheless asked federal courts to require the Trump administration to fund the agency. "The Bureau anticipates having sufficient funds to continue operations until at least December 31, 2025," the agency told a federal court in Kentucky. "In light of that development, the Bureau will undertake efforts to issue an interim final" rule. The agency's funding crisis comes as the CFPB, which has been virtually shut down since February, pursues efforts to ease and roll back existing regulations, including Civil Rights-era anti-discrimination protections. Last year, the CFPB rolled out rules it said would expand consumer control over their personal data, opening up access to new financial technologies, spurring competition and driving down costs. However, current agency leadership supported a banking industry lawsuit that sought to strike down the regulations, saying they exceeded the CFPB's legal authority. The CFPB did an about-face in July after prominent figures in the digital asset sector objected to plans by JPMorgan Chase (JPM.N) , opens new tab to charge financial technology companies for access to depositors' data. The agency has so far received nearly 14,000 comments on its proposed changes, requiring time to digest them in preparing a final version. https://www.reuters.com/world/us-consumer-bureau-issue-interim-final-open-banking-rule-cites-funding-shortfall-2025-12-09/

2025-12-09 21:26

WASHINGTON, Dec 9 (Reuters) - The U.S. Transportation Department on Tuesday threatened to withhold transit funding for Chicago trains and buses, and demanded more police protection, citing an incident in which a 26-year-old woman passenger was attacked and set on fire last month. The Federal Transit Agency said in letters to Illinois Governor JB Pritzker and Chicago Mayor Brandon Johnson , opens new tab that they must develop and implement a plan to reduce assaults on transit workers and passengers and address unsafe conditions or face potential loss of federal funding. Sign up here. The department has sent similar letters over concerns about transit issues in New York and Boston. Chicago, like the other two cities is heavily Democratic. President Donald Trump has regularly threatened funding for large cities run by Democrats, including major infrastructure projects in Chicago and New York. Chicago Mayor Johnson said at a press conference he will respond to the letter and takes the funding threats seriously. "We do have to look at what the security apparatus looks like for public transportation," Johnson said at a press conference. "I don't need a letter from the Trump administration to tell me what my priorities are." Last month, federal prosecutors charged a 50-year man with a federal terrorism offense for allegedly setting a passenger on fire on a Chicago Transit Authority train. Prosecutors said Lawrence Reed of Chicago purchased gasoline at a Chicago gas station and filled it in a hand-held container approximately 20 minutes before allegedly pouring the liquid on victim on the train. Reed has been detained pending trial and ordered to undergo a mental evaluation. Pritzker criticized the FTA letter at a press conference. "This is the federal government threatening state and local government with taking away federal funds for a purpose that they're not allowed to," Pritzker said. "We want the safest possible and most modern transit system in the entire country, and that's what we're prepared to implement." Illinois passed public transit reform that includes increased funding for public safety programs, including combatting violent crime on public transit, his office said. The Federal Transit Agency issued a directive ordering Chicago to update its transportation safety plan and maintain a safe operating environment for workers and passengers. "If CTA does not take immediate action to increase its law enforcement presence, we will withhold federal funds," " said FTA Administrator Marc Molinaro. https://www.reuters.com/legal/government/us-threatens-withhold-chicago-transit-funding-after-attack-passenger-2025-12-09/

2025-12-09 21:02

WELLINGTON, Dec 10 (Reuters) - New Zealand's top central banker said on Wednesday that there was no preset course for monetary policy and that adjustments would be made if the outlook for inflation changed. Reserve Bank of New Zealand Governor Anna Breman, who stepped into the role last week, told reporters that the monetary policy committee was keeping a close watch on all incoming data, including inflation and growth numbers. Sign up here. "I'd like to stress that there is no preset course for monetary policy," she said. "It's really important to see that we have a forward-looking policy rate path that's being published... but it's also important to stress that, of course, if circumstances change, if we get new data that shows that the economy and inflation is going in a different direction from what we expected, we will adjust the monetary policy," she added. New Zealand's central bank cut the official cash rate by 25 basis points to 2.25% at the end of November and signalled an end to the easing cycle. It has forecast the cash rate will remain on hold over the coming year, but markets have moved to price in more than two hikes in 2026. Breman said some financial conditions had tightened "a bit" and the monetary policy committee had to evaluate how that affected the economy. "Right now our focus will be to see how this affects households and firms and businesses and if that is in line with economic developments that we are expecting," she said. Breman added that while there had been some encouraging signs the economy was recovering, it was important to look at data to see that improvement was confirmed "while still maintaining the focus on keeping inflation low and stable." Third-quarter inflation in New Zealand was at 3.0%, at the top of the central bank's target band of 1% to 3%. The central bank previously said it expects inflation to come down due to spare capacity in the economy. Breman said the central bank "would maintain a laser focus on our core mandate" of low and stable inflation. https://www.reuters.com/world/asia-pacific/new-zealand-central-bank-says-no-preset-policy-path-inflation-outlook-guides-2025-12-09/