2023-12-29 18:43

NEW YORK, Dec 29 (Reuters) - A gauge measuring the borrowing costs on loans between banks and other participants in the U.S. repurchase agreement (repo) market hit its highest level since it was launched about five years ago, New York Federal Reserve data released on Friday showed. The Secured Overnight Financing Rate (SOFR), a measure of the cost of borrowing cash overnight collateralized by Treasury securities, hit 5.4% on Thursday - the highest since April 2018, when the New York Fed began publication of the rate. A spike in the price for repurchase agreements, or repos - in which investors borrow against Treasury and other collateral - can be a sign that cash is getting scarce in a key funding market for Wall Street. Market participants, however, said the recent rise was related to borrowing costs being driven up because many dealers have closed their books for the year, limiting the availability of funding. "The rise in SOFR is directly related to the demand for year-end financing needs and the lack of counterparties doing financing the last day of the year," Tom di Galoma, managing director and co-head of global rates trading at BTIG, said on Friday. "Many have closed their books for the year, and it is pushing SOFR higher." Another measure of the cost of borrowing short-term funds backed by U.S. Treasuries spiked this week to its highest level since September 2019, when dwindling bank reserves forced the Federal Reserve to intervene. The DTCC GCF Treasury Repo Index , which tracks the average daily interest rate paid for the most-traded General Collateral Finance (GFC) Repo contracts for U.S. Treasuries, stood at 5.495% on Thursday, a four-year high. “Year end pressure in funding markets is normal,” said Spencer Hakimian, CEO of Tolou Capital Management, a New York-based macro hedge fund. “Banks tend to slow down activity to bolster their balance sheets for compliance purposes ahead of the new year. This, in itself, is nothing to be worried about - unless it persists through January,” he said. This week's increased usage of the Federal Reserve's reverse repo facility, through which money market funds lend to the Fed, was evidence of money market funds wanting to invest cash but lacking private counterparties, market participants said. Cash flowing into the Fed's reverse repo facility jumped to $829.6 billion on Dec. 28 from $772.3 billion as of the end of last week. Steven Zeng, U.S. rates strategist at Deutsche Bank, said the trend should reverse as the new year starts next week. He said the SOFR rate was still within the federal funds rate range of 5.25% to 5.5%. "It's not telling me that the funding scarcity in repo market is worse than usual. To me it really is the usual year-end behavior as banks reduce their balance sheet usage," he said. https://www.reuters.com/markets/rates-bonds/us-overnight-funding-rate-hits-record-high-amid-year-end-volatility-2023-12-29/

2023-12-29 17:54

Aug 30 (Reuters) - The U.S. central bank held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the conclusion of its July 30-31 policy meeting, but since then Federal Reserve Chair Jerome Powell has declared "the time has come for policy to adjust," signaling that rate cuts are likely to begin at the Sept. 17-18 meeting. Just what size of a reduction - 25 basis points or 50 - will hinge on data between now and then. Among the key statistics the U.S. central bank is watching: INFLATION (PCE released , opens new tab Aug. 30; CPI , opens new tab released Aug. 14; CPI release Sept. 11): The personal consumption expenditures price index the Fed uses to set its 2% inflation target came in slightly softer than forecast in July, with an annual increase of 2.5%, the same as in June. The core index excluding food and energy costs was also slightly lower than forecast at 2.6%, also unchanged from the month before. But it is the month-on-month rates starting in April that underpin Fed officials' growing confidence that inflation is on its way back to the target in a sustainable fashion, allowing them to turn their focus to protecting the job market. The headline monthly rate in July was 0.2%, as was the core rate. Since April, when readings softened after a bump up in the first quarter of the year, the unrounded headline rate has averaged 0.12% and the core has averaged 0.17%, both of which annualize essentially to rates at or just below the Fed's target. "With inflation on track to moderate back to the 2% target, the Fed is more free to focus on the health of the economy," Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in a note. EMPLOYMENT (Released Aug. 2 , opens new tab; next release Sept. 6): U.S. firms added an underwhelming 114,000 jobs in July, and revisions to the prior two months knocked 29,000 positions from the previously estimated number of payroll jobs. That pushed the three-month average total payroll growth down to 170,000, below the level typical before the COVID-19 pandemic. The unemployment rate also rose to 4.3%, which could heighten fears that the labor market is deteriorating and potentially making the economy vulnerable to a recession. The number of people in a job or looking for work grew. Government data in late July showed the slowing of the labor market is being driven by low hiring, rather than layoffs, with hires dropping to a four-year low in June. Average hourly wages rose 3.6% in July compared to a year ago, versus a 3.8% annual increase in June. The Fed generally considers wage growth in the range of 3.0%-3.5% as consistent with its 2% inflation target. JOB OPENINGS (Released July 30 , opens new tab; next release Sept. 4): In a sign of the job market's continued resilience, the level of job openings remained above 8 million in June, while the number of open jobs available for each unemployed person fell slightly to 1.2, remaining roughly where it was in the years before the pandemic. Powell has kept a close eye on the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and the pandemic-era jump to more than 2 to 1 in the number of open jobs for each available worker was emblematic of the time. Things have cooled substantially. Other aspects of the survey, like the quits rate, now down to 2.1, have edged back to pre-pandemic levels in what Fed officials view as an emerging balance between the supply and demand for workers. While the hiring rate has slowed, for example, the layoff rate has remained stable in a sign that companies are holding on to their workers. Sign up here. https://www.reuters.com/markets/us/charting-feds-economic-data-flow-2024-04-05/

2023-12-29 16:34

Gold gained 13% this year, hitting a record high in early Dec Bullion could hit $2,300 on Fed rate cuts next year -J.P. Morgan Autocatalyst palladium braces for worst yearly fall since 2008 Dec 29 (Reuters) - Gold investors anticipate record high prices next year, when the fundamentals of a dovish pivot in U.S. interest rates, continued geopolitical risk, and central bank buying are expected to support the market after a volatile 2023. Spot gold is on track to post a 13% annual rise in 2023, its best year since 2020, trading around $2,060 per ounce. "Following on from a surprisingly robust performance in 2023 we see further price gains in 2024, driven by a trifecta of momentum chasing hedge funds, central banks continuing to buy physical gold at a firm pace, and not least renewed demand from ETF investors," Saxo Bank's Ole Hansen said. On Dec. 4, gold hit a record high of $2,135.40 on bets of U.S. monetary policy easing in early 2024 after a perceived dovish tilt from Federal Reserve Chair Jerome Powell, surpassing the previous record scaled in 2020. The precious metal almost made uncharted territory in May this year as a U.S. regional banking crisis took hold. By October, it had retreated close to $1,800 an ounce until safe-haven demand triggered by the Israel-Hamas conflict spurred another rally. Investors returned to the popular SPDR Gold Shares exchange-traded fund , which posted net inflows of over $1 billion in November. A Reuters poll in October forecast prices will average $1,986.50 in 2024. They have averaged above $1,950 so far this year, above any previous yearly average price. J.P. Morgan sees "a breakout rally" for gold in mid-2024, with a targeted peak of $2,300 on expected rate cuts. UBS forecasts a record of $2,150 by end-2024 if cuts materialise. The World Gold Council, in its 2024 outlook, projected that a drop of about 40 to 50 basis points in longer maturity yields, following 75-100 points of rate cuts, could translate into a 4% gain for gold. INFLATION RISKS The conflict in the Middle East, uncertainty from elections in major economies, and central bank purchases led by China will also boost safe-haven bullion's appeal next year, analysts predicted. But, "gold could be forced to unwind some of this year's gains if an inflation resurgence forces the Fed to abandon plans for a policy pivot in 2024," said Han Tan, chief market analyst at Exinity. Inflation cooling faster than the Fed trims rates may also slow the economy and dent retail buying. Heraeus Metals expects higher gold jewellery demand in top consumer China this year, with more support possible in 2024 from stimulus measures. By contrast, silver looks set to fall 1% in 2023, trading just under $24 an ounce. It will trend towards $26 an ounce next year, benefiting from improved industrial demand, according to TD Securities. On track to fall 6% in 2023, platinum will hold a range between $800 and $1,100 an ounce in 2024, Heraeus estimates. The impact of the energy transition was demonstrated as autocatalyst-dependent palladium fell by more than a third this year, the market's worst performance since 2008. Palladium , which fell below $1,000 an ounce in November - for the first time in five years - before recovering, faces surpluses as electric vehicles become more popular. Bank of America expects palladium to average $750 per ounce in 2024 subject to any major supply cuts. https://www.reuters.com/markets/commodities/gold-enter-2024-with-sights-set-record-highs-2023-12-29/

2023-12-29 16:13

TSX ended 2023 8% higher Infotech leads yearly gains Index up 0.14% on Friday Dec 29 (Reuters) - Canada's main stock index ended higher on the final trading day of the year, wrapping 2023 with gains, powered by a boost in energy and financial stocks. The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) was up 29.06 points, or 0.14%, at 20,958.44, a third consecutive weekly gain. Although battling inflationary winds, Canadian stocks snapped last year's declines to climb 8% in the year, entering 2024 with fresh hopes of an interest rate cut by the Bank of Canada. "In 2023, equity markets showed remarkable resilience, providing a significant snapback stock market recovery as the major stock market indices ascended the proverbial wall of worry," said Brandon Michael, senior investment analyst at ABC Funds. "There remains many reasons to be optimistic and bullish on stocks in 2024 ... The economy is on strong footing, consumers' resilience, inflation is decelerating sharply and earnings continue to surprise." U.S. stocks closed modestly lower on the last trading day of 2023 and capped a robust year-end rally as investors eyed easier monetary policy in the year ahead. In Canada, the energy sector (.SPTTEN) rose 0.3% as crude prices gained. Financials (.SPTTFS) rose 0.3% and closed the year 8.7% higher. The information technology (.SPTTTK) index led yearly gains, soaring nearly 57%, helped by a 123% surge in Shopify (SHOP.TO). On Friday, they were down about 1.4% and dragged the broader tech index. Healthcare (.GSPTTHC) stocks are up 23% for the year and the index marked its first gain in six years. The materials sector (.GSPTTMT), which includes precious, base metals miners and fertilizer companies, was among the worst hit on Friday, dropping 0.4% and about 2.9% during the year. The index was weighed by a dip in the prices of gold and copper as the dollar strengthened. Trading remained slim during the day as investors broke for the year-end holiday. The TSX will be shut on Jan. 1 for New Year's Day. On the corporate front, a U.S. court approved Hut 8 to proceed with the full mining operations plan concerning Celsius Network bankruptcy proceedings. However, the shares reversed earlier gains to drop nearly 17%. https://www.reuters.com/markets/tsx-eyes-higher-open-last-trading-day-year-2023-12-29/

2023-12-29 15:04

BERLIN, Dec 29 (Reuters) - The heads of European Union institutions called for a strengthened euro and progress towards a capital markets union in a joint appeal that was published by Germany's Funke Media Group on Friday. The piece, which commemorates the 25th anniversary of the currency, was written by European Commission president Ursula von der Leyen, European Parliament president Roberta Metsola, European Council head Charles Michel, the head of the ECB, Christine Lagarde, and Eurogroup chief Paschal Donohoe. In it, the leaders stress the need for cooperation to overcome challenges, which include increasing geopolitical tensions and the climate crisis. In addition, "our competitiveness is facing unprecedented challenges due to energy and industrial policy measures in other parts of the world," they write in the piece that is due to appear in the media group's print editions on Saturday. They also advocate the establishment of a capital markets union that would extend across the entire continent and could be used to mobilise private financial resources. In order to increase competitiveness and security, "the existing structures could be strengthened through revised budgetary rules and a more robust banking union," they write. https://www.reuters.com/markets/europe/heads-eu-issue-joint-call-stronger-euro-capital-markets-union-2023-12-29/

2023-12-29 14:21

Dec 29 (Reuters) - U.S. equity funds attracted massive inflows in the week up to Dec. 27, bolstered by expectations of early rate cuts by the Federal Reserve as data showed that inflation cooled further in November. According to LSEG data, investors purchased a net $14.57 billion worth of U.S. equity funds during the week, marking their biggest weekly net purchase since June 14. The U.S. personal consumption data last Friday showed that U.S. prices fell in November for the first in more than 3-1/2 years, pushing the annual increase in inflation further below 3%. U.S. large-, small-, and multi-cap funds attracted $8.93 billion, $3.63 billion and $642 million, respectively, however, mid-cap funds witnessed outflows of $665 million. Meanwhile, U.S. sectoral equity funds had outflows of about $1.19 billion with consumer staples and healthcare witnessing $924 million and $721 million worth of net selling, respectively. Bond funds, meanwhile, received a marginal $8 million worth of inflows after four successive weeks of outflows. U.S. general domestic taxable fixed income funds, and short/intermediate investment-grade funds saw net purchases of $1.83 billion and $210 million, respectively. Short/intermediate government & treasury funds meanwhile, suffered outflows of about $1.92 billion. The LSEG data also showed that U.S. investors purchased about $9.68 billion worth of money market funds after two weeks of net selling in a row. https://www.reuters.com/markets/us/us-equity-funds-see-big-inflows-rate-cut-bets-rise-2023-12-29/