2023-11-29 17:04

NEW YORK, Nov 29 (Reuters) - The U.S. Treasury yield curve, which plots the yields of different government bond maturities, will likely steepen in 2024 as the Federal Reserve will start cutting interest rates, a Bank of America analyst said on Wednesday. U.S. Treasury benchmark 10-year yields are expected to be at 4.25% by the end of next year, said Mark Cabana, head of U.S. rates strategy at BofA, in a media briefing. The curve comparing two- and ten-year Treasury yields - widely considered to be a recessionary signal when inverted - is expected to turn positive next year and end the year at +25 basis points, he said. Despite the expected bond rally, demand concerns will likely continue to impact long-dated securities as the Treasury is expected to ramp up debt issuance. "We have a lot of concerns about the supply demand backdrop ... There's a lot of duration risk that the market needs to absorb," said Cabana. Long-dated Treasury yields, which rise when prices fall, surged earlier this year as investors feared interest rates would remain high for long. Many have also attributed the move to rising concerns over increased government bond supply. Yields, however, have retrenched this month on expectations that the Federal Reserve has reached a peak in its interest-rate hiking cycle, and as the Treasury announced a more modest year-end schedule of Treasury debt sales. Ten-year yields , which went above 5% last month for the first time in 16 years, were at around 4.28% on Wednesday. Fed funds future traders have in recent days increased bets the Fed could start cutting interest rates as soon as March next year, although the consensus remained for a first cut to be delivered in May, according to CME Group data. "We are increasingly confident that they will be delivering rate cuts next year," said Cabana, adding that the timing of the first cut remained uncertain. https://www.reuters.com/markets/us/us-treasury-yield-curve-steepen-next-year-fed-cuts-rates-says-bofa-2023-11-29/

2023-11-29 15:49

JAKARTA, Nov 29 (Reuters) - Bank Indonesia (BI) will maintain its benchmark rate at the current level into 2024 barring any major changes in global dynamics, Governor Perry Warjiyo said on Wednesday, signaling the central bank is done with its rate hiking cycle. Speaking at an annual gathering of financial executives and government officials hosted by the central bank, Warjiyo said the benchmark 7-day reverse repurchase rate at 6% should be sufficient to keep domestic inflation within a target range of 1.5% to 3.5% in 2024 and 2025. The bank's inflation target range this year is 2% to 4%. "To ensure inflation remains under control within target ... the BI rate will be maintained, with further responses to be aligned with global and domestic economic dynamics," the governor said. BI has hiked interest rates by a total of 250 basis points (bps) since August 2022 to October, with its latest rate hike made in response to a plunge in the rupiah's exchange rate amid capital outflows linked to the U.S. monetary tightening. Warjiyo expected the rupiah to become more stable in 2024, with the Federal Reserve expected to cut U.S. rates by 50 bps in the second half of next year. The rupiah strengthened on Wednesday ahead of the gathering. With the monetary policy guidance, Warjiyo put Indonesia's GDP growth outlook within a range of 4.7%-5.5% for 2024 and 4.8%-5.6% for 2025, and between 5.3% and 6.1% in the medium term, by 2028. These figures were stronger than BI's 2023 growth outlook of 4.5%-5.3%. Next year, higher civil servant salaries, spending for elections on Feb.14, the construction of Indonesia's $32 billion new capital city project, and exports of processed natural resources will provide tailwind to growth, Warjiyo said. Still, headwinds are expected from weakening global economic growth. "Geopolitics is affecting geo-economy. As a result, global economic prospects will weaken in 2024 before improving in 2025," he said. Speaking at the same event, President Joko Widodo warned Indonesian financial executives of the unpredictability of wars happening in other parts of the world and their impact on domestic economy. He urged banks to prioritise lending over putting any excess liquidity into government bonds or BI's securities. BI expects loan growth to pick up to 10-12% in 2024 and 11-13% in 2025, from 9-11% this year, Warjiyo said. ($1 = 15,390.0000 rupiah) https://www.reuters.com/world/asia-pacific/indonesia-central-bank-calls-policy-coordination-amid-persistent-global-risks-2023-11-29/

2023-11-29 15:47

Nov 29 (Reuters) - The death of Berkshire Hathaway's (BRKa.N) Charlie Munger heralds the end of an era, leaving Warren Buffett as the conglomerate's lone investing legend and shining the spotlight on managers who have largely operated in their shadow. Few companies have been so closely associated with their leaders as Berkshire has with Buffett and Munger, who knew each other for more than six decades, the last 45 years as the Omaha, Nebraska-based conglomerate's chairman and vice chairman. Munger's death on Tuesday, five weeks shy of his 100th birthday, leaves Berkshire Vice Chairmen Greg Abel and Ajit Jain, who respectively oversee its non-insurance and insurance businesses, as the 93-year-old Buffett's top advisers and sounding boards. They became vice chairmen in 2018, started taking a more prominent public role only at the most recent of Berkshire's annual meetings, and will have bigger boots to fill than at almost any other company. Managers have said Abel fully embraces Berkshire's culture, which includes an extreme decentralization that gives business units broad autonomy. That means big units such as the BNSF railroad and Geico car insurer, each with tens of thousands of employees, and small units such as Borsheims jewelry, with about 142 employees, can run without interference from Berkshire headquarters, which employs only about 26 people. But Abel and Jain have different styles from Buffett and Munger. At the 2021 annual meeting, Jain was asked how he and Abel interact with each other. "There is no question that the relationship Warren has with Charlie is unique and it's not going to be duplicated," Jain said. "We don't interact with each other as often as Warren and Charlie do. But every quarter we will talk to each other about our respective businesses." Abel said he and Jain regularly consulted with one another, and in particular when something unusual was happening at one of Berkshire's businesses. Investors say they have faith. "I can’t imagine investors haven't thought about what happens when Buffett is gone as well," said Bill Stone, chief investment officer at Glenview Trust. "You don’t need them to be as good as Buffett or Munger to make Berkshire a good company and arguably a great company." Berkshire did not immediately respond to a request for comment outside business hours. CEO-DESIGNATE Berkshire has had a succession plan since at least 2006 when Buffett, then 75, told shareholders the company he has run since 1965 would be prepared for his departure. Munger inadvertently signaled during Berkshire's 2021 annual meeting that Abel, a 61-year-old Edmonton, Alberta, native who spent a quarter century at what is now Berkshire Hathaway Energy, was the CEO designate. Jain, 72, would retain oversight of insurance operations. Buffett has praised both executives, calling Abel "a first-class human being" in a 2013 video message and referring to Jain as a "superstar." A lifelong hockey fan, Abel graduated in 1984 from the University of Alberta, worked at PricewaterhouseCoopers and energy firm CalEnergy and joined the company, then known as MidAmerican Energy, in 1992, which Berkshire took over in 2000. Abel became MidAmerican's chief in 2008 and benefited from its ability, unusual in the utility industry, to retain earnings rather than pay dividends. That freed him to make acquisitions, and expand into renewable energy. Investors will have to wait until Abel takes over to see his willingness to shed businesses that are underperforming or have mediocre outlooks - his predecessors liked to buy and hold businesses forever - or whether Berkshire might pay its first dividend since 1967. Jain, who was born in the Indian state of Odisha, has specialized in pricing for risk, especially large risks such as natural catastrophes. He joined Berkshire in 1986. Besides the two top executives, Berkshire's plan also calls for Buffett's eldest son Howard Buffett to become non-executive chairman, charged mainly with preserving Berkshire's culture. Todd Combs and Ted Weschler, who help Buffett run Berkshire's $300 billion-plus common stock portfolio - about half of which is in one stock, Apple (AAPL.O) - appear in line to take over all of it. "Berkshire has talented people there that will help with the stock picking," said Bill Smead, chief investment officer at Smead Capital Management in Phoenix. "But it will never be the same." LOSS OF LEGACY For shareholders, a signature in Berkshire's universe is its annual meeting, a pilgrimage known as "Woodstock for Capitalists," where Buffett and Munger would answer more than five hours of shareholder questions. It is a weekend of shopping, investor conferences and events that draws tens of thousands of people to Omaha in early May, even though fans can watch it streamed on their home computers or smartphones. Many shareholders, especially local, have said they will continue going, but others have been less sure. "What really glued us to these men was their advice on living a full life by instructing people how to think clearly, to be honest with oneself, to learn from mistakes and to avoid calamities," said Whitney Tilson, an investor who previously ran T2 Partners and Kase Capital and has attended many meetings. In May 2020, at the height of the pandemic, Buffett held the meeting virtually from Omaha. Munger didn't attend. "It particularly doesn't feel like an annual meeting because my partner of 60 years, Charlie Munger, is not sitting up here," Buffett said. "I think most of the people who come to our meeting really come to listen to Charlie." https://www.reuters.com/markets/us/after-mungers-death-berkshire-succession-comes-into-focus-2023-11-29/

2023-11-29 15:10

Nov 28 (Reuters) - Philips (PHG.AS) shares fell more than 6% on Wednesday after the U.S. Food and Drug Administration said it is alerting patients of a new safety issue with machines made by the group that are used for the treatment of obstructive sleep apnea. The Amsterdam-based healthcare technology company has been grappling with the fallout of a global recall in June 2021 of millions of respirators used to treat sleep apnea over worries that foam used in the machines could become toxic. The new issue identified by the FDA involves the heating element in a humidifier used in the "DreamStation 2" sleep therapy device. Philips said in a statement it had flagged the matter with the FDA itself after a review Philips conducted over the past three months that found 270 complaints over the over the past three years. "Philips Respironics is in discussions with the (FDA) regarding the reports," it said. Philips shares were down 4.9% at 18.58 euros by 1223 GMT. Analysts from ING said in a note that the DreamStation 2 is the successor of the DreamStation 1 machine which had used the problematic foam. "The DS2 has silicon instead of the degrading foam, and as a result the successor could remain in the field and in many instances was used as a replacement machine," ING said. A spokesperson for the company said that around a million DreamStation 2 machines are on the market, and they can continue to be used as long as their safety instructions are followed. The FDA said it had received reports of people facing thermal issues such as fire, smoke, burns, and other signs of overheating while using Philips' DreamStation 2 CPAP machines. The agency said the reports indicate that the issues may be related to an electrical or a mechanical malfunction of the machines. https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-cautions-use-philips-sleep-apnea-machines-2023-11-28/

2023-11-29 14:35

LONDON, Nov 29 (Reuters) - Digital bank robberies and other cyber hacks will be a key risk for countries launching digital versions of their currencies, a new report from the Bank for International Settlements has warned. The BIS, dubbed the central bankers' central bank, has been overseeing much of the global development work on central bank digital currencies (CBDCs) and its report is its most comprehensive assessment yet of the challenges. They range from whether central banks have the technological know-how to provide digital cash and the potential dangers of outsourcing work to the damaging environmental impact their huge energy needs could have. A worst case scenario though would be a cyber hack that saw money stolen from what would effectively be a central bank's digital vault. "Cyber security is a key risk for CBDCs," the report published on Wednesday said, adding they would have "far-reaching implications" for the way central banks currently operate. The number of banks across the globe that are working on CBDCs has tripled over the last three years – to 130 as of mid-2023. Nearly a dozen have already been launched, including in the Bahamas and Nigeria. China is trialling a prototype digital yuan with 200 million users, while the European Central Bank has just begun two years of advanced-stage exploratory work. "Issuing a CBDC will have major implications for the business model of central banks and the risks they face, and it will modify their risk profiles," the BIS report said. It added that CBDCs using new technologies such as distributed ledger technology (DLT) will face "unique cyber risks" as there is no widely accepted cyber security framework currently. Furthermore, central banks are flying somewhat blind as there is "limited real world data on the key threats to CBDCs, regardless of the type of technology they use." https://www.reuters.com/technology/cybersecurity/digital-bank-robberies-key-risk-central-bank-e-money-bis-report-warns-2023-11-29/

2023-11-29 13:01

LONDON, Nov 29 (Reuters) - Investors pulled a net $7.6 billion from the hedge fund industry in October, particularly from low performing stock pickers as many of these funds failed to improve their performance from last year, Nasdaq research firm eVestment said on Wednesday. This was after investors pulled a net $19.2 billion from hedge funds in September. Hedge funds primarily focused on trading equities reported an average negative 2.7% performance in October and a negative 3% performance so far this year, eVestment said. October marked a 20th consecutive month of money draining from these hedge funds taking long and short bets on rising and falling equities. Redemptions, when hedge funds' customers decide to withdraw cash, mainly centered on these stock picking strategies, said the eVestment report. This strategy traditionally tallies up to be the largest hedge fund sector, but now is only a touch bigger by asset size than multi-strategy hedge funds, the report said. Multi-strategy hedge funds now held $677.67 billion in assets, compared with $678.12 billion for the stock-picking funds, the report added. The 15 stock picking funds with the largest redemptions in 2023 posted an average negative performance of 13.4% in 2022. Meanwhile, last year's top performing stock funds, which averaged a positive 4%, saw inflows, the report added. Investors redeeming money and losing bets accounted for a $20.1 billion decrease in assets under management in October. This shrunk the size of the hedge fund industry to an estimated $3.429 trillion, said the report. So far this year, the hedge fund industry overall has seen asset outflows of about $75 billion, said the report. Credit strategies fared far better than others. About half of the credit-focused hedge fund managers reporting to eVestment said that in October, inflows totaled about $400 million, the report said. (This story has been refiled to remove extraneous tag from the headline) https://www.reuters.com/markets/embargoed-hedge-funds-suffer-net-76-bln-outflows-october-evestment-2023-11-29/