High Quality Short and Medium Dated Bonds Look Attractive — Market Talk

1041 ET - Good quality short-dated and medium-dated bonds look appealing given that they have stayed relatively steady amid fiscal and inflation uncertainty, UBS Global Wealth Management's Mark Haefele says in a note. Long-dated government bond yields faced pressure this week. On Tuesday, the U.S. 30-year Treasury yields climbed to a 19-year high of 5.337% and German 30-year Bund yields reached 3.782%, the highest since 2011, Tradeweb data show. Short and medium-maturity bonds offer attractive total returns, Haefele says. ([email protected])1010 ET - A tariff deal between the US and Canada would represent another step toward eventual interest-rate increases from the Bank of Canada, says economist Derek Holt of Bank of Nova Scotia. Holt is among of the few economists predicting rate increases prior to year end. He says his call is partly based on the expectation of a US-Canada trade deal prior to the midterms. "The odds of this happening went up," Holt says, citing President Trump and PM Mark Carney statements on significant progress to date to avoid implementation of a new 50% tariff on certain Canadian goods. A deal, contingent on its details, "would buoy market and business sentiment toward Canada," he adds. ([email protected], @paulvieira)1003 ET - Germany should invest in expanding its transportation infrastructure in light of supply concerns over the low water levels in the River Rhine, Swiss business lobby Economiesuisse's chief economist Rudolf Minsch says. Companies are waiting for transport solutions from governments, with Swtizerland proceeding only slowly, he says. But the situation in particularly acute in Germany. "As in Basel, shallow-water sections in Germany should also be dredged, particularly in the German Kaub area," Minsch says, referring to the pinch point in the Rhine Valley in northwestern Germany. Firms are still waiting for expanded north-south rail capacity in Germany. "This expansion is constantly being delayed, much to the chagrin of the business community and consumers," he says. ([email protected])1001 ET - Gold prices climb 2% amid a weaker U.S. dollar and falling U.S. government bond yields after the Treasury said it would at least double the amount of bonds it buys back. In early U.S. trade, New York gold futures are up 2.1% to $4,516.10 a troy ounce. Markets now await the release of minutes from the Federal Reserve's July policy meeting for more cues on the interest-rate outlook. ([email protected])0948 ET - The U.S. Treasury's plan to increase buybacks of long-dated government debt is positive for bitcoin, Standard Chartered's Geoff Kendrick says in a note. "Bitcoin, a way to store wealth without a central authority, was built to allow investors a way to avoid this type of intervention." Key for bitcoin is to rise above $65,500, he says. Bitcoin has likely reached its cycle low and investors should be positioning for a move to $100,000 by year-end, he says. Bitcoin rises 0.6% to $64,938, LSEG data show. The Treasury said Wednesday it will increase, by at least double, the size of liquidity support buyback operations for securities from the 10-year to 30-year sector. The announcement follows Tuesday's sharp rise in yields. ([email protected])0937 ET - Investors hoping to see bitcoin break out of its current range-bound malaise may have to wait until 2027, says Lacie Zhang of Bitget Wallet in a note. She says bitcoin has posted a minor recovery from multi-year lows below $59,000 in June--but the low spot volume trade for the token suggests that investors remain unconvinced that it has posted a near-term bottom. "Confirmation of a durable bottom still requires sustained volume and less fear," says Zhang. CoinMarketCap's "Fear and Greed Index" crossed into neutral territory over the weekend, and remains at a score of 41 out-of 100. Bitcoin is up 0.4% to $64,830, while ethereum rises 1.3% to $1,937 and XRP is up 1% to $1.01. ([email protected])0931 ET - Sterling could struggle to rise on sustained basis as the Bank of England is unlikely to raise interest rates in the near term, Monex Europe analysts say in a note. Data Wednesday showed U.K. inflation rose to 2.9% in July, in line with expectations. Core inflation held at 2.6% versus an expected fall to 2.5% but this marginal beat shouldn't force the BOE's hand in September, they say. "Combined with looming fiscal uncertainty ahead of the autumn budget, we remain skeptical of sustained sterling upside that extends much beyond present levels." Sterling rises 0.6% to a 14-week high of $1.3621 versus a broadly weaker dollar. However, it stays steady at 0.8552 per euro after reaching a one-week low of 0.8562 per euro earlier. ([email protected])0926 ET - Swiss companies are responding quickly to the low water levels in the River Rhine caused by recent heatwaves, avoiding supply crises seen during the Covid-19 pandemic, business lobby group Economiesuisse's Rudolf Minsch says. Goods from northern ports are being rerouted to Switzerland by road or rail, while Genoa is gaining importance as a route into Switzerland, he says. Typically, about 10% of all goods enter Switzerland via the Port of Basel each year. However, rising prices are necessary. "Only then does it make economic sense to operate ships with lighter loads," Minsch says. He argues governments shouldn't intervene to prevent price increases, given the "self-regulating process" of pricing mechanisms that enable diversions, adjustments, and reduced consumption. ([email protected])0920 ET - An overnight decline in yields accentuates as the U.S. Treasury says it will at least double the size of buyback operations for longer-dated bonds. "The current maximum size of $2 billion per operation will be at least $4 billion per operation," the department says in a statement. The announcement follows a sharp selloff in long-term bonds that increased the government borrowing costs. The new buyback target takes effect September 9 through November 4, the Treasury says. The 10-year yield slides to 4.651% from 4.682% before the repurchase news. The 30-year yield falls to 5.202% from 5.266%. ([email protected]; @ptrevisani)0916 ET - The dollar extends its losses to reach an 11-week low against a basket of currencies as investors await the Federal Reserve's July meeting minutes at 1800 GMT. Markets will be scouring the minutes for any signals on whether the Fed could raise rates after investors recently trimmed rate-hike expectations following weak data. The Fed left rates unchanged in July although three officials preferred a rate rise. Fed Chair Kevin Warsh has refrained from providing forward guidance, putting emphasis on data. Upcoming data will probably have a bigger say in whether the Fed lifts rates in September than the minutes, ING's Chris Turner says in a note. The DXY dollar index falls to as low as 99.001. ([email protected])0856 ET - The bond selloff eases and Treasury yields decline, although markets still face the possibility of elevated borrowing costs. The standoff over the Strait of Hormuz continues, keeping oil prices around $90 and fueling inflation fears. Rising government debt and increased bond issuance to finance data centers also contribute to volatility in fixed income. A 20-year Treasury bond auction will test investors' appetite for long-term securities. The 30-year yield eases to 5.219% from Tuesday's settle of 5.284%. The 10-year falls to 4.625% from 4.706% and the two-year to 4.158% from 4.174%. ([email protected]; @ptrevisani)0819 ET - Investors interpreted the latest economic data as a sign that the U.S. economy is cooling gradually rather than slowing sharply, reinforcing expectations that the Federal Reserve is unlikely to tighten policy further, Columbia Threadneedle Investments' Keith Balmer says. "While geopolitical tensions remain a risk, markets have largely looked through recent headlines, with the key focus being whether disruptions to energy markets lead to a sustained rise in oil prices and renewed inflationary pressures," the portfolio manager says in a note. Overall, Columbia Threadneedle remains "constructive" on risk assets, he says. "Economic growth remains resilient, corporate earnings continue to hold up well and the long-term investment case for equities remains intact, particularly in emerging markets, Asia and the U.S." ([email protected])