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McGeever: The 100 billion dollar Treasury record that you missed.
For good reason, the recent spike in 30-year bond yields has dominated world bond markets. With so much focus on the long end, it seems that few have noticed the historic changes in the ultra-short U.S. Treasury Market. The weekly sale of four-week T bills has now reached the landmark of $100 billion. The September 4 auction marked the fifth consecutive sales at this record-high amount. This new government strategy is reflected in the flood of bills being sold. The Trump administration wants to reduce interest rates and the debt maturity profile of the country by borrowing at the short end of the curve. It seems to be working so far. Investors expect at least 150 basis point of rate easing before the end of this year. This is not only bringing down short-term rates, but also longer-term yields. The benchmark 10-year rate is at its lowest level since the 'Liberation Day tariff chaos' in April, and the 30-year rate is once again slipping away from 5%. Investors who lend to Uncle Sam over a period of 10 years with the associated risk get paid 4.08% annually, while those who lend to Uncle Sam in a four-week period receive 4.20%. These bill auctions are generating strong demand. Last week's $100-billion sale was 2,78 times oversubscribed. What's the issue? Let me Roll It The greatest concern is the 'rollover risk'. The government must refinance large portions of its debt more often because it concentrates sales on the front of the curve. It is then more vulnerable to unexpected financial, political or economy shocks. These could lead to an increase in short-term borrowing rates or force the Fed's policy rate to be raised. Fed expectations may be skewed downwards right now. But what if inflation expectations start to rise and the Fed is forced to stop its easing cycle, or even raise rates? This is not a crazy scenario. Goldman Sachs says the Fed is likely to ease in a climate of 3% inflation, high equity markets and the most accommodative financial conditions for three-and-a half years. The Atlanta Fed's GDPNow model also predicts 3.5% economic growth. The full impact of Trump's new tariffs on inflation is not taken into consideration. The increased bill issuance is well-absorbed, but the cash that goes into them depletes liquidity pools and buffers elsewhere in the system. The overnight reverse repo facility of the Fed is almost empty and total bank reserve at the Fed is declining. Nobody knows the minimum level of comfortable reserves in the banking system. In late 2019, a sudden fall below this level caused significant volatility in the money markets and an increase in overnight rates. Experts believe that it is higher now, due to the expansion of the banking system and economy. Reserves are decreasing steadily and may soon fall below $3 trillion. Citi analysts warn that they will continue to "march" below this level as Tbill issuance increases, putting pressure on repo and funding costs. THRESHOLD According to Wall Street estimates, the Treasury is increasingly relying on T-bills as a funding source. This could mean that new issuances over the next 18 month may exceed $1.5 trillion. The share of outstanding bills is also likely to increase. This percentage is currently just under 21 percent, which is slightly below the average historical level of 22.5%. However, it is above the range of 15-20% recommended by the Treasury Borrowing Advisory Committee. T Rowe Price analysts believe the share will soon reach 25%. This is a level that was last seen during pandemics and the Global Financial Crisis. It suggests borrowing policies seen before crises may become the norm. All of this won't be a problem as long as the demand for increased issuance is strong. There's good reason to think that this will be the outcome. Money market funds, the largest buyers of T-bills, have seen their holdings explode from $4.7 billion in early 2020 to over $7 trillion today. There is also a massive demand for T-bills from stablecoin issues, who want to back their crypto assets using safe and liquid assets such as T-bills. The market may continue to "play ball" with the new government funding strategy. The Trump administration is hoping so, with over $1 trillion in new issuances coming.
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African leaders offer climate model following US withdrawal
African leaders want to provide a global model of tackling climate change through green investments. They said this on Monday after the United States pulled out of the Paris Climate Agreement, which deflated efforts against climate changes. Ethiopia is hosting its second climate summit, COP30. The continent has been ravaged by landslides and floods in the past year. "We are here to design the world's next climate economy," Ethiopian Prime Minister Abiy Ahmed said at the opening ceremony. "We are here to design the next climate economy," Ethiopian Premier Abiy Ahmed said at the opening ceremony. Leaders have positioned the 54-nation continental as being ripe for investment in carbon capture, solar energy, minerals critical for green technologies and food production, to keep the development on track despite the climate crisis. Abiy said that if we make the right decisions now, Africa could be the first continent in the world to industrialise its ecosystems without damaging it. He called for the creation of a new Africa Climate Innovation Initiative, funded by Africa, which would bring together African universities and research institutions, startup companies, rural communities, and inventors in order to develop 1,000 solutions by 2030 to address climate challenges. Officials say that although leaders sought additional funding at the Nairobi summit two years ago, the continent still receives only 1% of global climate finance each year. African countries are the most vulnerable and least responsible of the effects of global warming. Yet, they have demanded for years that the COP meetings provide more funding to assist them in adapting to climate change. Mahamoud Youssouf is the chairperson of the African Union Commission. Climate justice is needed to address the vulnerability of our members, which has been caused by the climate change, the debt burden, and the structural injustices of the international financial system. Leaders expressed concern about the possible damage that could be caused by a deterioration of the multilateral strategy to combat climate change. The Trump administration withdrew from the historic Paris climate agreement for the second consecutive time in the first half of this year. It has also pulled out of clean energy partnerships, including those with South Africa. William Ruto, Kenyan president, said: "Too many commitments are broken, and international solidarity dismissed as weak precisely when the magnitude of the climate crises demands increased cooperation, not lesser," Reporting by Dawit Endshaw in Addis-Abeba and Duncan Miriri, Nairobi; editing by Kevin Liffey
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Copper prices rise as stocks fall
The copper price was stable on Monday. This was due to the outflows of warehouses registered at the London Metal Exchange. A weaker dollar and expectations for stronger demand in China were also factors. In official open-outcry trade, the benchmark copper price on the LME fell 0.1% to $9.890 per metric ton. Last week, the contract reached a five-month peak of $10.038 amid growing expectations that U.S. rates will be cut in this month. The Yangshan premium and the import appetite of China, the top consumer, also supported the market. Its three-month record price is up 1.8% at $58 per ton. The yuan reached a new high in relation to the U.S. dollar, which makes metals priced in dollars more appealing for Chinese buyers. Imports of Chinese unwrought copper fell in August from July, but increased from the previous year. Meanwhile, imports copper concentrates rose to 2,76 million tons, which is a four-month record. Analysts at ANZ stated in a report that "lower treatment charges did not curtail China's desire for copper concentrate". Imports of refined copper should remain strong in September due to the favorable import parity, and the prospect of a weaker domestic production. China's export growth in August slowed down to its lowest level in six months, while import growth was 1.3% after a 4.1% increase a month before. Copper stocks registered on the LME LME data revealed that the total amount of 155,825 tonnes was a result of outflows in several locations of 2,125 tons and new cancellations of 8,500 tones in South Korea. LME aluminium rose 0.4% in official activity to $2,610 per ton as inventories of aluminium on warrants After 32,000 new cancellations, LME storage dropped to 442,425 tonnes, the lowest level since late July. LME zinc rose by 0.1% to 2,864, while lead increased 0.4% to 1,992, and tin rose 0.5% to $35,500. Nickel also grew 0.2% to 15,260. (Reporting and editing by Tasimzahid, Kirby Donovan; Tasim Devitt)
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Fermi, a data center builder, files for an IPO in the US as listings increase.
Fermi, a Texas-based company founded by the former U.S. Energy secretary Rick Perry, filed an initial public offering (IPO) in the United States on Monday, as companies race to capture investor interest for new issues. Terms of the offer were not disclosed. Wall Street's IPO Season is off to a good start after Labor Day. The IPO calendar features big names such as Swedish fintech Klarna, and the Winklevoss Twins' cryptocurrency exchange Gemini. StubHub, the ticket reseller, and Netskope, a cybersecurity company, both launched roadshows Monday. They aim to raise $851 million each and $813 millions. Fermi announced in June plans to build the largest energy and data facility powered by nuclear, natural gas, and solar to meet the increasing energy needs of artificial intelligence. The announcement is the first major investment in nuclear power since President Donald Trump signed executive orders to streamline and accelerate the Nuclear Regulatory Commission licensing process. This will support plans to increase U.S. Nuclear Energy capacity from 100 GW to 400 GW. Fermi stated that data from Bloomberg Intelligence showed the global generative AI industry is expected to grow between $64 billion and $457 billion dollars by 2027. Macquarie Group led a $100 million round of funding last month for the company that has been in existence for nine months. UBS Investment Bank Cantor and Mizuho will be the book-running managers of the offering. Fermi filed to list under the Nasdaq symbol "FRMI". The company plans to also apply to list its shares on the main London Stock Exchange. Reporting by Arasu Kanagi Basil in Bengaluru and Pritam biswas; editing by Vijay Kishore
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India is likely to finalise the framework for a Qatar trade agreement in October, as Trump tariffs bite
A government source stated on Monday that India will likely finalise terms of reference of a proposed free-trade agreement with Qatar by early October. This is in response to its efforts to create deeper global partnerships, and to offset the impact from U.S. Tariffs. The government source who requested anonymity because the details of the trade negotiations are not yet public told reporters that Trade Minister Piyush Goyal may visit Doha to finalize the framework for the negotiations on October 6. Both sides agreed that they would double their bilateral trade in five years to $28 billion during the visit of Qatar's Sheikh Tamim Bin Hamad Al-Thani to India. Qatar also announced plans for an investment of $10 billion in India, in the areas of infrastructure, technology and manufacturing, food safety, logistics, hospitality, logistics and other sectors. India and Qatar have a close energy partnership and last year, a long-term agreement was renewed for the supply to India of liquefied gas for 20 years beginning in 2028. New Delhi has intensified its efforts to strengthen trade relations with other countries after U.S. president Donald Trump doubled the total tariffs to 50% by imposing additional 25% duties on Indian goods last month for purchasing Russian oil. In addition, India is seeking to sign a free-trade agreement with the European Union (EU), India's largest trading partner for goods, by the end of this year. The U.S. Tariffs are estimated to affect 55% of India’s $87 billion worth of merchandise exports, benefiting other competitors like Vietnam, Bangladesh, and China. Source: India is also looking to sign bilateral trade agreements with Oman and Chile, as part of its efforts to diversify and boost markets while protecting small businesses and farmers.
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Commission: EU envoy to Washington for talks about Russia sanctions
David O'Sullivan, European Union's Sanctions Envoy, is in Washington along with a team to discuss additional sanctions against Russia with U.S. colleagues. On Sunday, U.S. president Donald Trump said that he was prepared to move into a second phase, which is the closest thing he's come to suggesting that he may be about to increase sanctions against Moscow for its war in Ukraine. EU Council President Antonio Costa stated that new sanctions are being closely coordinated with U.S. officials and they hope for better cooperation following several disappointments in the early part of the year when Trump pursued peace talks with Russian president Vladimir Putin. The United States is not joining the other Group of Seven (G7) nations - the EU and Britain - to lower the price cap for Russian crude oil, before sanctions are imposed at $47.60 per barrel. Trump announced steep tariffs against U.S. imports of Indian goods, in part because India is a major buyer of Russian energy. The EU is currently working on a 19th set of sanctions against Russia. EU diplomats say that the package will likely include additional listings of Chinese firms, Russian banks, and vessels from Moscow's "shadow fleet" which evades sanctions. It may also include a ban on transactions involving Russian oil. Kremlin says On Monday, he said that sanctions will never force Russia to change its course.
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UN Human rights chief condemns "mass killing" of Palestinians in Gaza
The United Nations Human Rights Chief condemned Israel for "massacring" Palestinian civilians in Gaza, and "hindering sufficient life-saving aid", saying that the country has a case before the International Court of Justice. Volker Turk is the head of the Office of the United Nations' High Commissioner for Human Rights (OHCHR). He did not describe the Gaza War as a genocide in progress, as had been urged by hundreds of U.N. employees. In his opening remarks to the 60th Human Rights Council session in Geneva, Turk expressed disgust at the "open use of genocidal language" and the "disgraceful humanization" of Palestinians that senior Israeli officials had engaged in. Turk said: "Israel's killing of Palestinian civilians, its wholesale destruction and indescribable suffering; its refusal to provide sufficient aid for civilians and the subsequent starvation; the killing of journalists and its commission of crime after crime are shocking to the conscience of the entire world." Turk said that Israel has a case before the International Court of Justice, and the evidence is mounting. Turk was referring to a January ruling by the ICJ which stated that Israel had a duty to prevent genocide. Israel's U.N. delegation in Geneva has said that it will respond to any requests for comments shortly. Israel previously denied accusations of genocide against Gaza. It cited its right to self defense following the Hamas attack on October 7, 2023 that resulted to the death of 1,200 people, and the capture of 251 captives, according to Israeli statistics. Gaza's health ministry reports that Israel's subsequent offensive has killed nearly 63,000 people. A global hunger monitor states that a part of the territory suffers from famine. Turk addressed the issue of human rights, and said that they are being undermined by "disturbing" trends such as the glorification violence and the withdrawal of certain states from the system multilateral. He said that "rules of war are being dismantled - and there is virtually no accountability." Turk condemned widespread violations that he claimed had occurred following Russia's invasion of Ukraine, as well as conflicts in Sudan and Myanmar. (Reporting and editing by Miranda Murray, Aidan Lewis, and Olivia Le Poidevin)
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Six Palestinians are killed by Palestinian gunmen at a Jerusalem bus stop
On Monday, two Palestinian gunmen opened up at a bus station on the outskirts Jerusalem and killed six people. Police described the attack as "a terror attack," which was one of the most deadly in recent years. Dashboard camera footage from the scene shows people running away from a bus parked on the side of the road. Shots can be heard. A video from the scene showed bullet holes in a bus's windows and windscreen. "Suddenly, I heard the shots start..." Ester Lugasi told Israeli TV that she felt as if she had been running for an eternity. "I thought I would die." Ambulance service identified five victims: a man aged 50, a woman aged in her fifties, and three men aged in their 30s. The ambulance service said that 11 people were injured, six of whom had gunshot injuries and were in serious condition. Gideon Saar, the Israeli Foreign Minister, said that a sixth victim had died. He also confirmed that the gunmen are Palestinians living in the Israeli-occupied West Bank. Hamas, a Palestinian militant group, praised the two Palestinian "resistance" fighters it claimed were responsible for the attack. However, it did not claim responsibility. Islamic Jihad is another Palestinian militant group that praised the shooting. Benjamin Netanyahu, speaking at the site of the attack said that Israeli forces were pursuing those who assisted them. Israeli police reported that two attackers arrived in a car and fired at a Ramot Junction bus stop. Police said they recovered several weapons, ammunition, and a knife from the scene. After the shooting, footage showed that there was a large police presence in Ramot. A paramedic who arrived at the scene told the ambulance service that there were several victims lying on the street and sidewalk. Some of them were unconscious. Israeli military has said that it has deployed soldiers in the area to assist police in their search for suspects. It said that soldiers were also deployed in Ramallah, West Bank, to "thwart terror" and conduct interrogations. In Tel Aviv, in October 2024, armed with knives and guns, two Palestinians killed seven people. Two Palestinian gunmen murdered three people in November 2023 at a Jerusalem stop bus. Israeli security services claimed that the attackers of the 2023 Jerusalem shooting had Hamas ties. Reporting by Rami Amitay, Maayan Lulbell, Alexander Cornwell, Ahmed Elimam, and Jana Choukeir, in Jerusalem; Editing and production by Gareth Jones, Ros Russell, and Ros Jones.
India's top refiner claims that Russia's oil spot supply is normal
Anuj Jain is the head of finance for Indian Oil Corp, India's largest refiner. He said that spot supplies of Russian oil have not changed. Barrels are still trading at a $2-$3 discount per barrel in Dubai, and will be delivered to Indian ports.
India, which is the world's largest purchaser of Russian crude oil, has benefited from discounts on Russian production as Europe and the U.S. shun Russian oil due to Moscow's invasion of Ukraine in 2022.
Washington has pressured India into stopping buying Russian oil by imposing heavy tariffs on Indian exports. However, Prime Minister Narendra Modi has stated that the government will continue to buy Moscow's crude because it is economically viable.
IOC, the state-run oil company, buys Russian crude from traders on a delivery basis.
According to LSEG trade flow, the loading of Russian oil to India in August almost halved from 1.34 million barrels per day in July to 686.850 barrels per daily.
The August loading of Russian crude oil for India was low, as refiners stopped purchases after discounts shrank.
"We never stopped (buying Russian crude). Jain said that we are already planning to buy for November and October.
He said that IOC must reduce its imports of Russian crude oil due to the high inventories.
We wanted to optimize our inventory as well. Jain explained in Hindi that this was one of the major factors. (Reporting and writing by Mohi Naira in Singapore, Nidhh Verma, Editing by Sonali Pau)
(source: Reuters)