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Treasury yields increase for the fourth consecutive day as crude prices raise inflation risk
U.S. Treasury Yields rose on Thursday for the fourth day in a row, as the war in Iran continued. This fueled concerns about inflation and its impact on Federal Reserve Policy. U.S. crude jumped 5.5% - to $78.77 a barrel on Thursday, while Brent jumped up to $84.36 a barrel, up 3.64% for the day. This was due to the fact that more oil tankers were attacked in Gulf waters, as the U.S. vs. Iran war intensified, and Iranian drones invaded Azerbaijan. Since the beginning of the war last week, crude prices have risen by roughly 16%. The yield on U.S. benchmark 10-year Treasury notes rose 4.7 basis point to 4,129%, after reaching a three-week peak of 4.148%. "The spike in gasoline prices in response to the Middle East events is a major concern for those who expect a Fed reaction function," Michael Green, chief market strategist of Simplify Asset Management, Philadelphia. The curve is primarily driven by people's fears about inflation. According to LSEG, the markets are pricing in Fed cuts of 40 basis points this year. This is down from 50 basis points just before the 'war' began. The 30-year bond yield increased 3.5 basis points, to 4.752%. It had previously reached 4.772%. This was its highest since February 12. CME's FedWatch Tool shows that the expectation of a reduction?of 25 basis points or more at the June meeting has fallen to 35.8%. This is down from 47.4% last week and 75% one month ago. The U.S. Treasury yield chart, which measures the difference between the yields of two-year and 10-year Treasury bills, as a measure of economic expectations was positive by 55.7 basis points. The recent economic data also indicates that price pressures are still present, while the labor markets remain stable. This makes it less likely that the Fed will see the need to lower interest rates. Labor Department reported that weekly initial claims for unemployment were at 213,000 seasonally adjusted, which was slightly less than the 215,000 estimated by economists polled. The Labor Department also reported that import prices increased 0.2% in January, which was in line with expectations. This followed a 0.2% increase in December, but this had been revised upwards. The yield on the two-year U.S. Treasury, which moves typically in line with Fed expectations, increased 3.1 basis points, to?3.574%. Fed officials recently stated that it would take time to evaluate the impact of the Iran conflict on monetary policies. On Wednesday, Governor Stephen Miran stated on Bloomberg TV that the conflict had not changed the need to cut interest rates. Richmond Fed President Tom Barkin said that the high inflation rate and the stronger recent jobs numbers could change the Fed's outlook. The five-year U.S. Treasury inflation-protected securities (TIPS) brokeeven rate was 2.533% on Thursday, after closing on Wednesday at 2.5%. The 10-year TIPS Breakeven Rate was at 2.29% last, which means the market expects inflation to average 2.3% per year over the next decade.
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US allows Rosneft German transactions despite Russia sanctions
The United States issued on Thursday a 'general licence' exempting transactions that involve the 'German unit of Russia’s Rosneft’ from?U.S. sanctions. The U.S. Treasury Department announced that sanctions would be imposed on the Russian company Rosneft. This will provide Berlin with much-needed clarity about the future of the business. The license, which has no expiration date, replaces the one that was set to expire April 29. The extension of the existing U.S. sanction waiver reduces the risks of disruptions to German refining operations, at a moment when the conflict in the Middle East escalates and is unsettling the global energy markets. Germany placed the local units of Rosneft, a Russian oil company, under trusteeship by 2022 following Moscow's invasion in Ukraine that shattered Berlin's decades long energy relations with Russia. Assets include a stake at the PCK Schwedt refining plant, which is a major fuel supplier to the capital area. According to correspondence seen by, in January, the management of the refinery privately warned the German government about the U.S. sanctions affecting its business. Brussels approved recently a new trust structure which gives Berlin long-term control over Rosneft’s German assets as part of efforts to find a structural solution. (Reporting and editing by Susan Heavey and Kirsten Donovan; Additional reporting by Christoph Steitz)
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Wall Street drops early as bond sales drive Iran war
Wall Street suffered an early drop on Thursday, as the Iran conflict pushed up oil prices and 'the dollar' and triggered another wave of selling? in increasingly anxious global bond markets. Uncertainty sparked a new day of?see-saw movements. Asian stocks rose overnight after South Korea’s president ordered assistance for its battered markets. However, Europe lost gains when Wall Street reopened on the downside. Iran launched a barrage of missiles against Israel, and bombings of Tehran intensified after Republican Senators blocked a bipartisan motion in Washington to stop the U.S. aerial assault on Wednesday. U.S. Energy Sec. Chris Wright said that the impact of the war on the energy markets was a "small" price to pay in order to achieve military goals. Kristalina Georgieva, the head of International?Monetary?Fund, warned that it is already testing global economy's resiliency. John Hardy, a Saxo Bank analyst, said that the main barometers are the crude oil prices and the increase in bond yields. He added that the markets weren't prepared for a conflict lasting more than 1-2 weeks. Oil prices are heading towards $85 per barrel. The euro, the pound, and government bonds that serve as benchmarks were all under pressure. Trevor Greetham of Royal London Asset Management said, "What's quite remarkable is that oil prices haven’t dropped," referring to experts who expressed doubts about Donald Trump's recent pledge to provide insurance for oil tankers to protect them against attacks. The overnight action in Asia was again volatile. South Korea's KOSPI closed almost 10% higher, wiping out most of the worst daily drop it had ever experienced a day before. The recovery came after President Lee Jae Myung activated a $68 billion fund to stabilise the market, citing a need to reduce volatility due to "the escalating Middle East crisis". Nikkei in Japan soared nearly 2% while Chinese shares rose almost 1%. This was after Beijing's party leaders announced a target of 4.5%-5% growth for this year, as part longer-term plans. OIL PRESSURE The broader narrative was driven by concerns about energy. Brent crude has risen to $84.25 a barrel, and is still near $84 as U.S. trades gain momentum. Data from ship-tracking shows that around 300 oil tankers are?stuck' in the Strait of Hormuz. Traffic through this chokepoint has been all but stopped since the start of the war. Royal London's Greetham stated that the rising natural gas prices are causing bond investors to reduce their expectations of global rate reductions and consider the possibility of a hike. The yield on benchmark U.S. 10 year notes, which moves in the opposite direction of prices, increased by nearly 6 basis points, to 4.14%. The European market was also choppy, with the key German bunds market heading for its steepest week-end selloff in a full year. Traders now see a 60 percent chance of a rate hike from the ECB by December. After a brief pause in the previous session, the dollar has also resumed its gains. The dollar index, which measures greenbacks against a basket currencies, increased by 0.3%. The euro fell by the equivalent of $1.1600 while the yen dropped to 157.20 dollars. Gold, the traditional safe-haven asset, also sawsawed. Gold rose to as much as $5,175 per ounce, before falling back down to $5,100 during busy trading. Later, Christine Lagarde and other officials of the European Central Bank, including its President, will speak. Investors are looking for hints on the policy implications of the current economic situation. Joachim Nagel, the German Bundesbank's chief, has already warned that a prolonged war in Iran will increase inflation and harm growth. However, he said it is still too early to draw firm conclusions. Erik Liem, a Commerzbank analyst, said that the recent dynamics may also be relevant to March ECB forecasts. The cutoff date for most meetings is two weeks prior to the event.
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Flacks Group is'ready' to bid for Thyssenkrupp's steel business, if current sales talks fail
Michael Flacks, the CEO of Flacks Group, said that if current attempts to sell Thyssenkrupp's steel division fail, they would be "ready" to bid for it. Thyssenkrupp and Jindal Steel International have been in discussions since the autumn about a possible sale for Thyssenkrupp Steel Europe. However, these discussions are yet to produce a formal bid. Flacks Group was selected by Italy in 'December' to conduct exclusive negotiations on the sale Acciaierie d'Italia, a bailed out steel company. Flacks stated that "our main interest in Italy is now, but we're interested in major companies and, if talks about an acquisition of Thyssenkrupp Steel fail, we will bid for it." Thyssenkrupp shares rose as much as?2.2% on this news. Flacks said to the FT that he is also interested in acquiring British?Steel. A Thyssenkrupp representative said that the restructuring?of TKSE - which included the cutting or outsourcing up to 11,000 positions - had 'boosted the attractiveness of the division.' The company is?in positive talks with Jindal Steel International. (Reporting and editing by Toby Chopra; Additional reporting by Christoph Steitz, Jane Merriman, Jan Harvey; Toby Chopra; Additional reporting by Andres González)
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EBRD chief urges Turkey to fight inflation and focus on power project
The head of the European Bank for Reconstruction and Development said on Thursday that Turkey should "stay 'on course'" in its fight against?inflation, and she praised the steps taken by the central bank to deal with the market fallout caused by the Middle East war. The EBRD president, Odile Renaud-Basso said that the bank will continue to invest in Turkey this year at a "very high level" and that the bank is looking into funding a high-voltage transmission system Ankara has planned for the next decade. Renaud Basso stated that the central bank had already taken swift action. She said that there is still a long way to go, but it is important to keep on track and finish the work. Meetings with Officials: Reassuring Conversations Renaud Basso spoke at the conclusion of a 4-day visit, which included meetings with Vice President Cevdet Yilmaz and Finance Minister Mehmet Simsek. She said, "Everything I heard (reassured) me that this progress is stable" about the measures to combat inflation. The Turkish central bank has slashed its interest rates from mid-2025 by 900 basis point to 37%, as the annual inflation rate dropped from 40% at the start of last year to 30% in January. A rise of 31.5% in prices last month indicated a slowdown on disinflation. An escalating U.S./Israeli war against Iran also threatens to push up prices. The central bank has already taken a number of steps to respond. On Monday it sold about $8 billion worth of foreign currency, which pushed the overnight market rate up to around 40%. Renaud Basso?responded that the EBRD is "looking into" Ankara’s plans to invest $30 billion over the next decade in a high voltage electricity transmission system. She said, "It is part of our discussion with the government." Last year, the EBRD allocated a record 2.7?euros for 54 projects in Turkey. This country is EBRD’s number one recipient. The funding for this year could include renewable energy projects and energy-related projects. The Turkish government aims to quadruple its renewable energy production capacity by the year 2035, and build new nuclear power plants. The network will transfer electricity to consumption centers and send excess electricity to Europe's neighbours. The World Bank has been in contact with Turkey to discuss funding of up to $6 billion for the upgrade of electricity transmission infrastructure. (Reporting and editing by Tomasz Janowski, Tomasz Chopra)
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Codelco and Microsoft sign AI agreement for mining operations
The miner, Codelco, a state-owned company in Chile and the world's largest copper producer, signed a Memorandum of Understanding with Microsoft to evaluate joint initiatives?in artificial intelligence, advanced analytics, automation, and digital security. Key Context * The agreement is initially for 18 months with a joint governance of?strategic tracking and operational monitoring. * These include the use of intensive data, AI to make decisions, autonomous operations and automation of critical processes. Both companies will be involved in the early testing of new products and solutions, as well as sharing international experiences. KEY QUOTES Working with Microsoft, a technological leader of the highest caliber, consolidates our position as leaders in mining. Codelco's Ruben Alvarado, CEO of Codelco, said that in order to cope with the digital transformation we are facing today, it is necessary to consider and process large volumes operational data. Microsoft Latin America's president, Tito Arciniega, said: "This alliance with Codelco represents the potential of artificial intelligence to advance the development of the mining industry and the Chilean market, by facilitating safer, efficient, and'sustainable' operations, with an emphasis on people, productivity, and long-term value for the company and country." (Reporting and writing by Fabian Cambero, Kylie Madry and Alexander Villegas).
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Starmer: UK to send four additional Typhoons to Qatar
Keir Starmer, British Prime Minister, said that four more Typhoon jet fighters will be sent to Qatar as the conflict in the Middle East escalates. He also stated that the UK's defence plan is the best. The cautious British response to the Iran Crisis and a drone strike on its key military base in Cyprus has led to doubts about Britain's military effectiveness. Starmer has also been criticized by Donald Trump for not providing enough support for Starmer's?strikes against Iran. Starmer said at a press conference that Britain had the 'right plan' and had pre-deployed military equipment in the region prior to the start of war. Starmer said, "My main focus is to provide calm and level-headed leadership for the national interest." It means that we must use our diplomatic and military strength to protect the people of our country, and also have the courage to adhere to our values and principles no matter what pressure is put on us. He said: "Britain is sending four more 'typhoon' jets to Qatar to strengthen the 'defensive operation there and in the?region. He said, "We have the right plan for defence." (Reporting and writing by William James; editing by Kate Holton, Michael Holden and Sarah Young)
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McGeever: The data on US jobs forces us to look backwards from the Mideast chaos and AI "doom"
Investors will turn their focus on Friday, at least temporarily, to a more familiar economic area: U.S. job data. Since the joint U.S. and Israeli attack on Iran last Saturday, the events have dominated the market's thinking. Fears of artificial intelligence throwing millions of white collar workers to the scrap heap?have been put aside. The U.S. non-farm payrolls for February and the unemployment rate will once again bring these concerns to the forefront of investors' minds, and depending upon the details, they may also be at the top of the agendas of policymakers. A poll of economists found that the median consensus was for a net increase in non-farm payrolls of 59,000 last month, which is less than half the January rise. The unemployment rate will remain at 4.3%. The jobs report is still closely scrutinized to look for any warning signs. These could include weak job growth or even net job loss, as well as an increase in unemployment. The monthly payrolls and other labor market data such as "JOLTS", layoffs and weekly claims for unemployment will likely be the lightning rods of the "AI doom debate"?about whether technology will ultimately destroy jobs, economic growth and demand. APOCALYPSE, HOW? Last week, the markets were abuzz with talk about an upcoming AI "apocalypse." Investors were trying to determine AI winners and losers. Bets on the Federal Reserve cutting rates multiple times this year also rose. Jack Dorsey CEO of Block Inc., who announced on February 26, that he would be firing nearly half his staff, openly cited AI, even though the fintech firm is "strong" and profits are improving. Some people think that Dorsey, and other CEOs or chief financial officers might blame the disruptive?power? of AI for cost-cutting efforts - particularly given the labor hoarding after the pandemic. Dorsey’s statement scared investors, but it was not surprising. A series of research notes and blogs describing the doomsday AI scenarios had been widely circulated. Investors and policymakers need to separate the facts from the noise when assessing AI's impact on the labor markets. This means analyzing hard numbers, which are often backwards-looking. It is a challenge to use that data to predict the direction of wind. The picture is more balanced than AI skeptics would have you believe. In a recent study, Professor Suraj Srinivasan of Harvard Business School and his team analyzed all U.S. jobs posted from March 2019 to March last year. The study found that after ChatGPT launched in November 2022 the demand for analytical, technical and creative roles increased by 20%, while openings for jobs that are most likely to be automated fell 13%. Goldman Sachs economists estimate AI is currently a hindrance to job growth by?5,000 to 10,000 per month. This is negligible in an economy which creates over 30 million new gross jobs each year. Goldman's economists believe that AI will eventually displace 11 million workers, or 6-7% of the total workforce. The technology will also create new jobs. They wrote: "We do not expect a job apocalypse." Another research indicates a similar direction. Morgan Stanley's survey of U.S. firms conducted in January revealed that companies in the industries most likely to adopt AI are more likely to hire and retrain employees than to eliminate or not fill jobs. A Dallas Fed paper published last week concluded that AI has both helped and replaced workers. Monthly U.S. Employment Reports are usually all about the headline numbers. With AI doomsday concerns 'rife', the details below the headlines could now take on a much greater significance and cut through the fog. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
UK borrowing costs rise again due to inflation fears about the Middle East war
Due to the increase in energy prices caused by the conflict in the Middle East, investors have reduced their bets that the Bank of England will cut interest rates this month.
Analysts said that Britain was at risk of a rise in inflation. Yields on two-year bonds, which are sensitive to expectations for short-term rates of interest, rose 10 basis points and reached a high point of 3,815%.
The indices fell by 2 bps Wednesday, but were on track for their biggest weekly rise since October 2024.
UK gilts two-year are the worst performing government bonds in the Group of Seven this month. Their yields have risen by over 27 basis points. France and Germany have both gained 21 basis points.
Kathleen Brooks is the research director for XTB. She said that concerns about an inflation crisis in Britain?as a result of soaring energy prices are playing out on the 'bond market' and the 'UK interest rate futures markets.
Interest rate futures priced a 1 in 4 chance of a BoE cut this month, and fully priced only a quarter-point decrease in borrowing costs by 2026.
The UK has the highest rate of inflation among large, wealthy economies. It is also more dependent on imported gas and oil compared to many other countries.
The BoE's "Monetary Policy Committee" will take into consideration the length and scope of war, according to analysts.
Michael Saunders (a former MPC Member and senior advisor at Oxford Economics) said that if energy prices fall quickly, the MPC will likely resume easing in April or June.
"Our new baseline will still assume a second reduction later this year." If the energy price increase persists or increases, then the MPC may be forced to take a longer pause.
The yield on the five-year British Gilt?jumped by 10 bps at 4,035%, while that of the 10-year gilts was up by an equal amount at 4,547% as of 1413 GMT.
The 30-year yields also rose by 9 bps to 5.246% on the same day.
(source: Reuters)