U.S. Treasury expected to boost bond sales amid worsening deficit, soaring rates

The U.S. Treasury Department is expected to increase issuance of longer-dated bonds starting this week and likely to continue the trend into next year as the fiscal deficit rapidly deteriorates and interest rates soar.

The U.S. Treasury Department will increase issuance of longer-dated debt in its quarterly refinancing operation for the first time since early 2021, to $102 billion from $96 billion, according to consensus among traders. Although not as high as the record high during the new crown epidemic crisis, it is well above the pre-epidemic level.

When the plan is announced on Wednesday, debt management is also expected to increase the size of regular issuance of bonds of all maturities, with the possible exception of varieties that are in relatively low demand, or in relatively small increments. Traders will also be watching for updates on the bond buyback program.

Demand for public borrowing has risen due to factors such as the Federal Reserve raising interest rates to 22-year highs, which in turn pushed up Treasury yields. The Fed is also reducing its holdings of U.S. debt. These factors raise the risk of greater price volatility when governments sell bonds.

“There’s going to be a significant increase in supply,” said Mark Cabana, head of rates strategy at BofA. “We’re surprised by the deficit and the data is alarming.”

Traders’ consensus expectations for the refinancing operations plan are as follows:

On August 8, $42 billion in 3-year bonds
On August 9, $37 billion in 10-year bonds
August 10, $23 billion in 30-year bonds
On top of that, most traders expect issuance to rise by $2 billion each for most maturities, with many citing smaller increases in seven-year and 20-year notes, which had previously been in poor demand.

Some traders believe the 20-year will be the only one that remains unchanged in size. Since the U.S. Treasury Department relaunched the bond in 2020, it has been plagued by weak pricing and liquidity.

Walmart buys Tiger Global’s stake in Flipkart for $1.4 billion

the largest U.S. retailer, recently paid $1.4 billion for the fund’s stake in Flipkart, according to a letter to investors from hedge fund giant Tiger Global, further cementing its stake in the firm. Control of the Indian e-commerce giant.

The deal, which took place in recent days, values ​​Flipkart at around $35 billion, down from the $38 billion it was slated for in 2021.

In 2018, Walmart paid $16 billion for a 77% stake in Flipkart, and the company has been accelerating its foray into India’s online retail industry in recent months.

Zuckerberg pointed out that the retention rate of Threads is low, Meta is considering adding more attractive features

Meta CEO Mark Zuckerberg said in an internal speech that Threads, its Twitter competitor, lost more than half of its users within a few weeks of exiting, so the focus Should be on retention.

Zuckerberg said, “If hundreds of millions of people sign up and at least half of them stay, that would be great. It’s clearly not there yet.”

For this decline, Zuckerberg said that it is normal, and also said that as the company adds more activation functions to the app, it is expected that the retention rate will increase.

Meta chief product officer Chris Cox said that the company is considering adding more features that can attract users to stay, such as important Threads that can be seen on Instagram.

A spokesman for Meta declined to comment.

Meta’s upbeat outlook for next quarter’s revenue in its earnings report yesterday sent its shares higher. Meta has been sitting on the sidelines for a year due to the collapse of advertising revenue last year and the high cost of Metaverse. The optimistic outlook is a sign of a comeback for it.

U.S. PMI data leads the world, the dollar soars and falls, but be wary of the pullback of London gold!

First Gold Network, July 25th, the last trading day, the PMI data released by the United States led the world, and the US dollar index said it had reached its highest level in the past two weeks. Affected by this, London gold fell under pressure. On Tuesday (July 25), the U.S. dollar index fell back quickly in the short term, falling to around 101.30. Weaker dollar boosts gold pricesStronger, London gold is currently trading at $1963 per ounce.

On Tuesday (July 25), London gold opened at US$1955.00 per ounce. As of press time, London gold temporarily recorded US$1963.09 per ounce, an increase of 0.41%.

London gold prices were on the defensive for the fifth straight day, at their lowest level in a week. As a result, the US PMI numbers are relatively good relative to economic activity data from the UK, Eurozone and Australia.

Data show that the initial value of the US S&P global manufacturing PMI in July rose to 49.0 from the previous 46.3 and the market forecast of 46.4, while the services PMI fell to 52.4 from the expected 54.0 and the previous 54.4. As a result, the Composite PMI edged down to 52.0 from 53.2 previously and the consensus forecast of 53.1. The Chicago Fed’s National Activity Index slipped to -0.32 in June from -0.28 (revised) previously and the consensus forecast of 0.03.

Upbeat U.S. retail sales data for June replaced downbeat U.S. housing and economic activity data last week, supporting the dollar’s rebound from its weakest level in 15 months. However, previously released cues on U.S. employment and inflation have been downbeat, pointing to concerns about the Fed’s policy shift in July, which in turn has fueled dollar bulls in the near term.

On the other hand, the initial HCOB manufacturing PMI in the euro zone fell to its lowest level since May 2020, from 43.4 previously to 42.7 in July, below market forecasts of 43.5. Likewise, Germany’s HCOB Manufacturing PMI fell to a 38-month low, while Services and Composite PMIs came in below market expectations and prior data for July.

In addition, the UK’s July S&P global/CIPS manufacturing PMI initial value fell to the lowest level in 2023, while Australia’s July S&P global manufacturing PMI initial value rose to 49.6 from 48.2 before, but the service industry PMI fell from 50.3 to 48.0 below 50.0, indicating a contraction in economic activity. As a result, US PMIs were relatively upbeat and thus underpinned the dollar’s fifth straight day of gains despite the unimpressive data releases. That said, the U.S. dollar index DXY rose for the fifth day in a row, hitting its highest level in nearly two weeks, while the euro fell across the board, which in turn weighed on London gold prices.

In the Asian market on Tuesday, the U.S. dollar index fluctuated and fell slightly. It is currently trading around 101.30, but it still holds on to most of the overnight gains.

Looking ahead, the Fed isn’t the only central bank meeting this week, with the European Central Bank and Bank of Japan also holding policy meetings that could affect global markets.

Of the three central banks, the Bank of Japan is the most likely to launch a market-moving surprise move that could tweak its yield curve control policy, traders said.

Futures markets expect the Fed’s overnight rate to rise to 5.41% in November and stay above 5% until May 2024.

London gold is highly sensitive to rising interest rates, because rising interest rates will increase the opportunity cost of holding non-yielding London gold.

Kinesis Money market analyst Carlo Alberto De Casa said in a report: “Any dovish surprise, especially from the Federal Reserve, could be beneficial to London gold, and gold prices are likely to break through the $2,000 mark again.”

The U.S. dollar index edged up 0.30% to 101.38, making London gold more expensive to hold in other currencies, limiting its upside.