Latest news with #TreasuryMarket
Bloomberg
12 hours ago
- Business
- Bloomberg
Bessent's Top Bank Reform Is Good for Markets
US banks seem likely to get the changes they want to an obscure but important rule known as the supplementary leverage ratio. The leading reform proposal should cut the capital that banks need for this measure and help make the Treasury market more resilient, but not lead to a giveaway of shareholder capital that could undermine their safety. For the financial system, that's a win-and-not-lose outcome. Treasury Secretary Scott Bessent has been pushing for this to be the first major financial reform since he took on the job. The Federal Reserve said on Tuesday that it will discuss the changes next week and hold an open meeting. Two main changes have been under discussion. The first is to take Treasuries out of tallies for the size of bank balance sheets, which would mean banks could lend to the government almost without using any equity. The second is to reduce the amount of capital banks need for their whole balance sheet, which would allow them to run a larger balance sheet for a wider variety of assets. The latter option is now the leading plan, Bloomberg News reported this week.
Globe and Mail
21 hours ago
- Business
- Globe and Mail
US Regulators Mull Easing Banks' Capital Rule on Treasury Trades
In a move aimed at enhancing liquidity in the $29 trillion U.S. Treasury market, U.S. regulators are planning to ease a key capital requirement that has long constrained large banks' trading activity. The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency are reportedly considering a proposal to lower the enhanced supplementary leverage ratio (SLR) by up to 1.5 percentage points for the largest U.S. banks, including JPMorgan Chase JPM, Goldman Sachs GS, Morgan Stanley MS, and Wells Fargo WFC. Details of the Proposed Capital Rule Adjustment for Banks Currently, all U.S. banks are obligated to hold capital equal to at least 3% of their total exposures, including assets and off-balance sheet items like derivatives. The largest global banks are required to maintain an additional 2%, bringing their minimum leverage ratio to 5%. The proposal would reduce the capital requirement under the SLR for bank holding companies from 5% to a range of 3.5% to 4.5%, while subsidiaries could see their threshold drop from 6% to the same range. How Easing Capital Rule Impact Banks? Fed Chair Jerome Powell has raised concerns that strict capital rules may limit banks from holding Treasuries, particularly during times of volatility. Under the current framework, Treasuries are treated in the same category as higher-risk assets, which can reduce incentives for banks to trade or hold them. Michelle Bowman, the Fed's vice chair for supervision, earlier this month, stated that leverage rules are meant to support capital strength. However, when these ratios are set too high, they may limit market activity and reduce liquidity. A proposed easing of these capital requirements could benefit major banks such as JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Wells Fargo by reducing the amount of capital they must hold in reserve. This would give them more flexibility to expand operations, particularly in lending and Treasury trading. In addition, lower capital buffers could enhance bank profitability by freeing up funds for investment and business growth. However, the overall effectiveness of the changes will depend on how banks respond and whether regulators introduce further reforms. Currently, JPMorgan, Morgan Stanley, and Wells Fargo carry a Zacks Rank #3 (Hold), while Goldman Sachs has a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Only $1 to See All Zacks' Buys and Sells We're not kidding. Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent. Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone. See Stocks Now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report
Yahoo
2 days ago
- Business
- Yahoo
US Bonds Rally Stalls as Powell Endorses a Patient Fed Approach
(Bloomberg) -- The Treasury market stalled after Federal Reserve officials indicated they're still on course to deliver two interest-rate reductions this year, despite the risk of resurgent inflation. Security Concerns Hit Some of the World's 'Most Livable Cities' JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads How E-Scooters Conquered (Most of) Europe Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown US government debt is finishing Wednesday with mild gains after policymakers left their benchmark rates steady and kept intact projections for two cuts by the end of the year. A stronger rise in Treasuries after the decision faded as Chair Jerome Powell emphasized that it would take time to fully gauge the impact of tariffs on the economy. To Subadra Rajappa, head of US rates strategy at Societe Generale, the knee-jerk reaction in the $29 trillion market — and subsequent ebb — shows that the Fed ultimately 'remains in 'wait-and-see' mode.' Traders are pricing in about 47 basis points of easing, which implies expectations for nearly two reductions in the remainder of 2025. The first is fully priced in for October, though some see a move as soon as September. The Fed has held rates steady since December at 4.25%-4.5%. Yields on two-year notes, most sensitive to the Fed's monetary policy, were ending lower by a basis point at 3.94% after earlier climbing as high as 3.96%. Most others were little changed on the day. Powell told reporters after the rate decision that overall uncertainty has diminished, but it hasn't gone away. Questions have been swirling around the outlook for the world's top economy given President Donald Trump's evolving trade policies and current budget negotiations in Congress. So far, most major indicators show a generally healthy, if slowly cooling, US economy. The Fed chief said he expects to learn more about the impact of tariffs on inflation in the months ahead. 'We haven't been through a situation like this,' Powell said, 'and I think we have to be humble about our ability to forecast it.' The comments contributed to the stall-out in Treasuries, drawing investor focus away from officials' projections for the path of interest-rate cuts ahead. While officials' median projection for two rate cuts in 2025 remained the same as those released at the March gathering, a few lowered their expectations. Seven now foresee no rate cuts this year, compared with four in March. Two others pointed to one cut this year. The market, however, quickly realized that the Fed remains focused on the data, Michael de Pass, global head of rates trading at Citadel Securities, said. 'When there's a fair amount of uncertainty around the rate path, the dots tend to complicate the messaging. That's definitively the zone that we're in now,' he said. What Bloomberg strategists say: The Fed's decision to hold the course, despite weaker growth, underscores its priority to preserve inflation-fighting credibility. As growth cools and labor market risks mount, markets may view the Fed's restraint as misplaced, with traders pushing for a stronger focus on employment amid rising fears that policy missteps could spark renewed market turbulence. — Michael Ball, Markets Live Macro Strategist, New York The concern about resurgent inflation was reflected in policymakers' expectations for the years ahead. Officials now see just one cut each in 2026 and 2027. 'It seems a compromise to leave two cuts in for this year and kick the can down the road,' said George Catrambone, head of fixed income at DWS Americas. 'That said, whereas the dots have been downplayed in recent weeks, I think it's noteworthy the dots have drifted higher in '26 and '27.' --With assistance from Kristine Aquino, Edward Bolingbroke and Carter Johnson. Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? How a Tiny Middleman Could Access Two-Factor Login Codes From Tech Giants Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? American Mid: Hampton Inn's Good-Enough Formula for World Domination ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 days ago
- Business
- Yahoo
Is the Treasury Market Still Safe? Bank of America Strategist Weighs In
Meghan Swiber, senior U.S. rates strategist at Bank of America's investment banking arm BofA Securities, joins WSJ's Take On the Week podcast to share how investors should think about the U.S. Treasury market's recent moves.
Yahoo
6 days ago
- Business
- Yahoo
Fears over the safety of US government bonds have been put to rest — for now
Concerns over what Trump's tax bill will do to the federal deficit have rattled the Treasury market. Nerves were soothed somewhat on Thursday after strong demand at a 30-year auction. Both near- and long-dated bonds rallied, pushing yields lower. The bond market just cleared a key hurdle and put investors at ease about the state of government borrowing — at least for now. The Treasury Department saw solid demand for its anxiously awaited auction of 30-year government bonds on Thursday. It comes a day after a 10-year offering saw similarly strong demand. The Treasury market has been destabilized in recent weeks by concerns over the impact President Donald Trump's tax bill will have on an already-swollen federal deficit. It was those same worries that led to tepid demand at a 20-year auction a few weeks ago, and led to the fixation on this week's offerings. Recent volatility in the 30-year has led some to speculate that the bond — historically considered to be one of the safest investments in existence — was losing it its luster as a safe haven. Despite continued calls for investors to continuing "selling America," US government bonds look fine for the time being. This embedded content is not available in your region. In the end, the government sold $22 billion worth of 30-year bonds on Thursday at a yield of 4.84%. That's 8 basis points below what the 30-year US Treasury yield traded around at the time the auction closed, implying strong demand. Demand was also solid at the 10-year US Treasury auction on Tuesday, when the government sold $39 billion worth of 10-year bonds at a 4.42% yield, which was also lower than expected. Bonds were mired in a sell-off for most of April and May as concerns swirled around mounting debt levels, the impact of tariffs on the US economy, and the GOP tax bill, which is expected to add trillions to the budget deficit over the coming decade. Treasury bonds are thought of as an ultra-safe corner of US financial market. Soft demand is a sign investors may be too skittish about the US macro picture to pick up government debt — something that would be unusual and reflect extreme fear about the macro outlook. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
