Day: September 26, 2023

U.S. Treasury yields hit a peak not seen since the early tremors of the 2007-2008 global financial crisis on Tuesday, as fears of interest rates staying high for longer roiled risk assets globally and drove the dollar to a 10-month high.

Asian and European stock benchmarks sagged, with U.S. equities set to follow suit, and crude oil prices dipped on recent remarks from Federal Reserve officials that drove a bearish steepening of the U.S. yield curve.

The benchmark STOXX index of 600 European shares (.STOXX) slid 0.5%, in line with an earlier fall in MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS).

The yield on 10-year Treasury notes rose as high as 4.566%, a 16-year peak, while a hefty pipeline of U.S. treasury auctions this week and fears of a U.S. government shutdown all further stoked the skittish mood.

Bond yields, which move inversely to prices and rise when risks related to the issuer are perceived as growing, remained elevated among euro zone sovereigns as the narrative that central banks will keep rates higher for longer held sway.

Germany’s 10-year government bond yield , the euro area’s benchmark, was last little changed on the day at 2.789%, having briefly hit a 12-year high of 2.813% in early trade.

The gap between the yields on Italian benchmark 10-year BTP bonds and safer German Bunds has risen to around 1.86 percentage points (186 basis points), the widest since late May, as Prime Minister Giorgia Meloni prepares a difficult 2024 budget.

Minneapolis Fed President Neel Kashkari said more rate hikes were likely needed given the surprising resilience of the U.S. economy.

The nervousness around U.S. government debt is exacerbated by efforts from the Republican-controlled House of Representatives to advance steep spending cuts this week, which stand no chance of becoming law but could trigger a partial shutdown of the government by next Sunday.

Hundreds of thousands of federal workers could be furloughed and public services suspended if Congress is unable to fund the new fiscal year starting Oct. 1.

Traders now put the odds of another quarter-point Fed hike by January at a coin toss, and have pushed the likely start of rate cuts to summer.

Chicago Fed President Austan Goolsbee said on Monday that inflation staying entrenched above the central bank’s 2% target remains a bigger risk than tight Fed policy slowing the economy more than needed.

The European Central Bank and Bank of England have also touted higher rates for longer in policy meetings since the middle of the month.

The U.S. dollar index – which measures the currency against six major developed market peers, including the euro and yen – ticked up 0.2% to 106.2, the highest since November 2022, as the world’s biggest economy continued to outperform.

The greenback’s strength against the yen in particular has kept traders on alert for an intervention to prop up the Japanese currency, especially after Finance Minister Shunichi Suzuki on Tuesday said no options were off the table.

The dollar held near an 11-month peak of 148.97 yen from overnight, with 150 per dollar seen by financial markets as a red line that would spur Japanese authorities to act, as they did last year.

Gold drifted slightly lower to $1,910.6, extending its slump from above $1,947 over the past week, as bullion’s appeal dimmed in the shade of the steamroller dollar.

Crude oil remained weak amid concerns that fuel demand would be crimped by major central banks holding interest rates higher for longer, even with supply expected to be tight.

Brent crude futures were down 72 cents at $92.57 a barrel, while U.S. West Texas Intermediate crude futures were trading 69 cents lower at $89.99.

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EL PASO, Texas (NewsNation) — Mexico’s top officials fear another U.S.-Mexico border closure as the Juarez-El Paso border crossing has seen 2,000 illegal crossings each day.

Officials are concerned this will lead to another border entry point shutdown like the one in Eagle Pass last week.

Over 1,000 migrants — mostly Venezuelans — have been waiting in long lines at the border, waiting to turn themselves in to Border Patrol agents on the El Paso side.

Standing there for hours in the scorching heat, the migrants wait to make it past the concertina wire to be processed.

Groups of migrants like this trek to the border every day, trying to cross over onto U.S. soil.

NewsNation crews witnessed a group of Venezuelans with a 2-year-old slide right under the concertina wire, placing cardboard on their backs to avoid being cut.

However, this has become common as the humanitarian crisis at the southern border continues to grow.

A prominent Thai human rights lawyer was convicted on Tuesday of insulting the monarchy and sentenced to four years in prison, the first conviction under a controversial law guarding the royal institution since a civilian government took office after years of military-backed rule.

Arnon Nampa was found guilty of defaming King Maha Vajiralongkorn during a student-led rally on Oct. 14, 2020, that commemorated a popular uprising in 1973 that led to the fall of a decade-long military dictatorship. He was also fined 20,000 baht ($550) for violating an emergency decree banning large public gatherings during the coronavirus pandemic.

Arnon, 39, still faces 13 more cases under the lese majeste law, which makes insulting the monarch, his immediate family and the regent punishable by up to 15 years in prison.

The court said in its ruling Tuesday that Arnon had declared at the rally that if it were dispersed, it would be at the order of King Maha Vajiralongkon. It said that statement was false because such actions would be up to the police to decide, and that Arnon had therefore defamed the king.

Arnon’s lawyer, Kritsadang Nutcharat, said his client will appeal and seek bail. Arnon hugged his son before being taken away to be jailed.

Arnon told reporters before entering the courtroom that even if he loses his freedom, his struggle is worth fighting for. He was accompanied by his wife, son and father. About 20 other people came to Bangkok Criminal Court to express their solidarity.

“The movement of the new generation created a phenomenon of change for the country in a way that cannot be turned back,” Arnon said. “I want the fight of the new generation to truly change the country.”

Arnon was awarded the 2021 Gwangju Prize for Human Rights by a South Korean foundation for his pro-democracy work.

He was among the first people to publicly call for reform of the monarchy and has remained one of the most vocal advocates of the movement. Earlier this year he accused the government of using internationally notorious Pegasus spyware to monitor his mobile devices.

The monarchy has long been considered a pillar of Thai society and criticism of it has been taboo. Conservative Thais, especially in the military and courts, still consider it untouchable. However, public debate on the topic has recently grown louder, particularly among young people.

Critics say the lese majeste law is often used to quash political dissent. At least 257 people have been charged in 278 cases since November 2020, including at least 20 minors, according to the group Thai Lawyers for Human Rights.

Opposition to reform of the monarchy was highlighted after Thailand’s general election in May which ended the nearly decade-long rule of Prayuth Chan-ocha, who initially took power in a 2014 military coup.

The progressive Move Forward Party won the most seats in the election but was denied power by Parliament. Conservative members of the military-installed Senate, which picks the prime minister together with the elected House of Representatives, voted to block party leader Pita Limjaroenrat from taking the post, citing his party’s call for a mild reform of the lese majeste law.

The populist Pheu Thai party, which ran second in the election, then formed a coalition with military-backed parties and succeeded in forming a new government led by Prime Minister Srettha Thavisin. Pheu Thai pledged not to touch the lese majeste law to win support for its rule.

An explosion in the city of Kryvyi Rig, the hometown of President Zelensky in the central Dnipropetrovsk region, damaged homes, farm buildings and solar panels.

The official Kremlin toll from last week’s strike in Sevastopol is one missing serviceman. Ukraine claims it took out the fleet’s commander and 34 other officers.

As thousands of Armenians fled their homes in Nagorno-Karabakh saying they feared ethnic cleansing, the United States called on Azerbaijan to protect the rights of civilians and allow in humanitarian and monitoring missions.

The Armenians of Karabakh – a breakaway part of Azerbaijan beyond Baku’s control since the dissolution of the Soviet Union – began fleeing this week after their forces were defeated in a lightning military operation by Azerbaijan’s military.

At least 13,550 of the 120,000 ethnic Armenians who call Nagorno-Karabakh home arrived in Armenia on the first day of the exodus, with hundreds of cars and buses crammed with belongings snaking down the mountain road out of Azerbaijan.

“We are calling on Azerbaijan to maintain the ceasefire and take concrete steps to protect the rights of civilians in Nagorno-Karabakh,” U.S. Agency for International Development (USAID) chief Samantha Power told reporters in Yerevan.

Power, who earlier handed Armenian Prime Minister Nikol Pashinyan a letter of support from U.S. President Joe Biden, said Azerbaijan’s use of force was unacceptable and that Washington was looking at an appropriate response.

She called on Azerbaijan’s President Ilham Aliyev to live up to his promise to protect ethnic Armenian rights, fully reopen the Lachin corridor that connects the region to Armenia and let in aid deliveries and an international monitoring mission.

Aliyev has pledged to guarantee the safety of Karabakh’s Armenians but said his iron fist had consigned the idea of the region’s independence to history.

Ethnic Armenians who managed to get to Armenia gave harrowing accounts of fleeing death, war and hunger.

Some said they saw many dead civilians – one said truckloads. Others, some with young children, broke down in tears as they described a tragic odyssey of running from war, sleeping on the ground and with hunger churning in their bellies.

“We took what we could and left. We don’t know where we’re going. We have nowhere to go,” Petya Grigoryan, a 69-year-old driver, told Reuters in the border town of Goris on Sunday.

Reuters was unable to independently verify accounts of the military operation inside Karabakh. Azerbaijan has said it targeted only Karabakh fighters.

“We are going to learn a lot more in a hurry about the severity of those conditions and what those individuals have gone through causing them to leave Nagorno-Karabakh,” USAID’s Power said.

As Armenians rushed to leave the Karabakh capital, known as Stepanakert by Armenia and Khankendi by Azerbaijan, fuel stations were overwhelmed by panic buying.

The authorities there said at least 20 people were killed and 290 injured when a fuel storage facility blew up on Monday.

“The doctors and medical staff in Stepanakert are doing their best to save the lives of the wounded in these difficult and cramped conditions,” the local Armenian authorities said.

The Azerbaijani victory changes the balance of power in the South Caucasus region, a patchwork of ethnicities crisscrossed with oil and gas pipelines where Russia, the United States, Turkey and Iran are jostling for influence.

Since the breakup of the Soviet Union, Armenia had relied on a security partnership with Russia, while Azerbaijan grew close to Turkey, with which it shares linguistic and cultural ties.

Armenia has sought closer ties with the West and blames Russia, which had peacekeepers in Karabakh but is now preoccupied with the war in Ukraine, for failing to protect Karabakh. Moscow denies blame and has told Pashinyan that he is making a big mistake by flirting with the United States.

Aliyev hinted on Monday at the prospect of creating a land corridor to Turkey across Armenia.

Anatoly Antonov, the Russian ambassador to the United States, told Washington to stop stoking anti-Russian sentiment in Armenia.

U.S. Treasury yields scaled fresh 16-year peaks on Tuesday, keeping the dollar near a 10-month high, as investors responded to the message from the Federal Reserve and other major central banks that rates are likely to stay elevated for longer.

Asia-Pacific stock benchmarks sagged along with gold, with European equities also set for a weaker open, while crude oil continued to drift back from 10-month highs.

The yield on 10-year Treasury notes rose as high as 4.566%, a level not seen since October 2007.

The U.S. dollar index – which measures the currency against six major developed market peers, including the euro and yen – ticked up 0.09% to 106.04, after reaching 106.10 overnight for the first time since Nov. 30.

MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) slumped 0.66%.

Tokyo’s Nikkei (.N225) lost 0.93%, while Hong Kong’s Hang Seng (.HSI) slipped 0.98% and mainland Chinese blue chips (.CSI300) retreated 0.4%.

U.S. stock futures pointed 0.35% lower, following a 0.4% rise for the S&P 500 (.SPX) overnight. Pan-European STOXX 50 futures fell 0.17%.

Westpac strategists see risks skewed toward even higher yields in the near term, buoying the dollar.

“We expect 10-year yields to establish a new, higher, range in coming weeks,” with a possible peak around 4.75%, they wrote in a client note. “Medium term, we would be looking to get long at some stage, but that time is not yet upon us.”

The next target for the dollar index is 107.20, they said.

By contrast, IG analyst Tony Sycamore says technical indicators suggest a top for Treasury yields is close.

“I think that over the next three or four days, we’re going to see yields start to come off, and U.S. equities could start to base,” he said. “But between now and then, it could get more ugly, that’s for sure.”

Traders now put the odds of another quarter-point Fed hike by January at a coin toss, and have pushed the likely start of rate cuts to summer.

Chicago Fed President Austan Goolsbee said on Monday that inflation staying entrenched above the central bank’s 2% target remains a bigger risk than tight Fed policy slowing the economy more than needed.

Minneapolis Fed President Neel Kashkari said more rate hikes are likely needed given the surprising resilience of the U.S. economy.

The European Central Bank and Bank of England have also touted higher rates for longer in policy meetings since the middle of the month.

The relative outperformance of the U.S. economy – with investors increasingly betting on a soft landing while growth in the euro zone and Britain stagnate – has buoyed the dollar against those currencies.

The euro sagged 0.08% to $1.0584, approaching the overnight low of $1.0575, a level last seen in mid-March.

Sterling slipped 0.14% to $1.2196, taking it back toward Monday’s six-month low of $1.21945.

The dollar also held near an 11-month peak of 148.97 yen from overnight, raising the risk of intervention by Japanese authorities.

Gold drifted slightly lower to $1,914.15, extending its slump from above $1,947 over the past week.

Crude oil remained weak amid concerns that fuel demand will be crimped by major central banks holding interest rates higher for longer, even with supply expected to be tight.

Brent crude futures were down 38 cents at $92.91 a barrel, while U.S. West Texas Intermediate crude futures were trading 34 cents lower at $89.34.

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