TREASURIES-Yields rise on budget hopes, before supply
Treasury yields rose on Tuesday as President Donald Trump indicated he would compromise on a budget that, if passed, would avert a government shutdown and as investors prepared for new Treasury supply. Trump indicated an openness on Monday to delaying his push to secure funds for his promised border wall with Mexico, potentially eliminating a budget sticking point. If the government is shut down for any significant period of time, the Federal Reserve would not have access to data needed to gauge the strength of the economy, reducing the likelihood of a near-term rate increase. Investors and dealers are also preparing for the sale of $88 billion in new short- and intermediate-dated supply this week, starting with a $26 billion sale of two-year notes on Tuesday. “I’d be surprised if many people are set up for this week’s Treasury supply, given the concerns over the weekend with the French election,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. Benchmark 10-year notes were last down 8/32 in price to yield 2.30 percent, up from 2.27 percent late on Monday. The yields hit five-month lows of 2.17 percent last Tuesday as concerns grew about France’s vote. Centrist Emmanuel Macron is now expected to defeat far-right leader Marine Le Pen in the May 7 presidential runoff. Rising stocks and stronger risk sentiment also reduced demand for safe-haven bonds on Tuesday
Euro zone lending to grow but ECB weighs on profits: ECB survey
Banks across the euro zone are set to expand lending further in the second quarter, even as the European Central Bank’s ultra-easy monetary policy erodes profitability, an ECB survey showed on Tuesday. Banks may slightly tighten access to credit for companies in the second quarter but corporate, household and consumer loan volumes will continue to rise, helped by ultra low rates, ECB said. Aiming to keep financial conditions exceptionally easy, the ECB has cut interest rates into negative territory and buys 60 billion euros worth of assets per month, all in the hope of reviving growth and inflation. While the negative rates and asset buys have improved access to finance, most banks said the overall impact on profits was negative as the hit on margins was not offset by capital gains or the higher volumes. Indeed, separate data by the ECB out on Tuesday showed that euro zone banks’ return on equity dropped to 3.23 percent in the fourth quarter from 4.41 percent a year earlier, while return on assets fell to 0.21 percent from 0.28 percent.
China to boost non-fossil fuel use to 20 percent by 2030: state planner
China aims for non-fossil fuels to account for about 20 percent of total energy consumption by 2030, increasing to more than half of demand by 2050, its state planner said on Tuesday, as Beijing continues its years-long shift away from coal power. In a policy document, the National Development and Reform Commission (NDRC) said carbon dioxide (CO2) emissions will peak by 2030 and total energy demand will be capped at 6 billion tons of standard coal equivalent by 2030, up from 4.4 billion tons targeted for this year. The NDRC said it wants to increase oil and underground natural gas storage facilities, but it did not give any further details. The statement largely reiterated previous pledges contained in five-year plans and other policy documents and aimed at boosting wind and solar power usage.