Aurelia Butler

LONDON (Reuters) – Britain’s markets watchdog proposed a traffic light system on Wednesday showing savers how much value for money they get from their pension, with laggards possibly having their assets moved to a better performing plan if a red light flashes. The newly elected Labour government wants plans to perform better for savers, and to build up bigger pots for plugging the cash-strapped country’s investment gap in UK infrastructure and growth companies under the so-called Mansion House Compact.”Poorly performing schemes will be required to improve or ultimately protect savers by transferring them to better schemes,” the Financial Conduct Authority said in a statement.It proposed a ‘value for money’ framework that defined contribution (DC) pensions, the most common form of pension, would have to comply with.”Schemes will be compared on public metrics that demonstrate value – not just costs and charges, but also investment performance, and service quality,” the FCA said.”They would, once the final framework is decided, be publicly rated red, amber or green.”The government plans to legislate for the framework to be extended across the pensions market, as part of a sector review.Finance Minister Rachel Reeves urged pension schemes on Wednesday to continue “backing Britain”, and to consolidate so they can invest more in productive assets.The FCA said that by consulting now on DC pension schemes, which have 16 million savers, it means that future change can be accelerated across the system when the government’s pensions legislation is ready.The Investment Association, which represents asset managers, said the new framework is a “huge opportunity to improve the workplace pensions landscape” by expanding the investment opportunities open to schemes.The FCA said that focusing on value, rather than costs, will allow schemes to invest in assets for greater long-term returns, but have higher management costs, such as infrastructure and venture capital.The proposals also include mandatory end of calendar year disclosure on type and geographical location of assets that schemes invest in, as the government seeks to increase pressure to put more cash in UK-based assets.The rules could restructure the sector.”We expect that greater transparency will prompt some providers to consider if they have the scale and allocations to deliver good value,” said Sarah Pritchard, the FCA’s executive director of markets and international. More

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(Reuters) -U.S. Treasury yields rose on Wednesday after the Treasury Department saw soft demand for a $42 billion sale of 10-year notes and as companies rushed to sell debt as risk appetite improved.Supply is the main focus this week as traders wait on fresh economic data for further clues on the strength of the U.S. economy.Yields tumbled to more than one-year lows after Friday’s employment report for July showed an unexpected increase in the unemployment rate, while jobs gains also came in below economists’ forecasts, raising fears of an imminent recession.Tumbling stock markets partly blamed by traders unwinding popular dollar/yen carry trades, in which they sold the Japanese currency and bought U.S. assets, added to demand for safe haven U.S. debt.This demand has since ebbed as stocks move higher, but Treasury yields remain well below where they have recently traded, which was seen as denting interest in Wednesday’s debt auction.The 10-year notes sold at a high yield of 3.96%, 3 basis points above where they traded before the sale. Demand was 2.32 times the amount of debt on offer, the weakest since December 2022.”Investors just weren’t willing to pay up for sub-4% 10s,” said Vail Hartman, U.S. rates strategist at BMO Capital Markets in New York. “This suggests this move may still have a little bit further to run before dip buyers reemerge in a more meaningful way.”Heavy corporate debt issuance also pushed yields higher.“You have a lot of issuers who paused on Monday and even maybe held back yesterday just to make sure the coast was clear in terms of how risk assets are going to be received and now are coming to market today,” said Michael Lorizio, senior fixed income trader at Manulife Investment Management in Boston.Yields on interest rate-sensitive two-year notes were last up 1.8 basis points on the day at 4.0034%, after going as low as 3.654% on Monday, the lowest since April 2023.Benchmark 10-year note yields rose 8 basis points to 3.968%, after reaching 3.667% on Monday, the lowest since June 2023.The yield curve between two- and 10-year Treasury notes steepened 4 basis points to minus 4 basis points. It reached 1.50 basis points on Monday, the first time it has turned positive since July 2022.Traders expect the Federal Reserve to cut interest rates by 50 basis points at its next policy meeting on Sept. 17-18 as the economy slows, but they are also pricing in a 31% chance of a smaller 25 basis point rate reduction, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.The odds of an emergency rate cut before the September meeting have fallen as risk markets recover.The next major U.S. economic release will be consumer price inflation for July on Aug. 14. Comments by Fed Chair Jerome Powell at the Fed’s Jackson Hole Economic Policy Symposium on Aug. 22-24 may also provide new clues on the path of rate cuts.Rising geopolitical tensions in the Middle East could also increase demand for U.S. Treasuries. More

Total consumer credit rose $8.93 billion in June, slowing from a $13.95B gain seen in the prior month, the Federal Reserve said Wednesday, missing economists’ estimates for a $9.8B gain. The rise in June took the annual rate to 2.1% annual rate, weaker than the 1.5% rise in the prior month.The slowdown in credit usage comes just as fears of a economic slowdown returned focus following a string of weaker-than-expected data including the weaker jobs report last week. Revolving credit including credit cards, declined by nearly $1.7B, or 1.5%, in June after 6.3% jump in the prior month.Nonrevolving credit such as student loans, rose by a 3.4% rate after a 2.4% rise in the prior month. More

MUMBAI (Reuters) – India’s central bank is widely expected to hold rates steady on Thursday, but with growing worries about the global economy investors are hoping for a more dovish tone from policymakers that could open the door for an October rate cut.All 59 economists in the Reuters poll conducted in late July predicted the Reserve Bank of India would hold the repo rate at 6.50% for a ninth straight meeting.Still, investors are hopeful the RBI will soften its stance on inflation following the recent souring of global market sentiment and near-certainty of an interest rate cut by the U.S. Federal Reserve in September. “We expect the policy to have a dovish tilt taking cognizance of the recent weakness in global economy and volatility in financial markets,” said Parijat Agrawal, head of fixed income at Union Mutual Fund.”We expect the policy rates to remain unchanged (but) the Monetary Policy Committee may change its stance to neutral,” he said.Global equities and currencies tanked early this week as the Bank of Japan hiked rates to their highest levels since 2008 last week and fears of a U.S. recession rose on the back of weak employment numbers. While Indian equities fared relatively better, the rupee fell to all-time lows, prompting central bank intervention.”Staying relatively hawkish will only create an unwanted rupee carry, and increase the problem of plenty for the RBI,” said Madhavi Arora, chief economist at Emkay Global.However, another food driven spike in retail inflation to above 5% in June could prevent the central bank from signalling a policy pivot just yet.Governor Shaktikanta Das has repeatedly said the RBI wouldn’t shift policy gears until inflation was firmly on the path to reaching the target of 4%.Meantime, growth in the Indian economy remains strong. Despite some slowdown expected from the 8.2% expansion in fiscal 2024, India will remain among the fastest growing economies globally if the 7.2% expected growth is achieved.Traders are not expecting any significant changes to the central bank’s approach to liquidity management, although the banking system is flush with cash.In the absence of any change in rates or stance, the 10-year yield is seen holding in a 6.8%-6.9% range in the near-term with expectations of a fall towards 6.6%-6.5% once rate cut views get firmly built in.A change in stance to neutral could push the rupee to 84 levels while the 10-year bond yield could see a 5-10 basis points fall, traders said. More