Aurelia Butler

NEW YORK (Reuters) – The U.S. sovereign debt profile remains on an unsustainable path with deficits likely to widen more than what has been recently projected by the Congressional Budget Office, an analyst at investment firm DoubleLine said on Tuesday.The CBO, a non-partisan budget agency, last week issued fresh forecasts for the U.S. budget deficits for the next 10 years. They showed a slightly improved fiscal picture compared to its previous outlook published in June 2024.Debt to gross domestic product, a key metric of a country’s fiscal health, is now estimated to grow to 118.5% by 2035 from about 98% last year, the CBO said on Friday, lower than the 122% debt-to-GDP ratio by 2034 it had forecast last year.Those projections, however, are “very optimistic,” said Ryan Kimmel, an analyst at the bond-focused investment firm DoubleLine, given expectations of tax cuts by President Donald Trump. They are also based on dovish views on the level of interest rates, he said.”If you tweak those rate assumptions by very small amounts, the debt dynamic deteriorates quite dramatically … the unsustainable debt dynamics still remain in place,” he said in an interview.The CBO’s estimates are based on existing laws and assume that the tax cuts Trump signed into law when he was president in 2017 will expire as planned at the end of this year.If Trump, who returned to the White House on Monday, and Republicans in Congress succeed in extending the current individual and small business tax rates, this could increase deficits by over $4 trillion over the next 10 years, the CBO has previously estimated.The CBO projects that the effective federal funds rate, as well as yields on three-month Treasury bills and 10-year Treasury notes will remain below 4% from next year until 2035.”Given that the entire (yield) curve right now is above 4%, it might be a bit challenging to get there, especially if you have this more optimistic growth outlook that should feed through into higher interest rates,” said Kimmel. Benchmark 10-year yields were last at about 4.6%, while interest rates are currently in a 4.25%-4.5% range.To be sure, Trump’s pick for Treasury Secretary Scott Bessent said last week that high deficits in recent years were due to a “spending problem” – an acknowledgment that Kimmel said was a positive signal. But there was still little clarity from the Trump administration on the fiscal front, he added. Given expectations of a deteriorating fiscal outlook, which will likely require the U.S. government to issue more debt, DoubleLine is betting long-term Treasury yields will keep rising, said Kimmel.”We don’t think that the debt dynamic is positive for the long end of the yield curve … We’ve seen the curve steepen quite a bit, but we think that there’s still some room for the curve to steepen.” More

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(Reuters) – A look at the day ahead in Asian markets. Day two of the second Donald Trump administration, and exchange rates are in the global market crosshairs as investors nervously try to figure out how to trade the immediate fog shrouding the U.S. president’s trade policy.That Trump will impose tariffs on imports from many of America’s major trading partners seems almost certain. On what products and countries, and to what degree, are unknown right now, leaving the dollar and other currencies vulnerable to choppy and volatile trading.The same applies to other asset classes too, although the immediate impact is being felt more acutely in FX. Implied volatility across G10 currencies as measured by Deutsche Bank (ETR:DBKGn)’s ‘DBCVIX’ index remains relatively high, although it did pull back late on Tuesday.Investors will be relieved that Trump chose not to hit major trading partners with tariffs on his first day in office. They will be hoping his approach to tariffs follows the path SocGen analysts sketched out last week – “talk tough, aim high, but act gradually.” But the president’s off-the-cuff remarks to reporters late on Monday that some tariffs could come on Feb. 1 triggered an immediate reversal in the dollar, and served a timely reminder of how difficult the market terrain will be for investors to navigate in the coming weeks and months.The dollar looks stretched on positioning, sentiment and valuation metrics – hedge funds last week held the biggest net long dollar position in nine years; ‘long dollar’ is one of investors’ most crowded trades, according to Bank of America’s latest fund manager survey; and Citi analysts reckon the currency is overvalued by 3%.But that doesn’t mean it can’t go even higher, which is likely if Trump follows through with his more extreme protectionist measures and fiscal policies, Citi analysts warn. Rising Treasury yields and term premiums have tended to be dollar positive in recent years, they note.Meanwhile, the outlook for markets in Asia on Wednesday is fairly positive following a day of calm on global FX markets, falling Treasury yields and solid gains on Wall Street. Nikkei futures are pointing to a rise of around 0.75% for Japanese stocks at the open in Tokyo.China’s markets will be under scrutiny following their decent start to the week on the back of Trump’s initial ‘go slow’ signals on tariffs. The yuan on Tuesday rose the most since early November, as per the central bank’s daily fixing, and on Monday registered its best day in spot market trading since August. The main economic events in Asia on Wednesday are the release of New Zealand’s latest consumer inflation figures and an interest rate decision and guidance from Malaysia’s central bank. Here are key developments that could provide more direction to markets on Wednesday:- New Zealand inflation (December)- Malaysia interest rate decision- World Economic Forum in Davos  More

Consumer spending has remained strong on hopes of a soft landing for the economy and falling interest rates, helping companies like Capital One rake in more from interest payments on credit card debt.  The credit card business makes up nearly half of the loan portfolio of Capital One, which is one of the largest issuers of Visa (NYSE:V) and Mastercard (NYSE:MA) credit cards in the United States by balances.The McLean, Virginia-based company’s net interest income — the spread between interest earned on loans and paid out to customers on deposits — increased nearly 8% in the fourth quarter to about $8.1 billion.Capital One, which is acquiring Discover Financial for $35.3 billion in an all-stock deal, said provision for credit losses fell to $2.64 billion from $2.86 billion a year earlier. “Our fourth quarter results included steady top-line growth in our domestic card business, strong originations and a return to loan growth in our auto business, and stable credit results across our businesses,” CEO Richard Fairbank said in a statement. Capital One’s non-interest income, which primarily consists of interchange income, net of reward expenses, service charges and other customer-related fees, rose 5% to $2.09 billion. Capital One’s net income available to common stockholders rose to $1.02 billion, or $2.67 per share, in the three months ended Dec. 31, from $639 million, or $1.67 per share, a year earlier.Shares of the company rose 36% in 2024. The consumer lender was sued last week by the U.S. Consumer Financial Protection Bureau, which accused the bank of illegally cheating customers who held its flagship “high interest” savings account out of more than $2 billion in interest payments.Capital One denied the CFPB’s claims, however, and added that they will defend themselves in court. More

This tax break, which temporarily removes the Goods and Services Tax/Harmonized Sales Tax on certain items, affects around 10% of the CPI basket, including food purchased in restaurants and store-bought alcoholic beverages.Core inflation measures also experienced a decline, with the average of the trimmed and median core measures falling to 2.45% yoy from November’s 2.60%. The median core inflation led at 2.4% yoy, followed by the trimmed mean at 2.5%. Despite the decreases, the core measures, which are adjusted for taxes, suggest some underlying easing, with services inflation remaining steady at 3.5% yoy and shelter inflation slowing slightly.In light of the recent inflation data, BofA’s inflation forecasts remain largely unchanged, with expectations for inflation to stabilize at 2.0% yoy by the end of 2025 and 2026. However, the Bank of Canada (BoC) is now anticipated to cut interest rates by 25 basis points at its upcoming meeting on January 29, a shift from the previous stance of holding rates steady. This expectation is driven by the continued fall in inflation, anchored inflation expectations, and weaker economic indicators from November 2024. Additionally, potential tariffs proposed by President Trump could influence the BoC to cut rates to support the Canadian economy and allow the Canadian dollar to act as a buffer.Canadian rates rose across the yield curve following the CPI announcement, reflecting the market’s reaction to the likelihood of rate cuts and the potential imposition of tariffs. The market is currently pricing in an 84% chance of a BoC rate cut at the next meeting. Furthermore, the risk of tariffs is leading to expectations of further BoC rate cuts to mitigate the impact on Canadian economic growth.In the foreign exchange market, the Canadian dollar saw little movement post-CPI release, as the anticipated BoC rate cut was already factored in. However, the possibility of the US implementing a 25% tariff has brought volatility to the USDCAD exchange rate, which remains below 1.45. The outcome of the tariff situation and the BoC’s response could influence the USDCAD pair to break above this level and potentially move towards a 1.50 range, depending on further policy rate adjustments by the BoC.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

(Reuters) -Harvard University will provide additional protections for Jewish students under a settlement announced on Tuesday that resolves two lawsuits accusing the Ivy League school of becoming a hotbed of rampant antisemitism.Harvard said it will adopt the International Holocaust Remembrance Alliance (IHRA) definition of antisemitism, including specific examples of discrimination and harassment, when evaluating whether conduct violates its non-discrimination and anti-bullying policies.The university will also address Frequently Asked Questions about its policies online, report annually for five years on its enforcement efforts, and provide training on combating antisemitism to staff who review discrimination complaints.Harvard’s settlement resolves a lawsuit by Students Against Antisemitism, and a lawsuit by Jewish Americans for Fairness in Education and the Brandeis Center for Human Rights Under Law, and includes unspecified monetary payments. The university did not admit wrongdoing.Both lawsuits were among many accusing major universities of encouraging antisemitism after war broke out between Israel and Hamas in October 2023, leading to several months of pro-Palestinian protests on American college campuses.Marc Kasowitz, a lawyer for Students Against Antisemitism, said in an interview he had “great confidence” that Harvard was committed to protecting its Jewish students, including those targeted simply for supporting Israel.”Statements about destroying the state of Israel, murdering Israelis, and that sort of thing are antisemitic statements,” he said. “That gives us confidence that these measures are going to be very, very protective of the interests and rights of Jewish students on the Harvard campus.”Kenneth Marcus, who founded and chairs the Brandeis Center, said IHRA’s definition of antisemitism provides clear guidance to school administrators, and aligns with President Donald Trump’s 2019 executive order on combating antisemitism.”We expect every other college to meet or exceed that standard,” Marcus said in an interview.HARVARD PLEDGES A ‘WELCOMING’ CAMPUSJewish students accused Harvard of selectively enforcing its anti-discrimination policies, including by tolerating their being maligned as “murderers” and subjected to a viral “die-in” where attendees accused Israel of war crimes.They also accused Harvard of hiring professors who promoted anti-Jewish violence and spread antisemitic propaganda.Last June, Harvard task forces on antisemitism and anti-Muslim bias each found a Cambridge, Massachusetts campus beset by discrimination and harassment, including toward people with pro-Palestinian as well as pro-Israel views.Both lawsuits accused Harvard of violating Title VI of the Civil Rights Act of 1964, which bars federal funds recipients from allowing discrimination based on race, religion and national origin.The FAQ includes a statement recognizing that many Jews consider Zionism part of their identity, and that discrimination or harassment targeting Jewish and Israeli people can also violate Harvard’s policy if directed toward Zionists.”We are committed to ensuring our Jewish community is embraced, respected and can thrive at Harvard,” a university spokesperson said in a statement.”We are resolute in our efforts to confront antisemitism and will continue to implement robust steps to maintain a welcoming, open, and safe campus environment where every student feels a sense of belonging,” the spokesperson added.TRUMP’S IMPACTAlexander Kestenbaum, a Harvard Divinity School student and plaintiff in the Students Against Antisemitism lawsuit, did not settle and will keep seeking compensatory damages. His new lawyers did not immediately respond to requests for comment.The settlement came after a federal judge in Boston refused to dismiss both lawsuits.Kasowitz said Trump’s statements about how his second administration would protect Jewish students’ rights were “certainly helpful” in reaching the settlement.Students Against Antisemitism settled similar litigation against New York University last July, and Kasowitz said the group was pleased that campus life for Jewish students there has “dramatically improved.”The group is still pursuing Title VI cases against Columbia University and the University of Pennsylvania, while the Brandeis Center is pursuing cases against several schools including the University of California, Berkeley.Columbia and Penn declined to comment on the settlement or their lawsuits. UC Berkeley did not immediately respond to requests for comment. Harvard declined additional comment. More

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