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China to invest nearly $900 billion in power grids: state media By Reuters

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© Reuters.

BEIJING (Reuters) – China will invest close to $900 billion in the next five years to help further develop the country’s power grids, the official Xinhua News Agency reported on Saturday.

Investments in power grids and related industries are expected to exceed 6 trillion yuan ($896 billion) in 2021-2025, Xinhua reported, citing Mao Weiming, chairman of the State Grid Corp of China, the country’s biggest power utility.  

The investments will centre on areas such as ultra high voltage power transmission, electric vehicle chargers and new digital infrastructure, Mao said.  

($1 = 6.6933 renminbi)

 

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Stimulus-fueled rally in Treasury yields may have room to run, investors say By Reuters

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By David Randall and Kate Duguid

NEW YORK (Reuters) – Investors are gauging whether a rally in bond yields to their highest in months can run further, as markets increasingly price in chances that a fiscal stimulus deal is signed in Washington regardless of who wins the Nov. 3 election.

Benchmark 10-year Treasury yields (), which move inversely to bond prices, rose to 0.8682% Friday morning, the highest since early June when the U.S. economy began to reemerge from widespread lockdowns to halt the spread of the coronavirus.

Past rallies in Treasury yields have wilted over the years, as the Federal Reserve has kept rates low to help spark growth.

This time, however, some investors are betting that conditions may be right for a more sustained move. Lawmakers appear ready to deliver more fiscal stimulus in coming months, a vaccine against COVID-19 may come next year, and more U.S. Treasury bond offerings are set to weigh on prices.

“It may now be time to flip thinking on U.S. rates where instead of mechanically buying dips … upticks in bond prices now need to be sold,” analysts at Citigroup (NYSE:) wrote on Friday.

Net short bets on the 30-year Treasury () reached an all-time high earlier this month, reflecting wagers that yields would continue to rise on expectations of economic recovery and rising inflation.

Longer-dated bonds are sensitive to inflation expectations as rising consumer prices can erode their value.

The potential for more issuance to fund fiscal stimulus could also be a potential weight on Treasury prices.

The Treasury Department has issued record amounts of debt this year – roughly $15.5 trillion through the end of September – to fund government spending programs, most notably, the stimulus package Congress passed earlier this year.

The heavy supply has had a muted effect on prices so far, given the Fed’s near-zero interest rates and hefty debt purchases. Issuance could rise in the coming months if a fresh round of stimulus funding is passed, however.

U.S. House Speaker Nancy Pelosi said on Friday it still was possible to get another round of COVID-19 aid before the election, but that it was up to President Donald Trump to act, including bringing along reluctant Senate Republicans.

Trump and Treasury Secretary Steven Mnuchin countered that Pelosi must compromise to get an aid package.

At the same time, some investors believe a win by Democratic candidate Joe Biden, who is leading in the polls, and a sweep by Democrats in the Nov. 3 vote would likely usher in a bigger fiscal package and more economic spending, boosting bond prices further.

“My view is that the curve has further to go … if Biden does end up securing the White House and the Democrats take the Senate,” said John Briggs head of strategy, Americas at NatWest Markets.

Bets on a Biden victory may have been further fueled by the lack of any standout moments in the final debate between Trump and Biden on Thursday. Trump entered the debate trailing by 10 percentage points in national polls, though the contest appears tighter in some battleground states where the election will likely be decided.

Rising yields are a potential problem for the Fed as they raise the cost of borrowing for companies and individuals and threaten economic growth.

Still, “the Fed is not interested, exclusively, in keeping long-term interest rates low,” said Guy LeBas, chief fixed income strategist, Janney Montgomery Scott.

“If long-term interest rates rise because of stronger economic or inflation expectations, that is actually a good thing and I don’t think the Federal Reserve intends to choke it off,” he said.





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Threats to U.S. Treasury market liquidity still exist, Fed says By Reuters

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© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington

By Kate Duguid

NEW YORK (Reuters) – The U.S. Treasury market still runs the risk of abrupt freezes in liquidity like the one seen in March and April, as the COVID-19 pandemic roiled the financial system, a member of the Federal Reserve Bank of New York’s Market Committee said on Friday.

The market shock in March, which helped drive yields across maturities to all-time lows, was “truly an exceptional event,” Lorie Logan said in a speech to the Brookings-Chicago Booth Task Force on Financial Stability.

“However, while it is tempting to dismiss it as a once-in-a-lifetime shock, it is important to take time to reflect and assess if lessons can be learned that could make the Treasury market even more resilient to future shocks.”

The Treasury market is the deepest and most liquid in the world. Nevertheless, at the start of the coronavirus pandemic, a large number of investors tried to sell off their Treasury holdings only to find a limited number of buyers.

The major sellers were mutual funds, which sold off more than $200 billion of their Treasury holdings in the first quarter, foreign accounts, which sold off roughly $161 billion between February and April, and hedge funds.

The buyers, Treasury market primary dealers, reported that customer transaction volumes increased from $400 billion a day in February to $650 billion a day in mid-March. In the market for buying and selling all Treasuries save for the most recently issued, the spread between the prices asked and those bid rose to an all-time high, nearly 30 times their normal level.

Primary dealers were prior to the selloff holding historically high volumes of Treasury debt, and were therefore unable to take on more, explained Logan. The Fed stepped in and began purchasing Treasury debt, which returned liquidity to the market.

But primary dealers currently hold even more Treasury debt than they did at the beginning of the pandemic, and could, in the event of another bout of forced selling, face the same problem absorbing all the Treasury supply on offer.

To pay for the stimulus package passed by Congress earlier this year – among other government-funded programs – the Treasury Department has issued a record $15.5 trillion through the end of September. Issuance could rise in the coming months if a fresh round of stimulus funding is passed.

“Ongoing increases in the stock of Treasuries may result in greater peaks in the demand for intermediation,” said Logan.

Not mentioned in the speech was the possibility of market volatility around the U.S. election on Nov. 3.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Europe braces for lengthy battle with COVID By Reuters

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© Reuters. People wearing face masks are pictured at Schloss Strasse shopping street as the coronavirus disease (COVID-19) outbreak continues in Berlin

By Benoit Van Overstraeten and Nathan Allen

PARIS/MADRID (Reuters) – Europe faces a lengthy battle against the coronavirus at least until mid-2021, France warned on Friday, as anxious governments introduced ever more restrictions to curb the disease once again accelerating through the continent.

Europe’s daily infections have more than doubled in the last 10 days, reaching a total of 7.8 million cases and about 247,000 deaths, as a second wave right before winter has crushed economic revival hopes.

“When I listen to scientists I see that projections are for at best until next summer,” French President Emmanuel Macron said during a visit to a hospital near Paris.

France, which passed 1 million cases on Friday with a new record daily total of more than 42,000, has been one of the hardest-hit nations and has imposed curfews.

COVID-19 patients already occupy nearly half of France’s 5,000 intensive care beds and one of the government’s advisers warned the virus was spreading more quickly than in spring.

Further curbs are underway by governments desperate to avoid a repeat of blanket lockdowns that brought some control in March and April but strangled economies.

“We are all afraid,” said Maria, a 73-year old pensioner in the Slovakian town of Dolny Kubin, where officials were piloting a testing scheme. “I see what’s happening and it is terrifying.”

Belgium, another of the worst-hit countries, whose foreign minister went into intensive care this week, further limited social contact and banned fans from sports matches.

In the Czech Republic, with Europe’s highest per capita infections, Prime Minister Andrej Babis moved to sack his health minister for apparently flouting rules on masks after a meeting in a restaurant that should have been closed.

In Spain, which passed the 1 million case milestone earlier this week, two regions, Castilla and Leon and Valencia, urged the central government to impose night-time curfews.

‘FOLLOW PRECAUTIONS’

Official data show Spain already has the highest number of cases in Europe but the real picture may be even worse according to Prime Minister Pedro Sanchez, who said a nationwide antibody study suggested the total may be over 3 million.

“If we don’t follow precautions, we are putting the lives of those we love most at risk,” he said.

How long governments will be able to resist lockdowns is uncertain. The governor of Campania, the southern Italian region around Naples which has already imposed a curfew and shut schools, called for a total lockdown, saying “half measures” were not working.

“It is necessary to close everything, except for those businesses that produce and transport essential goods,” Vincenzo De Luca said.

While health services have not so far been overwhelmed to the extent they were in the first wave, authorities have warned of a likely surge in demand for intensive care beds as colder weather forces more people indoors and infections spread.

Italy’s top public health body said the situation was approaching critical levels in many regions and said complete tracing of contact chains had become impossible.

With its own hospitals under increasing strain, the Netherlands began transferring patients to Germany again, after dozens were treated in its larger neighbour during the earlier phase of the crisis.

But public support seen at the start of the crisis has steadily eroded amid a welter of often contradictory public information on the latest restrictions and growing fears about the economic costs.

Underlining the threat, a business survey showed service sector companies cutting back heavily as more and more consumers stayed home, raising the likelihood of a double dip recession this year in Europe’s single currency zone.





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