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A Reuters poll found that 58% of economists surveyed believed the addition of two dovish scholars to the Bank of Japan would not make raising interest rates more difficult.A Reuters poll shows the median forecast indicates the Bank of Japan will raise interest rates to 1.25% in the first quarter of 2027 and to 1.50% in the first quarter of 2028.A Reuters poll of 64 economists indicated that the Bank of Japan will keep its benchmark interest rate at 0.75% on March 19.A Reuters poll found that 60% of economists surveyed expect the Bank of Japan to raise its benchmark interest rate to 1.00% by the end of June (up from 58% in the February poll).March 11th - Amidst the uncertainty stemming from the ongoing conflict with Iran, market expectations for a potential interest rate hike by the Bank of Japan have weakened. Against this backdrop, demand for Japanese five-year government bonds was stronger than the 12-month average. The bid-to-cover ratio for this auction was 3.69, higher than the previous auctions 3.10 and the 12-month average of 3.44. Following the auction, Japanese bond futures narrowed their losses. Soaring oil prices coupled with a depreciating yen have increased the risk of Japan sliding into stagflation, prompting the government to increase fiscal spending and complicating the central banks tightening measures. The five-year yield, sensitive to monetary policy expectations, is currently trading around 1.64%. Strong demand at last weeks 30-year government bond auction indicates that investor demand remains robust despite the war factor. Next weeks 20-year government bond issuance will also be closely watched as investors assess how Middle East tensions might affect Prime Minister Sanae Takaichis fiscal agenda.

WTI rebounded from $73.00, but a decline appears probable as negative US PMI spark recession fears

Daniel Rogers

Jan 05, 2023 14:41

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West Texas Intermediate (WTI) futures on the New York Mercantile Exchange (NYMEX) have regained some ground in the Asian session after falling to near $73.00. Oil prices experienced a slaughter on Wednesday, which was precipitated by a consecutive dip in United States Manufacturing PMI data provided by the Institute of Supply Management (ISM) department.

 

The U.S. Manufacturing PMI dipped to 48.4 vs estimates of 48.5 and the previous publication of 49.0, marking the lowest figure since May 2000. The Federal Reserve's (Fed) aggressive policy tightening actions to combat persistent inflation have reduced the volume of manufacturing operations. To avoid increasing interest costs, companies are avoiding debt-raising negotiations, which has resulted in unaltered production capacities and diminished investment options.

 

In the meantime, the robust U.S. job market gives the Federal Reserve (Fed) a compelling justification to maintain higher interest rates for an extended period. The Unemployment Rate is extremely steady at lower levels, and pay growth is robust, which continues to keep inflationary pressures in check.

 

The American Petroleum Institute (API) stated that oil inventories grew by 3,298 million barrels for the week ending December 30. As people were preoccupied with New Year's celebrations, the majority of operational activity ceased. The official US oil inventory figures will provide fresh impetus moving forward.

 

In the Asian region, increased Covid infections in China are indicative of a delayed economic recovery. Analysts at Rabobank believe that China is still attempting to deal with the increase in Covid infections following the easing of restrictions. "The current increase of Covid infections is stressing the Chinese health care system in more ways than one. Bloomberg adds that this may also impede Beijing's aspirations to launch a homegrown semiconductor industry to compete with US-controlled supply chains.

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