Rating agency Fitch on Tuesday downgraded the U.S. government's top credit rating, a move that drew an angry response from the White House and surprised investors, coming despite the resolution two months ago of the debt ceiling crisis.

Fitch downgraded the United States to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

Fitch had first flagged the possibility of a downgrade in May, then maintained that position in June after the debt ceiling crisis was resolved, saying it intended to resolve the review in the third quarter of this year. With the downgrade it becomes the second major rating agency after Standard & Poor’s to strip the United States of its triple-A rating.

The dollar fell across a range of currencies, stock futures ticked down and Treasury futures rose after the announcement. But several investors and analysts said they expected the impact of the downgrade to be limited. (Reuters - Continue Reading)

Some Bank of Japan (BOJ) board members said domestic inflation might hold above the central bank's 2% target, minutes of their June policy meeting showed, providing insight into BOJ's move last week to let some rates rise along with increasing prices.

While one member called for a review of the bank's bond yield control policy "at an early stage," members agreed they did not need to do so for now with market function having improved somewhat, the minutes showed on Wednesday.

"Many members said bond market function was improving with distortion in the shape of the yield curve fixed," according to the minutes.

The discussion highlights how the board did not see an imminent need to tweak yield curve control (YCC) in June, but decided to do so last week based on changes in market and inflation developments since then.

At the June 15-16 meeting, the BOJ maintained its ultra-easy monetary policy and dovish guidance pledging to "patiently" sustain stimulus to achieve its price target. (Reuters - Continue Reading)

Mounting Treasury-bill supply is creating a “narrow and difficult” path for the Federal Reserve to keep unwinding its massive balance sheet and avoid roiling funding markets, according to Barclays Plc.

The key question is where the money will come from to absorb the hundreds of billions of dollars of bills the Treasury is selling in the wake of the debt-ceiling resolution in June. Along with Fed interest-rate hikes, that burst of issuance is driving up bill yields and luring cash from across the financial system.

The likely scenario, Barclays says, is that the money will continue to come mainly from a key Fed facility. But the firm also sees a risk that it drains bank reserves to the point that they become scarce, upsetting the market where banks obtain short-term financing. It’s an issue that will only grow in importance as Barclays expects the Treasury to sell an additional $940 billion of bills by year-end, pushing bill yields even higher. (Bloomberg - Continue Reading)

The Biden administration is again delaying a replenishment of the nation’s emergency oil reserve because of market conditions, according to people familiar with the matter. The decision comes as oil prices have rallied above $80 a barrel.

The Department of Energy is not taking up offers it got for a potential purchase, said the people, who asked not to be identified as details of the process haven’t been published. The administration rejected offers in January.

“The DOE remains committed to its replenishment strategy for the SPR, including direct purchases when we can secure a good deal for taxpayers; exchange returns; and cancellation of planned sales where drawdown is unnecessary, in coordination with Congress,” Energy Department Deputy Chief of Staff Bridget Bartol said. (Bloomberg - Continue Reading)