Australia, NZ Dollars Play Waiting Game For Key Inflation Reports

As the US government shutdown hurtles through a fourth week, the main source of federal funding for disaster relief efforts is running critically low, according to people familiar with the matter and an internal report reviewed by Bloomberg.

The Disaster Relief Fund, which finances federal assistance to disaster survivors and the deployment of federal staff to disaster zones, has reached a precarious level, current and former Federal Emergency Management Agency staff warn, threatening to curb crucial government disaster relief assistance in the middle of hurricane season.

Last October, FEMA officials began ringing alarm bells when the relief fund balance dipped to $11 billion. The agency was stretched thin at the time responding to hurricanes Helene and Milton, which struck the US within days of each other.

The current funding level is now more than a billion dollars below that.

A report of the Disaster Relief Fund spending level through the end of September showed the agency with about $8.4 billion remaining for staff deployment, aid and other efforts tied to presidential major disaster declarations, alongside $1.1 billion to respond to unexpected future events, such as earthquakes.

The agency is attempting to manage the remaining funds to ensure there are enough should a natural disaster occur. But the agency would likely need to prioritize immediate response efforts while postponing longer-term recovery efforts, according to one of the people.

If this funding completely dries up, the situation could become even more dire, with calls to FEMA's help line going unanswered. Staffing shortages could also hinder disaster survivors from registering for assistance.

"All recovery operations will be on hold," said Michael Coen, who served as FEMA chief of staff under President Joe Biden and signed an open letter in August criticizing the Trump administration's cuts to federal disaster work.

There's little indication that the shutdown will soon end, with both sides locked in a standoff over expiring health-care subsidies. The funding lapse is now the second longest on record, and may stretch into November. President Donald Trump is due to head for meetings in Asia at the end of the week, and no talks are scheduled before then.

While a House-passed stopgap spending bill under consideration in the Senate would replenish funding to the agency, Democrats have insisted on health-care funding to prevent Obamacare premiums from spiking in the new year.

Civilian federal workers are set to miss their first full paycheck on Friday.

The dwindling of the Disaster Relief Fund comes as the government's National Flood Insurance Program authorization expired on Sept. 30 and hasn't been reauthorized by Congress, meaning the program can't issue any new policies or renew existing policies. The National Association of Realtors has estimated the lapse in authorization for the National Flood Insurance Program could impact more than 1,300 property sales each day.

Trump floated the possibility of eliminating FEMA early in his presidency. He then established a review council to make recommendations on the agency's future before the year's end. But that hasn't stopped the administration from pushing forward with cuts to grant funding, staffing and programming.

In the first six months of the year, roughly 2,400 people left the agency, including many long-time senior staff, due to firings, resignations, and early exit packages, according to a government watchdog report.

Source: Bloomberg

Bank of Yokohama Ltd., Japan's largest regional lender, is prepared to pile back into the domestic debt market when the central bank's peak interest rate is in sight.

The Bank of Japan looks set to stand pat on policy this month, though there's a "good chance" of it raising interest rates in either December or January to 0.75%, according to Hitoshi Inoue, an executive officer who heads the lender's markets business. For now, the bank plans to stay cautious on Japanese government bonds, he said.

His main scenario is for the BOJ's rate to peak at 1.25% after an additional hike in the fiscal year starting April 2026 and another the following year. The BOJ moves would likely lift the 10-year Japanese government bond yield to around 2%, Inoue said. The benchmark rate was at 1.65% in Tokyo on Wednesday.

After Japanese banks "struggled" for years as rock-bottom interest rates sharply curtailed lending margins, "it's the total opposite now," Inoue said in an interview. "In a world with interest rates, our core portfolio will be made up of sovereign bonds and Japanese and US stock index investments."

Market participants are watching whether commercial banks will get back into government debt as the BOJ, still by far the biggest holder of JGBs, reduces purchases as part of its exit from monetary stimulus.

Japanese banks including Yokohama had loaded up on foreign bonds and other assets to make up for diminishing returns from domestic debt after the BOJ started radical monetary easing in 2013. Market players are also keeping a close eye on whether Japanese investors will unload those overseas assets to bring funds home.

Bank of Yokohama, named after the port city near Tokyo where it's based, is the core unit of Yokohama Financial Group Inc. The banking group had a securities portfolio of about ¥2.1 trillion ($14 billion) at the end of June, excluding assets it has set aside to hold to maturity. About half of the holdings are JGBs and other yen bonds.

In its fiscal first half ended in September, the bank started buying "some amounts" of JGBs, mainly two-year and five-year notes, according to Inoue, who said the yields on these securities have become attractive. Two-year JGB yields have climbed about 33 basis points this year to around 0.935% while five-year yields have risen around 48 basis points to 1.225%.

When the timing is right, the bank will mostly purchase short- and medium-tenor notes to match its liabilities, which are largely made up of relatively short-term customer deposits, he said. The bank will keep its current investment stance in the second half through March 2026, Inoue said.

If inflation and economic conditions pan out as the BOJ projects and the central bank's policy rate reaches its expected highest level, the Yokohama lender will "go full throttle" to buy JGBs, the banker said.

Inoue joined Bank of Yokohama in 1997 and became the executive in charge of markets in April this year.

The lender traces its history back to 1920, when financial difficulties at a major bank in the city prompted the Yokohama business community to ask the government to establish a new lender to rescue depositors and stabilize the local economy, according to its website.

Going forward, even if the bank starts a major shift into JGBs, it will keep some US Treasuries in its books as safe assets, Inoue said.

See also: 'Widow-Maker' Trade Becomes World Beater as Japan Bonds Sink (1)

Right now dollar-funding costs are elevated for Japanese investors, and the bank is buying Treasuries mostly for short-term capital gains, according to the executive.

The bank will also keep the scale of its collateralized loan obligations holdings steady. CLOs are "good buy-and-hold assets with solid returns," he said.

Source: Bloomberg

Source: Bloomberg

Source: AP

Source: Investopedia

Solana ETF: A regulated on-ramp and a test for liquidity

Institutional demand could redefine Solana’s market dynamics

Source: Cryptoslate