Canada Plans To Shrink US Reliance, Cut Spending In Upcoming Budget

BHP Groupsaid on Thursday it would be forced to take "difficult decisions" for its metallurgical coal business in Australia if there were no regulatory changes to support it, its CEO said at its annual general meeting on Thursday.BHP last month said it would suspend operations and cut 750 jobs at a Queensland coking coal mine it shares with a unit of Mitsubishi, blaming low prices and high state government royalties that have dented its returns."Without change, there's without doubt going to be more difficult decisions that are going to be made," CEO Mike Henry said at the miner's annual general meeting.

Incoming chair Ross McEwan of the world's top miner and Australia's biggest company said that the critical minerals deal between the U.S. and Australia this week was a "good start".U.S. President Donald Trump and Australian Prime Minister Anthony Albanese signed a critical minerals agreement aimed at countering China on Monday."I think, it's a little bit early to actually see the outcomes of what we see as a good meeting between the prime minister of Australia and the president of the United States. But I think it was a very good meeting to start those conversations," McEwan said.

BHP is a large producer of copper, iron ore and steelmaking coal, rather than in niche critical minerals markets, he added, although copper is increasingly regarded as a strategic metal given its outsize role in the energy transition.Australia is quite well positioned to support the U.S. as it tries to derisk its critical mineral supply chain, Henry said, after he and two top Rio Tintoexecutives met with Donald Trump and Interior Secretary Doug Burgum in the Oval Office on August 19."I was impressed on just how fierce the focus is in the U.S. on getting more ... mines and processing facilities up and going," Henry said. BHP is looking with partner Rio Tinto to build the Resolution copper mine in Arizona, which could account for a quarter of U.S. demand for the metal.

"I think we should see (the agreement) as symbolically significant, in that it goes to just how seriously this issue has been put down and the position that Australia can play in supporting the U.S.," Henry said.

Source: TradingView

The Australian and New Zealand dollars held still on Thursday as the threat of a new round of U.S.-China trade restrictions curbed risk sentiment ahead of a key reading on U.S. inflation.

Investors assume the U.S. consumer price report on Friday is unlikely to deter the Federal Reserve from cutting rates next week, but could decide whether it moves in December as well.

Australia's third-quarter CPI is due on October 29 and again will likely decide whether the Reserve Bank of Australia cuts its 3.60% cash rate in November.

Analysts at CBA see headline CPI picking up to an annual 3.0%, the very top of the RBA's 2% to 3% target band, while the core measure should stay at 2.7%.

"Given the cautious and gradual pace of easing so far, we expect the RBA will want to see clear evidence that inflation is continuing to move towards the mid-point of the target band before easing further," said Trent Saunders, a senior economist at CBA.

"With trimmed-mean inflation expected to remain steady on an annual basis, we do not expect the hurdle for another rate cut to be met by the November meeting."

With so much at stake the Aussie was stuck at $0.6487, having hardly moved overnight. Support comes in at $0.6471 and $0.6438, with resistance around $0.6525 and $0.6628.

The kiwi dollar idled at $0.5736after crawling as high as $0.5759 overnight. Support lies at $0.5710, with resistance at $0.5769 and $0.5884.

Yields on kiwi 10-year bonds (NZ10YT=RR) have fallen 22 basis points so far this month to trade 12 basis points under Australian yields, near levels not seen since 2020.

New Zealand cash rates at 2.5% are far below the Australian 3.60%, helping lift the Aussie as high as NZ$1.1445earlier this month from around NZ$1.0800 mid-year. It was last trading at NZ$1.1302.

"This does suggest a good chance the cross can test levels above NZ$1.1500, but we don't envisage such moves as likely to prove sustainable," said Rodrigo Catril, a senior FX strategist at NAB.

In particular, there was a good chance the New Zealand economy would pick up speed in the coming quarter given the full impulse from past rate cuts is yet to be felt.

"If we are right about NZ potential growth rebound, then next year the cross is at risk of facing a more pronounced downturn," he added.

Source: Reuters

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