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[Quick Facts]

1. Former BOJ official expects the BOJ to consider fine-tuning YCC and forward guidance.

2. Fitch downgrades the U.S. leveraged loan default rate and postpones the U.S. recession forecast to H1 next year.

3. Trump says he will temporarily be the House Speaker.

4. Fed's Daly says rising bond yields may mean the Fed can stay on hold.

5. U.S. bond traders are betting historic sums on the November Fed meeting.

6. Biden's debt cancellation will benefit a total of 3.6 million eligible Americans.

7. U.S. initial jobless claims edge up.

[News Details]

Former BOJ official expects the BOJ to consider fine-tuning YCC and forward guidance

Former Bank of Japan (BOJ) official Kazuo Momma noted that the Bank of Japan may discuss the need to fine-tune its forward guidance as well as its yield curve control (YCC) policy at its meeting later this month. The central bank may discuss whether the current yield ceiling is justified if upward pressure increases in the future, Kazuo Momma said. Given the recent rise in yields, the depreciation of the yen, and continued stronger-than-expected inflation, the BOJ could act again, but this is not his basic forecast scenario. Commenting on potential measures, Kazuo Momma said the BOJ could raise the level of interest rates for its daily bond-buying operations from 1%, or raise its target for 10-year bond yields to 0.25% and also raise the upper limit of the volatility range.

Fitch downgrades the U.S. leveraged loan default rate and postpones the U.S. recession forecast to H1 next year

Rating agency Fitch Ratings said it has revised its FY23 institutional leveraged loan (LL) and high-yield bond (HY) default forecasts downwards to 3.0%-3.5% from 4.0%-4.5% for leveraged loans, and to 3.0%-3.5% from 4.5%-5.0% for HY. Key factors behind the downward revision include better-than-expected U.S. economic growth in 2023 and improved conditions for high-risk issuers on the market's watch list over the past year.

Fitch's default forecasts for FY24 LL and HY remain unchanged at 3.5%-4.5%. The macroeconomic environment has not proved to be as bad as previously expected. Fitch's economic team recently adjusted its view on the timing of the U.S. recession to the first half of 2024.

Trump says he will temporarily be the House Speaker

Former U.S. President Donald Trump said he would accept being speaker of the House of Representatives until they find a new speaker. This followed the removal of U.S. House Speaker Kevin McCarthy. House rules do not require the speaker to be a sitting member. "I have been asked to speak as a unifier because I have so many friends in Congress," Trump said, "If they don't get the vote, they have asked me if I would consider taking the speakership until they get somebody longer-term, because I am running for president."

Both Representative Steve Scalise, the majority leader, and Representative Jim Jordan, the Judiciary Committee chairman, are vying for the position, but Trump has not endorsed either of them.

Fed's Daly says rising bond yields may mean the Fed can stay on hold

San Francisco Fed President Richard Mary Daly said on Thursday that as U.S. monetary policy moves deeper into restrictive territory, much progress has been made toward achieving the 2% inflation target, and U.S. Treasury yields have risen recently, so the Fed may not need to raise interest rates again.

If we continue to see the labor market cool down and inflation fall back toward our target, we can keep rates stable and allow the effects of policy to play out. As long-term interest rates have risen in recent weeks, the need for us to take further action has diminished because financial markets are already moving in that direction, and they've down the work.

But she also kept open for further rate hikes if necessary.

U.S. bond traders are betting historic sums on the November Fed meeting

According to CME Group, the number of open interest in the federal funds futures market betting on the November rates soared to nearly 600,000 contracts on Wednesday, the most in the market's 30-year history. The record number means each basis point change in rates could affect $25 million, and most of the contracts are betting on rising rates.

Biden's debt cancellation will benefit a total of 3.6 million eligible Americans

In an effort to ease the financial burden on American students, President Joe Biden plans to announce another $9 billion in student debt relief after the Supreme Court blocked his earlier plan to eliminate a large amount of student debt. The White House revealed that the package, to be announced at 1 p.m. ET, would bring total student debt relief under the Biden administration to $127 billion, benefiting nearly 3.6 million Americans.

The new relief package is divided into three main parts: (1) $5.2 billion in additional debt relief for 53,000 borrowers under Public Service Loan Forgiveness programs. (2) Nearly $2.8 billion in new debt relief for nearly 51,000 borrowers through fixes to income-driven repayment. These are borrowers who made 20 years or more of payments but never got the relief they were entitled to. (3) $1.2 billion for nearly 22,000 borrowers who have a total or permanent disability who have been identified and approved for discharge through a data match with the Social Security Administration;

Biden emphasized again his commitment to providing student loan relief, especially after his previous plan was blocked by the Supreme Court. This new initiative is designed to correct the problem and provide a "lifeline" for thousands of Americans struggling with student debt.

U.S. initial jobless claims edge up

U.S. jobless claims remained at a historically low last week, underscoring a still strong labor market. A resilient labor market continues to fuel consumer spending in the face of high inflation and high interest rates. Business demand for workers remains strong, and layoffs, which were "hot" earlier this year, have largely begun to diminish. On an unadjusted basis, initial jobless claims fell to their lowest level in a year.

[Focus of the Day]

UTC+8 20:30 U.S. Non-Farm Payrolls (Sept)

UTC+8 00:00 Next Day: Fed Governor Waller speaks