WASHINGTON (Reuters) - U.S. Treasury Secretary Janet Yellen said on Wednesday that $8.5 billion in COVID-era investments in community development financial institutions and minority-owned banking firms will boost lending to Black and Latino communities by nearly $140 billion over a decade.

Yellen said in prepared remarks to the Treasury's Freedman's Bank Forum that early reporting from the investment program indicates that one-third of total originations by recipient lenders were "deep impact" loans made to the hardest-to-serve borrowers.

"This is just the start," Yellen said of the Emergency Capital Investment Program (ECIP). "Over the next decade, we expect that ECIP will result in nearly $80 billion in increased lending in Black communities and nearly $58 billion in Latino communities."

The ECIP funding was authorized as part of a COVID-19 aid package approved by Congress in December 2020 and signed into law by then-President Donald Trump just before he left office. The program was implemented by the Biden administration.

Earlier on Wednesday, the Treasury announced a new goal to attract $3 billion in deposits to community development financial institutions and minority-owned banking institutions to help meet these lending targets, up from a $1 billion target for deposits reached in June.

TOKYO (Reuters) - Japan's 10-year government bond yield touched a new decade-high on Wednesday on speculation that the Bank of Japan (BOJ) may raise its cap for the benchmark yield.

The 10-year JGB yield rose to 0.865% earlier in the session, its highest since July 2013. The yield retreated to 0.850%, up 1 basis point (bps) from the previous session.

A recent surge in global interest rates is heightening pressure on the BOJ to raise the existing cap on the 10-year bond yield at its policy meeting next week.

"If the BOJ raises the ceiling of the 10-year bond yield, that implies the BOJ's stance to protect its yield curve control (YCC) is different from before," said Naoya Hasegawa, senior bond strategist at Okasan Securities.

"When (Haruhiko) Kuroda was the governor, they conducted relentless bond buying to contain elevated yields. But according to what media has reported, the current administration is trying to raise the ceiling so that the BOJ can reduce the bond-buying amounts."

The BOJ has conducted several unscheduled bond-buying operations recently, including the one in the previous session. Strategists have said the BOJ has not aggressively tried to contain yields based on the amounts they offered to buy.

The central bank uses the YCC to guide the 10-year yield to around 0% to support the economy. In July, it raised the de-facto cap on the yield to 1.0% from 0.5% to allow long-term rates to rise more, reflecting increasing inflation.

The five-year yield was flat at 0.355%.

Yields on other tenors fell after a solid outcome of a liquidity-enhancing auction, with the 20-year JGB yield slipping 1.5 bps to 1.630%.

The 30-year JGB yield fell 2.5 bps to 1.830%.

The two-year JGB yield fell 0.5 bp to 0.070%.

A look at the day ahead in European and global markets from Tom Westbrook:

Giants of tech and luxury goods have turned in mixed reports. Microsoft (NASDAQ:MSFT) and Google parent Alphabet (NASDAQ:GOOGL) each beat forecasts, but their share prices went in opposite directions as investors zeroed in on cloud computing.

Google shares fell 6% in after-hours trade. Microsoft shares rose 4%, leaving Nasdaq 100 futures down 0.3% in Asia.

Here's the wrapup of the pair's results.

Facebook (NASDAQ:META) parent Meta reports after-market on Wednesday. Its shares had fallen on Tuesday and slipped a little further after hours as dozens of U.S. states sued the company and its Instagram business, accusing them of addicting teens.

On the luxury front Kering (EPA:PRTP), owner of Gucci and Balenciaga, reported a bigger-than-expected drop in third-quarter sales. That was worse than the slowdown reported by LVMH, and the surprise jump in sales logged by Birkin-bag maker Hermes on Tuesday, which sent its shares up 3%.

Gucci's revamped look, unveiled last month in Milan by designer Sabato De Sarno, is yet to hit stores.

European loans data and a survey of German business conditions will be closely watched later on Wednesday. Santander (BME:SAN), Deutsche Bank and Dassault Systemes also report results.

In Asia, China's plans to raise a trillion yuan ($137 billion) in sovereign debt boosted Chinese shares in anticipation of spending and lifted MSCI's broad index of Asia ex-Japan stocks away from Tuesday's 11-month low. [MKTS/GLOB]

Central Huijin's vow to buy exchange-traded funds and keep doing so was also reminiscent of similar announcements from the state fund that drove strong rallies in 2013 and 2015. [.SS]

The Aussie dollar was the main mover in the foreign exchange market, rising as surprisingly strong inflation data prompted traders to re-price the risk of another rate hike.

Just this week, RBA Governor Michele Bullock said the bank would not hesitate to raise its 4.1% cash rate if there was a "material" upward revision to the inflation outlook.

Key developments that could influence markets on Wednesday:

Economics: Euro zone lending, German business survey

Earnings: Dassault Systemes, Deutsche Bank, CME Group (NASDAQ:CME), Hilton, Boeing (NYSE:BA) and, after market close, IBM (NYSE:IBM) and Meta

($1 = 7.3118 Chinese yuan)

By Kevin Yao

BEIJING (Reuters) -China is set to unleash fresh fiscal stimulus to shore up its economic recovery, drawing on a well-used playbook that relies heavily on debt and state spending but falls short on the deeper reforms called for by a growing number of analysts.

Some government advisers are recommending China lifts its 2024 budget deficit target beyond the 3% of gross domestic product (GDP) set for this year, which would allow Beijing to issue more bonds to revive the economy, policy insiders and economists have told Reuters.

The world's second-largest economy grew faster than expected in the third quarter, improving the chances Beijing can meet its growth target of around 5% for 2023.

But while the upbeat surprise gave battered China investors some cause for cheer, there are deeper concerns about the continued demise of private sector activity and the lack of longer-term reforms needed to shift the economy to consumer-led growth.

For now, the focus remains on sustaining a fragile recovery to avoid economic disaster.

"We need to make good preparations for next year and implement policies to stabilise growth. The foundation of economic recovery is not solid," said an adviser to the cabinet who spoke on condition of anonymity.

"For next year, we should still set a 5% GDP growth target."

China's parliament is set to approve just over 1 trillion yuan ($137 billion) in additional sovereign debt issuance when it concludes a five-day meeting that began on Oct. 20, sources told Reuters.

Such bonds will likely be used to fund water conservancy and flood prevention projects and come on top of an expected front-loading of 2024 local bond quotas.

CALLS FOR AMBITION

China's feeble post-pandemic recovery has exposed growing structural constraints and raised a sense of urgency around reforms to put growth on a more sustainable footing.

The debate about economic policy in China has heated up in recent months with some government advisers advocating reforms to help unleash new growth engines beyond property and infrastructure investment.

For those looking for structural reforms, the focus is on policies that spur urbanisation and household spending power, reduce the reliance on investment and level the playing field between state-owned enterprises and private firms.

Without such changes, economists warn China could be headed for a long-period of deflation and stagnant growth that fails to lift living standards for the country's 1.4 billion people.

However, near-term needs have largely overshadowed those calls for more politically ambitious reforms and instead centre on authorities stepping up fiscal and monetary support.

Local governments have been told to complete the issuance of the 2023 quota of 3.8 trillion yuan in special local bonds by September to fund infrastructure.

Some advisers say the central government has room to spend more as its debt as a share of GDP is just 21%, far lower than 76% for local governments.

"Fiscal policy should still play the leading role next year," said Xu Hongcai, deputy director of the economic policy commission at the state-backed China Association of Policy Science.

"For next year, actual growth could be lower than 5% but it cannot be too low, otherwise some problems will become more striking, such as employment and incomes," Xu told Reuters.

The central bank, which delivered modest interest rate cuts and has pumped more cash into the economy in recent weeks, is constrained in how much it can ease monetary policy for fears of stoking capital flight and hurting the yuan, analysts said.

"There is still room to cut interest rates and reserve requirement ratios but there is a question of sustainability," said Guan Tao, global chief economist at BOC International and a former official at the State Administration of Foreign Exchange (SAFE).

However, policy insiders believe more fundamental changes, especially a revival of market-based reforms, will be limited due to the political environment, under which the state has increased its control over the economy, including the private sector.

An expected Communist party plenum, which is likely to take place in November and traditionally focuses on reforms, could disappoint those awaiting big changes.

"We should push reforms as many problems are structural, but reforms are difficult to implement and require political will," said one policy insider.

($1 = 7.2987 Chinese yuan)

By Stella Qiu

SYDNEY (Reuters) -Australian inflation was surprisingly strong in the third quarter amid broad-based and stubborn cost pressures, a headache for policymakers that added greatly to the risk of a rise in interest rates as early as next month.

Investors reacted by narrowing the odds on the Reserve Bank of Australia (RBA) restarting the tightening cycle next month after four months of pauses, with futures now pricing in a 66% chance of a quarter-point hike to 4.35%, compared with 35% before the data.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 1.2% in the third quarter, above market forecasts of 1.1% and up from a 0.8% increase the previous quarter.

The annual pace of inflation slowed to 5.4%, from 6.0%, but was again above forecasts of 5.3%. For September alone, the CPI rose 5.6% compared to the same month a year earlier, up from 5.2% in August.

A closely watched measure of core inflation, the trimmed mean, rose 1.2% in the third quarter, to top forecasts of 1.1%. The annual pace slowed to 5.2%, from 5.9%.

The Australian dollar rose 0.6% to a week high of $0.6398 and three-year bond futures tumbled 15 ticks to 95.68, the lowest since 2011. Markets are now seeing rates peaking at 4.45% early next year, up from 4.35% before the data release.

Adam Boyton, head of Australian research at ANZ, now sees a quarter-point hike from the RBA next month, given the uncomfortably high inflation and the recent hawkish guidance from policymakers.

"While 4.35% should mark the peak in the cash rate, there is a risk it could tighten beyond that. Any easing remains a very long way off," Boyton said.

The biggest contributors to the third quarter inflation were fuel, rents, and electricity. Fuel prices rose 7.2% from a year ago, reversing two quarters of price falls, with the conflict in the Middle East potentially set to further stoke inflationary pressures.

Inflation remained elevated for a range of services such as vets, restaurant meals and hairdressers. Rents rose 7.6% from a year ago, the fastest since 2009.

One silver lining in the report is that food prices registered the slowest quarterly rise in two years as prices fell for fruit and vegetables.

Supermarket giant Woolworths said on Wednesday that average prices for the products it sold in the September quarter rose just 2% over a year earlier, a significant moderation compared with previous quarters.

Still, Michele Bullock, the new RBA governor, on Tuesday warned that there were risks inflation would prove more stubborn than expected and interest rates might have to rise further to bring it to heel.

Policymakers have said they have a low tolerance for allowing inflation to return to target at a slower pace than currently expected. The central bank forecast in August that inflation was only projected to return to the top of the bank's target band of 2-3% in late 2025.

The central bank will release its updated economic forecasts in early November.

"This brisk pace of core inflation signals that cost pressures are broad and heightened in the economy, in part stemming from the very tight labour market," said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.

"Governor Bullock's communications this week have laid the ground work for tighter policy, and the tick up in core inflation could well justify another round of rate hikes."

Jamie Dimon, CEO of JPMorgan, has expressed skepticism about the effectiveness of central banks' economic forecasts in navigating potential economic turbulence. Speaking at the Future Investment Initiative Summit, Dimon urged preparedness for diverse economic outcomes and criticized the excessive reliance on governments and central banks to steer through economic challenges.

Dimon also downplayed the potential effect of an additional 25 basis point hike by the Federal Reserve. This comes after a series of 11 rate hikes since 2022, with no further adjustments expected in November. Despite these increases, Dimon's comments suggest that further hikes may have a limited impact on the economy.

In his address, Dimon also voiced concerns over record peacetime fiscal spending and global overspending. He highlighted these aspects as potential destabilizers to economic stability. Furthermore, he pointed out the ongoing conflict in Ukraine as another factor that could potentially disrupt economic stability globally.

The CEO's remarks underscore a growing sentiment among financial leaders regarding the limits of monetary policy in addressing complex global economic issues. His call for readiness rather than definitive predictions indicates a shift towards a more cautious approach to economic planning and forecasting amidst an increasingly uncertain global economic landscape.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Kanishka Singh

WASHINGTON (Reuters) -Officials from the United States and China on Monday held a two-hour long virtual meeting to discuss domestic and global macroeconomic developments, the U.S. Treasury Department said, calling the meeting "productive and substantive".

THE TAKE

Ties between the world's two largest economies have been strained in recent years due to a number of issues including Taiwan, the origins of the COVID-19 pandemic, allegations of spying, human rights issues and trade tariffs.

Senior officials from both sides have been meeting each other in recent months to lay the ground for an expected meeting between U.S. President Joe Biden and Chinese leader Xi Jinping in San Francisco in November.

KEY QUOTES

"Today, the United States and the People's Republic of China held the first meeting of the Economic Working Group (EWG), which serves as an ongoing channel to discuss and facilitate progress on bilateral economic policy matters," the Treasury Department said.

China's finance ministry said the two sides had "in-depth, frank and constructive" talks, and also discussed bilateral cooperation in "addressing global challenges".

Both sides will continue to maintain communication, the ministry said.

U.S. and Chinese officials also raised "areas of concern," statements from the two sides said, without elaborating. The meeting was led by senior officials from the U.S. Treasury Department and China's finance ministry.

The EWG was launched last month following U.S. Treasury Secretary Janet Yellen's trip to Beijing in July. It was launched in parallel with a financial working group, which will hold its first meeting on Wednesday.

CONTEXT

The economic meeting follows other high-level engagements between the two countries in recent months that have seen visits from U.S. officials to China like Secretary of State Antony Blinken in June, Yellen in July and Commerce Secretary Gina Raimondo in August.

More recently, Blinken met Chinese Vice President Han Zheng in New York and U.S. National Security Adviser Jake Sullivan met Chinese Foreign Minister Wang Yi in Malta. China's top diplomat will travel to the United States later this week to meet Blinken.

(Reuters) -China is set to approve slightly more than 1 trillion yuan ($137 billion) in additional sovereign debt issuance on Tuesday as Beijing steps up its efforts to spur infrastructure spending and encourage economic growth, three sources told Reuters.

China's top legislators, the standing committee of the National People's Congress (NPC), are set to approve the extra debt issuance on the last day of a meeting which has run from Oct. 20 to Oct. 24, said the sources, who declined to be named due to confidentiality constraints.

Beijing is aiming to announce the plans as soon as late-Tuesday and begin issuing the debt, which is among the measures the Chinese government is taking to shore up the economy during down cycles, in November, two of the sources added.

In a sign that recent policy measures may be helping to bolster a tentative recovery, China's economy grew at a faster-than-expected rate in the third quarter, while consumption and industrial activity in September also surprised on the upside.

The third-quarter expansion put the government's annual growth target of around 5% for the world's second-largest economy within reach, analysts said.

Two of the sources, said that nearly half of the proceeds to be raised from the additional bond issuance would be spent on water conservancy and flood prevention projects, while the rest would be mainly used for post-disaster reconstruction and high-standard farmland construction.

China, which has experienced an unusually wet summer this year with devastating flooding in its northern and northeastern provinces, has so far mainly relied on local government special bonds rather than sovereign debt to fund infrastructure needs.

This prompted China's top leadership and central government to pledge in August to strengthen water conservancy and other infrastructure in the north of the country and to improve its ability to prevent and respond to floods and droughts.

The province of Hebei may spend two years on post-flood reconstruction, state media reported, after Typhoon Doksuri battered northern China in August, causing at least 29 deaths and 95.8 billion yuan of direct economic losses there alone.

China's State Council Information Office, which handles media queries on behalf of the government, did not immediately respond to a request for comment. The NPC and the Ministry of Finance also did not respond.

The Chinese parliament is already due to approve this week a bill that will allow local governments to front load part of their 2024 bond quotas, according to state media.

Chinese authorities have so far avoided aggressive fiscal stimulus to bolster the economy, although a property crisis and other headwinds continue to pose risks.

Beijing has in recent weeks unveiled a raft of measures, including more public works spending, interest rate cuts, property easing and efforts to shore up the private sector, after China's growth momentum dropped.

But its ability to spur growth has been hamstrung by fears over debt risks and a fragile yuan.

($1 = 7.3171 Chinese yuan renminbi)

(Reuters) - Suriname offered to exchange $675 million of dollar bonds for new notes, its government said on Monday, as the South American nation looks to continue debt talks with China next month.

It invited investors in debt due in 2023 and 2026 to swap their holdings for a new 10-year bond due July 15, 2033, with an annual interest rate of 7.95%.

Suriname will also issue notes with payouts linked to the government securing at least $100 million in oil royalties from an offshore reserve known as Block 58.

Once the $100 million is reached, Suriname will allocate 30% of its annual royalty income from Block 58 for to make payments on a quarterly basis until the notes mature in 2050, it said.

In September, the International Monetary Fund (IMF) board cleared the third review of its programme of more than $600 million for Suriname, granting the government's request for a waiver of non-compliance based on measures already taken.

Suriname said this month its foreign minister would visit Beijing in early November for talks, following China's counter response to a proposal regarding two-way debt negotiations.

It reached a deal with private bondholders in May.

By Jonathan Cable

LONDON (Reuters) - The Bank of England is likely done with policy tightening and will leave Bank Rate at 5.25% on Nov. 2, according to the vast majority of economists polled by Reuters who did however caution the chance of another increase this year was high.

Although inflation unexpectedly held steady at 6.7% in September, the highest of any major advanced economy, 61 of 73 economists in the Oct. 18-23 poll said there would be no move from the Bank next week, in line with market expectations.

"The Bank kept rates on hold in September and there hasn't really been much data since then to change that position. And the data we have had - wages, inflation - wasn't that different to what everybody expected," said James Smith at ING.

"The bigger picture is the impact of previous hikes is still coming through."

Only 12 economists forecast a quarter point rise to 5.50% at the November Monetary Policy Committee meeting.

However, 16 of 28 who answered an additional question said the chance of another lift this year was high. Despite 515 basis points of hikes since December 2021, inflation is still more than three times the BoE's 2% target.

"At some point, when it is more comfortable that core and services inflation are on an established downtrend, the MPC may want to switch to a more neutral guidance. But we don't think it will be ready to make that change just yet," noted Elizabeth Martins at HSBC.

September's inflation data was not far off what the Bank had expected, BoE Governor Andrew Bailey said last week, adding a slowdown in core inflation, which strips out volatile food and energy prices, was "quite encouraging".

Inflation was expected to gradually decline across the forecast horizon but it won't reach target until Q2 2025, the poll showed. It will average 3.0% next year and 2.2% in 2025.

The first cut to Bank Rate won't come until at least July, the majority of economists said, with a median prediction for a 25 basis point reduction in the third quarter. Around one-third of economists expected the Bank to act earlier.

That median expectation would put it slightly behind the United States Federal Reserve, which a separate Reuters poll narrowly suggested would begin easing in Q2, but in step with the European Central Bank's likely time scale.

The BoE was forecast to reduce Bank Rate by 50 basis points in the fourth quarter, putting it at 4.50% by year-end.

SLOWLY, SLOWLY

Britain will dodge a recession, median forecasts showed, but the outlook was weak. Having likely contracted 0.1% last quarter it will flatline in this one and eke out only 0.1% growth in the first two quarters of next year.

"It's a story of very slow growth over the next few quarters rather than an outright meaningful recession," ING's Smith said.

Still, a closely watched purchasing managers survey due later on Tuesday is expected to show business activity shrank again this month.

In the latest Reuters poll, 12 of 31 economists had a recession - two consecutive quarters of contraction - as their base case compared with eight of 23 in a September poll.

Across 2024 growth was put at 0.4% but the economy will rebound the following year and expand 1.4%, slightly weaker than the 0.5% and 1.5% medians, respectively, published in last month's poll.