By Harry Robertson

LONDON (Reuters) - Investors will have to buy a record amount of euro zone government bonds for a third straight year in 2025 and without the ECB in the market, potentially adding pressure on borrowing costs when political and economic uncertainty is high.

Bankers and analysts said they were confident markets can soak up the more than 660 billion euros ($694.52 billion) of net bond supply, with expectations for further European Central Bank rate cuts boosting government bonds' appeal.

However, they also say that high levels of bond sales could push up long-term borrowing costs relative to yields on short-term debt, which are anchored by central bank rate expectations, resulting in a steeper yield curve.

This means euro zone countries, grappling with weak growth and political uncertainty in Germany and France, may not see big declines in borrowing costs even as the ECB lowers rates.

"I think overall it will be absorbed," said Michael Krautzberger, global chief investment officer for fixed income at Allianz (ETR:ALVG) Global Investors.

"But it's one of the reasons why the euro curves could be quite a bit steeper as a combination of rate cuts at the short end and quite a bit of supply at the long end."

Analysts stressed that countries' borrowing plans remain uncertain, with U.S. President-elect Donald Trump putting pressure on Europe to increase defence spending and with France's 2025 budget in peril.

ECB OUT

Euro zone governments are set to sell around 1.26 trillion euros of bonds gross next year, banks estimate, down very slightly from 2024 as countries try to reduce deficits after spending big amid the shocks of COVID-19 and the Ukraine war.
 

Crucially missing from the market in 2025 will be the ECB, which since 2014 has hoovered up trillions of euros of bonds to support the bloc through successive crises.

The ECB has already stopped reinvesting the proceeds from maturing bonds in its Asset Purchase Programme and from January will do the same for its more flexible Pandemic Emergency Purchase Programme in a process known as quantitative tightening (QT).

Investors will have to absorb somewhere between 270 and 420 billion euros of bonds that the ECB might otherwise have bought next year, according to estimates from UBS, Bank of America and BNP Paribas (OTC:BNPQY). Different assumptions about the ECB's bond holdings produce different estimates.

Once redemptions, coupons, and QT are factored in, the effective bond supply to markets will be around 660 to 670 billion euros, according to the banks.

WHAT PRICE?

Higher yields have enticed investors back to government bonds after central banks hiked rates to tame inflation. Debt office officials are optimistic appetite will remain strong.

"An important feature of this year and a half has been quite a significant return of foreign investors," Italy's debt chief Davide Iacovoni told a conference in Brussels last week.

"We're in a situation where there's an expectation of lower interest rates and of course, Italy still pays quite an elevated spread," he said, referring to the higher yields available on Italian debt than on German peers.

UBS macro rates strategist Emmanouil Karimalis said Trump's threat to impose tariffs on the EU, which would dent the euro zone economy and potentially speed up ECB rate cuts, could boost safe-haven bonds.

However, Karimalis said investors may demand a higher return or "term premium" to lock in money for the long term - given the deluge of bond sales and heightened uncertainty.

CLOUDY OUTLOOK

Bond sales might have to rise if European governments increase military spending and if Germany, which holds a snap election in February, loosens long-standing debt rules.

UBS estimated Germany is currently set to reduce its gross bond issuance to 268 billion euros, down 7 billion euros from 2024.

France is likely to increase its borrowing slightly, even if Prime Minister Michel Barnier can pass his belt-tightening budget, UBS said. That means France would have the highest net supply in the euro zone - with redemptions, coupons and QT factored in - at around 202 billion euros in 2025, up 15 billion euros from this year, according to UBS.

Underlining the uncertainty around forecasts, French far-right leader Marine Le Pen on Wednesday threatened to seek to topple Barnier over the 2025 budget. French bond yields have risen sharply since the calling of snap elections in June that resulted in a hung parliament.

Ivan Morozov, sovereign credit analyst at T. Rowe Price, said political uncertainty had put off Japanese investors, traditionally an important French buyer.

"We need to get a bit more clarity on the French political situation before they come back to the market," he said.

($1 = 0.9503 euros)

By Tom Westbrook

SINGAPORE (Reuters) - Gold was headed for its largest weekly gain in nearly eight months on Friday and the euro hovered at a 13-month low as Russia lowered its threshold for using nuclear weapons and fired a hypersonic ballistic missile at Ukraine.

The risk of escalation also sent European gas prices to a one-year high and pushed investors towards safe havens, underpinning German debt and putting the Swiss franc on course for its first weekly rise in two months.

In Asia on Friday, chipmakers led stocks a little higher after Nvidia (NASDAQ:NVDA) touched a record high in U.S. trade on solid earnings, with shares in Taiwan and South Korea up more than 1% and the Nikkei gaining 0.8%.

Gold was steady at $2,677 an ounce and up more than 4.5% for the week so far while bitcoin, stood on the brink of breaking above $100,000 for the first time.

Assets linked to Adani Group companies remained under pressure, with dollar bonds nursing losses following chairman Gautam Adani's indictment for fraud by U.S. prosecutors.

Russia on Tuesday lowered its threshold for using nuclear weapons and overnight responded to the U.S. and UK allowing Kyiv to strike Russian territory with western weapons by firing a hypersonic intermediate-range missile at Ukraine's Dnipro.

"Those weapons typically carry nuclear warheads," said analysts at ANZ Bank, noting the attack sent oil prices higher.

"The exchange indicates the war has entered a new phase, raising concerns around disruptions to supply."

Brent crude futures are up nearly 4.5% on the week and edged up to touch a two-week high of $74.44 a barrel in Asia trade.

By Brigid Riley

TOKYO (Reuters) - The U.S. dollar stuck close to a 13-month high on Friday as investors assessed the outlook for the Federal Reserve's interest rate path and uncertainty in Europe kept the euro on the back foot, while bitcoin eyed the $100,000 level.

The yen, meanwhile, held its ground against the greenback after domestic core inflation figures remained above the Bank of Japan's (BOJ) 2% target in a sign conditions for further interest rate hikes were falling in place.

The dollar index edged down 0.05% to 107.01, not far off Thursday's one-year high of 107.15, its highest level since Oct. 4, 2023, with little data this week to dent its march higher.

Data overnight showed U.S. weekly initial jobless claims unexpectedly dropped to a seven-month low but also indicated some slack as it is taking longer for the unemployed to find new jobs, giving the Fed cushion to cut rates again in December.

Global PMIs are due later in the day, although those figures should not "change the dial too much," said Tony Sycamore, market analyst at IG.

"It's just trying now to find what the catalysts are ... (and) it's obviously going to be does the Fed cut or not again" in December, Sycamore said.

U.S. PCE for October scheduled for release next Friday will be the focus.

The dollar has rallied around 3% so far this month on expectations that U.S. President-elect Donald Trump's policies could reignite inflation and limit the Fed's ability to cut rates.

Recent comments from Fed officials, including Chair Jerome Powell, have indicated the central bank may take a slower course in its rate cut path.

Expectations for the path of rate cuts have been scaled back recently, but remain somewhat volatile. Markets are pricing in a 57.8% chance of a 25-basis-point cut at the Fed's December meeting, down from 72.2% a week ago, according to CME's FedWatch Tool.

Among Trump policies on weighing on investors' minds were the president-elect's campaign pledges of tariffs, with Europe and China both likely in the firing line.

But factors such as the scale and sequencing of the incoming president's policies remain an unknown, and likely will not come to light until after Trump is inaugurated in January.

The euro, which makes up a hefty portion of the dollar index, steadied at $1.0475 after falling to a 13-month low of $1.0461 on Thursday.

The euro has been one of the main casualties of the dollar's post-election ascent. Recent escalations between Russia and Ukraine and political uncertainty as Germany, the bloc's biggest economy, have further weighed.

Sterling traded at $1.25915, up 0.03% so far on the day.

Bitcoin had the $100,000 mark in its line of sight, holding flat at $98,080.92 after reaching a record high of $99,057 on Thursday.

The cryptocurrency has surged more than 40% since the U.S. election on expectations Trump will loosen the regulatory environment for cryptocurrencies.

The Japanese yen, which had been pushed back below 156 per dollar last week, received a boost as Japan's core inflation in October held above the central bank's 2% target to come in 2.3% higher from a year earlier, data showed on Friday.

"The renewed strengthening of underlying inflation coupled with the recent rebound in consumer spending and the renewed weakening of the yen strengthen the case for another BOJ rate hike next month," Marcel Thieliant, head of Asia-Pacific at Capital Economics, wrote in a research note.

The dollar was last down 0.17% on the day at 154.27 yen.

BOJ Governor Kazuo Ueda on Thursday said that the bank will scrutinise data ahead its rate review next month, and "seriously" take into account the impact yen moves could have on the economic and price outlook.

WASHINGTON (Reuters) - U.S. mortgage rates increased to a four-month high this week, which together with higher home prices could sideline potential buyers from the housing market in the near term.

The average rate on the popular 30-year fixed-rate mortgage increased to 6.84%, the highest level since July, from 6.785% last week, mortgage finance agency Freddie Mac (OTC:FMCC) said on Thursday. It averaged 7.29% during the same period a year ago.

Though the Federal Reserve has cut interest rates twice since September, U.S. Treasury yields have risen on strong economic data and investor fears that President-elect Donald Trump's policies, including higher tariffs on imported goods and mass deportations, could reignite inflation.

Mortgage rates track the 10-year Treasury note.

By Simon Lewis (JO:LEWJ) and Daphne Psaledakis

WASHINGTON (Reuters) - The Biden administration has moved to forgive about $4.7 billion in U.S. loans to Ukraine, State Department spokesperson Matthew Miller said on Wednesday, as outgoing officials seek to do what they can before leaving office to bolster Ukraine in its war against Russia. 

A funding bill passed by the U.S. Congress in April included just over $9.4 billion of forgivable loans for economic and budgetary support to Ukraine's government, half of which the president could cancel after Nov. 15. The bill appropriated a total of $61 billion to help Ukraine fight the full-scale invasion Moscow launched in February 2022.

"We have taken the step that was outlined in the law to cancel those loans," Miller told a press briefing, adding that the step was taken in recent days.

Congress could still block the move, Miller said.

The Senate is due to vote later on Wednesday on a motion of disapproval of loan forgiveness for Ukraine put forward by Republican Senator Rand Paul, a frequent critic of U.S. support for Ukraine. The majority of senators from both parties support aid to Ukraine.

President Joe Biden has ordered officials to rush as much aid to Ukraine as possible before he leaves office on Jan. 20 amid concerns President-elect Donald Trump could limit U.S. support.

(This story has been refiled to change to 'administration,' in the headline)

Investing.com-- Gold prices rose in Asian trade on Thursday as heightened tensions between Russia and Ukraine underpinned safe haven demand, helping bullion weather strength in the dollar.

Gold rose for a fourth consecutive session, extending a rebound from over two-month lows. But the yellow metal’s pace of gains now appeared to be slowing amid pressure from the dollar, as traders second-guessed expectations for lower U.S. interest rates. 

Spot gold rose 0.2% to $2,656.84 an ounce, while gold futures expiring in December rose 0.3% to $2,659.15 an ounce by 00:00 ET (05:00 GMT). 

Russia-Ukraine tensions support gold demand 

The yellow metal was underpinned by higher safe haven demand in the face of increased tensions between Russia and Ukraine, after the U.S. authorized the use of long-range missiles by Kyiv.

Russia had responded by lowering its threshold for nuclear retaliation, and warned of a dire escalation in the conflict over the U.S. move. Ukraine launched a series of missile strikes against Russian territories this week, using Western-made weapons. 

Fears of an escalation in the conflict drove traders towards gold, helping the yellow metal recover after it plummeted from record highs over the past two weeks.

Dollar, yield strength limits gold recovery 

Gold was nursing steep losses in the past two weeks as risk appetite was initially boosted by Donald Trump winning the 2024 presidential election.

Trump’s victory also saw traders pricing in the prospect of higher U.S. interest rates in the long term, which supported the dollar and Treasury yields. The greenback traded just below a one-year high on Thursday.

SINGAPORE (Reuters) - Bitcoin's march toward $100,000 made further ground on Thursday as investors bet a friendlier U.S. regulatory approach to cryptocurrencies under President-elect Donald Trump will unleash a boom era for the asset class.

Bitcoin prices topped $96,000 for the first time in Asia trade, touching a high just above $96,898.

The cryptocurrency's price has more than doubled this year and is up about 40% in the two weeks since Trump was voted in as the next U.S. president and a slew of pro-crypto lawmakers were elected to Congress.

"While it's now firmly into overbought territory, it is being drawn toward the $100k level," said IG Markets analyst Tony Sycamore.

Trump embraced digital assets during his campaign, promising to make the United States the "crypto capital of the planet" and to accumulate a national stockpile of bitcoin.

More than $4 billion has streamed into U.S. listed bitcoin exchange-traded funds since the election. This week, there was a strong debut for options on BlackRock (NYSE:BLK)'s ETF, with call options - bets on the price going up - more popular than puts.

Crypto-related stocks have been soaring along with the bitcoin price and shares in bitcoin miner MARA Holdings were up nearly 14% overnight, while MicroStrategy, a loss-making software company that has been buying bitcoin, rose 10% to take its market capitalisation beyond $100 billion.

"Many are wondering if this administration will bring the regulatory clarity the crypto community has been waiting for. It's likely too soon to say," said Will Peck, head of digital assets at WisdomTree, a global exchange-traded fund issuer.

"We see all of this excitement as bullish not only for bitcoin or crypto broadly, but the entire blockchain-enabled ecosystem that is growing today."

Investing.com-- Most Asian stocks fell on Thursday as earnings from market major Nvidia provided middling cues, while Indian markets were squarely in focus after the U.S. accused conglomerate Adani of corruption. 

Regional markets took few cues from a muted overnight session on Wall Street, as caution over NVIDIA Corporation (NASDAQ:NVDA) kept investors to the sidelines. But U.S. stock index futures sank in Asian trade, tracking an over 1% aftermarket drop in Nvidia.

Heightened tensions over Russia and Ukraine also kept overall risk appetite limited. 

Asia tech skittish as Nvidia offers mixed signals 

Technology-heavy Asian bourses mostly fell on Thursday, although stocks with direct exposure to Nvidia were a mixed bag as its results offered differing cues. The TOPIX index shed 0.3%.

The world’s most valuable listed company clocked stronger than expected earnings in the September quarter. But its guidance for the current quarter just barely scraped past expectations, pointing to slowing revenue growth and sparking some fears that artificial intelligence demand had potentially peaked. 

Japan’s Nikkei 225 index shed 0.7%, with chip stocks Advantest Corp. (TYO:6857) and Tokyo Electron Ltd. (TYO:8035)n both losing ground.

South Korea’s KOSPI rose 0.2%, buoyed by small gains in Nvidia supplier SK Hynix Inc (KS:000660), which said it had begun production of advanced flash memory chips. Peer Samsung Electronics Co Ltd (KS:005930) rose 0.5%.

Taiwan shares of TSMC (TW:2330) (NYSE:TSM)- the world’s biggest contract chipmaker and a major Nvidia supplier- fell 1%, while those of Hon Hai Precision Industry Co Ltd (TW:2317), also known as Foxconn (SS:601138), lost nearly 2%. 

Investing.com-- U.S. stock index futures moved little in evening deals on Wednesday as markets digested a mixed showing from artificial intelligence major Nvidia, which clocked strong earnings but presented an outlook that just scraped past estimates.

Futures moved little after a muted session on Wall Street, as anticipation of NVIDIA Corporation's (NASDAQ:NVDA) earnings deterred any big bets. Sentiment also remained strained amid increased tensions over Russia and Ukraine, and as earnings from retail giant Target Corporation (NYSE:TGT) fell well short of expectations.

S&P 500 Futures steadied at 5,939.0 points, while Nasdaq 100 Futures were flat at 20,751.25 points by 18:35 ET (23:35 GMT). Dow Jones Futures steadied at 43,551.0 points. 

Nvidia falls as guidance beat underwhelms 

Nvidia shares fell more than 1% in aftermarket trade to around $144.0, trimming some losses after falling as much as 2% just after its earnings. 

Earnings per share rose to $0.81 on revenue of $35.1 billion, higher than expectations of $0.75 in EPS and $33.09 billion in revenue. 

But Nvidia forecast fourth quarter revenue of $37.5 billion, plus or minus 2%. The guidance was just above estimates of $37.09 billion, underwhelming some traders hoping for a much bigger beat, especially given the stellar run-up in Nvidia’s valuation this year. 

The forecast also indicated a slower pace of revenue growth than seen in prior quarters. 

Nvidia, which recently overtook Apple Inc (NASDAQ:AAPL) to become the world’s most valuable listed company, flagged supply constraints, especially in its upcoming Blackwell line of next-generation AI chips. But the firm said demand for its advanced AI chips remained robust. 

TOKYO (Reuters) -Japan welcomed a record 3.31 million visitors last month, official data showed on Wednesday, as the weak yen propelled a tourism boom that is pouring money into the nation's coffers.

The number of foreign visitors for business and leisure rose from 2.87 million in September and exceeded the previous monthly record of 3.29 million set in July, data from the Japan National Tourism Organization (JNTO) showed.

Through October, about 30.2 million tourists have arrived in Japan, just shy of the annual record of 31.9 million set in 2019 before the COVID-19 pandemic shut global borders.

Japan's famous autumn leaf colours contributed to increased tourism demand last month from many markets across Asia, Europe, and North America, the JNTO said. Through October, 11 countries and regions have surpassed annual records for sending visitors to Japan.

Travellers spent 5.86 trillion yen ($37.72 billion) in Japan through September of this year, preliminary figures showed last month. That eclipsed the 5.3 trillion yen they spent in all of 2023, a record for any 12-month period.

Tourism spending, classified as an export in national accounts, is poised to become Japan's second-biggest export sector after autos and ahead of electronic components.