By Davide Barbuscia

NEW YORK (Reuters) -A hawkish tilt from Federal Reserve Chair Jerome Powell hasn’t been enough to convince some investors that the central bank is unlikely to hold U.S. interest rates at elevated levels for much longer.

Testifying to U.S. lawmakers, Powell on Wednesday said the Fed had a “long way to go” in bringing down inflation to its 2% target and suggested the central bank may need to raise rates twice more this year – a message he also delivered at last week’s monetary policy meeting.

Powell’s comments did little to sway investors in futures markets tied to the Fed’s policy rate, which on Wednesday reflected bets for only one additional rate increase this year, followed by cuts in January. The Fed’s projections, by contrast, imply 100 basis points of rate cuts from a peak of 5.6% by the end of 2024.

“The market generally holds the view that the economy is set to slow, that the recessionary conditions that the consensus expects towards the end of this year and into the next will lead the Fed to ease monetary policy,” said Roger Hallam, global head of rates at Vanguard, who has been looking to add to positions in longer-term bonds.

Skeptical investors have cited a range of factors for that rationale, from the lag with which monetary policy tends to take effect to the warning emanating from some parts of the U.S. yield curve, which has been inverted over the last year and became even more so in recent days – a signal that has preceded recessions in the past.

The yield curve comparing two-year and 10-year notes was at negative 100 basis points on Wednesday – the most inverted it has been since the collapse of Silicon Valley Bank in March.

An inverted yield curve occurs when yields on shorter-dated Treasuries rise above those for longer-term ones. It suggests that while investors expect interest rates to rise in the near term, they believe higher borrowing costs will eventually hurt the economy, forcing the Fed to later ease monetary policy.

The 2/10 spread has inverted 28 times since 1900. In 22 of these instances, a recession followed, analysts at Commonwealth Financial Network said last year. The curve most recently inverted in March 2022.

Not all bond bulls necessarily believe a recession is coming. Yields on everything from Treasuries to corporate bonds are the highest they have been in over a decade, raising their allure to income-seeking investors despite the threat of more rate hikes from the Fed.

“With a steeply inverted curve we see a lot of yield and a lot of attractive opportunities in the front end,” said Steve Hooker, portfolio manager of Newfleet Asset Management. “But at the same time, we believe that the Fed are going to pivot to cutting rates at some point, even if that’s a 2024 event.”

Hooker has been adding to positions in longer-dated Treasuries and corporate bonds.

Of course, the Fed has been proven right on its projections so far this year. Expectations that the Fed would cut rates in the second half of 2023 were rapidly priced out of markets several weeks ago amid evidence that the U.S. economy remains comparatively robust in the face of the monetary policy tightening the Fed has already delivered.

Greg Peters, co-chief investment officer of PGIM Fixed Income, said inflation remained way too high to anticipate rate cuts any time soon.

“We’re not going out and adding duration here. We think it’s way too premature,” he said.

(Reporting by Davide Barbuscia; Editing by Ira Iosebashvili and Leslie Adler)

By Nikolaj Skydsgaard

COPENHAGEN (Reuters) -A thyroid cancer safety signal was raised by the EU’s drugs watchdog last month over several Novo Nordisk products including semaglutide, which is used in popular diabetes and obesity medicines Ozempic and Wegovy.

The European Medicines Agency (EMA) raised the safety signal, which is a way to monitor potential adverse events from the use of approved drugs, Novo Nordisk said. Such a signal from the EMA does not mean that the medicine is the cause of any reported adverse events.

“Novo Nordisk is aware of the signal and the request by EMA and will deliver a thorough assessment of all relevant data to elucidate this topic,” Lars Otto Andersen-Lange, media relations director at Novo Nordisk, told Reuters.

Shares in Denmark’s Novo initially fell more than 2% but were down 1% at 1230 GMT in a weaker Copenhagen market after Danish media outlet B.T. reported the EMA safety signal.

Andersen-Lange said the B.T. report referred to a May 8 statement from EMA, which raised a thyroid cancer safety signal for several drugs in the GLP-1 class, including semaglutide.

But a “causal association” between semaglutide and thyroid cancer had not been demonstrated in large-scale clinical trials and post-marketing surveillance, he said.

“Patient safety has top priority for Novo Nordisk, and we take all reports about adverse events from use of our medicines very seriously,” Andersen-Lange added.

An EMA spokesperson told Reuters that in January the agency’s safety committee had “discussed a signal for medicines pertaining to the glucagon-like peptide-1 (GLP-1) receptor agonists class, including medicines containing the active substance semaglutide.”

The spokesperson said the discussion followed the publication of a study suggesting that there might be an increased risk of thyroid cancers with the use of these drugs in patients with Type 2 diabetes.

EMA’s safety signal also included GLP-1 drugs from competitors Eli Lilly, AstraZeneca and Sanofi. The companies have until July 26 to provide supplementary information requested in April, EMA said.

A spokesperson for Lilly said the U.S. firm has previously acknowledged the risk of thyroid cancer related to GLP-1 drugs and is working with regulatory agencies to conduct two studies investigating that link.

The spokesperson also said Eli Lilly had received the EMA’s request in April and would respond to the questions by July 26.

AstraZeneca and Sanofi did not immediately respond to Reuters’ requests for comment.

Both EMA and its U.S. equivalent, the FDA, mention on Wegovy’s label that semaglutide causes thyroid tumours in rodents but say the effects on humans are unknown. The FDA advises against taking Wegovy if the patient has a family history of thyroid cancer.

“It is probably far too early to raise a very strong concern about this. But it’s a good thing that they are looking into it,” Sydbank analyst Soren Lontoft Hansen told Reuters.

Sales of products based on semaglutide made up nearly 44% of total sales for Novo Nordisk in 2022.

(Reporting by Nikolaj Skydsgaard and Maggie Fick; editing by Alexander Smith)

By Tom Sims

FRANKFURT (Reuters) -Deutsche Bank is drawing up plans to cut 10% of its 17,000 German retail jobs over the next few years as part of cost savings, a person with knowledge of the matter said on Thursday.

The plans at Germany’s largest bank come as Claudio de Sanctis prepares to take over the retail unit, known as the private bank division, on July 1.

Deutsche Bank, which declined to comment on any cuts to retail jobs, has publicly said that it is identifying further cost savings and would be trimming jobs in certain areas to keep profits growing.

The reduction in retail jobs is in the planning phase and still subject to discussions with unions and worker representatives, the person said, adding that the bank will add staff in some areas while cutting in others.

There was no specific timeframe for the move.

The Verdi labour union said it wouldn’t comment on “speculation” of job cuts but noted that the bank was bound by laws that protect workers from dismissal.

Deutsche has in the past announced job cuts that never materialized. In 2019, it said it would cut 18,000 jobs as part of a major restructuring, but in the end it did not cut that many as business picked up again.

Deutsche, which in Germany also operates under the Postbank brand, has closed more than 300 retail branches in Germany over the past five years to around 1,000 currently.

The bank has been expected to continue to cut branches to curb expenses, Reuters has previously reported.

S&P last month upgraded its outlook for the bank and said that the retail division has “considerable scope” to cut costs.

Deutsche Bank recently said it was streamlining its mortgage business, which is part of its retail bank.

The retail division has long suffered from low interest rates, dampening its revenue, but its fortunes have turned around with a surge in interest income as central banks try to stamp out inflation with higher interest rates.

Manager Magazin first reported the plans.

(Reporting by Tom Sims; editing by Matthias Williams, Madeline Chambers and Susan Fenton)