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145 matches for " treasury":
The BoE announced on Thursday that it had agreed the Treasury could increase its usage of its Ways and Means facility--effectively the government's overdraft at the central bank--without limit.
A less rapid tightening of monetary policy in the U.K. than in the U.S. should ensure that gilt yields don't move in lockstep with U.S. Treasury yields over the coming years. But the outlook for monetary policy isn't the only influence on gilt yields. We expect low levels of market liquidity in the secondary market, high levels of gilt issuance and overseas concerns about the possibility of the U.K.'s exit from the E.U. to add to the upward pressure on gilt yields.
The Treasury waded in to the Brexit debate yesterday with a 200-page report concluding that U.K. GDP would be 6.2% lower in 2030 than otherwise if Britain left the E.U. and entered into a bilateral trade deal similar to the one recently agreed by Canada. All long-term economic projections should come with health warnings, and the Treasury's precise numbers should be taken with a pinch of salt.
Chancellor Sunak looks set to announce more fiscal stimulus next month to reinforce the economic recovery, despite recent record levels of public borrowing.
The recent sell-off in Treasuries has not yet reached significant proportions.
It has become fashionable to argue that the combination of favorable yield differentials and abundant global liquidity, courtesy of the BoJ and the ECB, will keep Treasury yields very low for the foreseeable future; the 10-year could even establish itself below 2%.
Under normal circumstances, we would have no hesitation calling for substantially higher long Treasury yields and a lower earnings multiple as the Fed raises rates. History tells us that you fight the Fed at your peril, as our first two charts show.
The Bank of England issued a statement yesterday that it is "working closely with HM Treasury and the FCA--as well as our international partners--to ensure all necessary steps are taken to protect financial and monetary stability".
After many years in which the phrase "twin deficits" was never mentioned, suddenly it is the explanation of choice for the weakening of the dollar and the sudden increase in real Treasury yields since the turn of the year, shortly after the tax cut bill passed Congress.
Many analysts were alarmed earlier this week by news from across the pond that the U.S. treasury is planning to break the bank in the fight against Covid-19.
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
The third straight 0.3% increase in the core CPI-- that hasn't happened since 1995--was ignored by the Treasury market yesterday, which appeared to be focusing its attention on the ECB.
Treasury yields closed Friday a few basis points higher across the curve than the day before the surprisingly soft March payroll report. A combination of slightly less dovish-than-expected FOMC minutes, a hawkish speech from Richmond president Jeff Lacker, rising oil prices, and robust--albeit second-tier--data last week seem to have done the work.
The Fed announced no significant policy changes yesterday, but the FOMC reinforced its commitment to maintain "smooth market functioning", by promising to keep its Treasury and mortgage purchases "at least at the current pace".
The two-year budget deal agreed between the administration and the Republican leadership in Congress will avert a federal debt default and appears to constitute a modest near-term easing of fiscal policy. The debt ceiling will not be raised, but the law imposing the limit will be suspended through March 2017, leaving the Treasury free to borrow as much as necessary to cover the deficit. As a result, the presidential election next year will not be fought against a backdrop of fiscal crisis.
We argued in the Monitor on Friday--see here--that the Fed likely will increase the pace of its Treasury purchases, in order to ensure that the wave of supply needed to finance the next Covid relief bill does not drive up yields.
The consensus for today's first post-apocalypse jobless claims number, 1,500K, looks much too low.
The FOMC minutes confirmed that most FOMC members were not swayed by the weak-looking first quarter GDP numbers or the soft March core CPI. Both are considered likely to prove "transitory", and the underlying economic outlook is little changed from March.
The MPC's meeting last week was notable not just for its glass half-full interpretation of the latest data, but also for its updated guidance on when it likely will begin to shrink its bloated balance sheet.
If you're looking for points of light in the economy over the next few months, the housing market is a good place to start.
Some analysts argue that sterling won't recover materially even if MPs wave through Brexit legislation, because the threat of a Labour government worries investors more than a messy departure from the EU.
The Caixin PMI likely remained stable or even strengthened in January. The December jump was driven by the forward-looking components, with both the new export orders and total new orders indices picking up.
Sterling has begun this year on the front foot, rising last week to its highest level against the U.S. dollar since June 2016.
The Fed made no changes to policy yesterday, as was almost universally expected.
BanRep cut Colombia's key interest rate by 25 basis points last Friday, to 6.25%. We were expecting a bolder cut, as economic activity has been under severe pressures in recent months.
April's money and credit figures show that relatively few firms suffered from a lack of liquidity at the beginning of the Covid-19 crisis.
We learned last week that the U.S. no longer has a coherent dollar policy.
Fed Chair Powell's semi-annual Monetary Policy Testimony yesterday broke no new ground, largely repeating the message of the January 30 press conference.
The recovery in the composite PMI to 52.4 in January, from 49.3 in December, should convince a majority of MPC members to vote on Thursday to maintain Bank Rate at 0.75%.
Today brings new housing market data, in the form of the weekly applications numbers from the MBA. The weekly data are seasonally adjusted but are still very volatile, especially in the spring.
A decade of public deficit reduction was fully reversed in April, as the coronavirus tore through the economy.
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
The FOMC kept policy unchanged at April's meeting-- rates stayed at zero, and all the market valves are wide open, as needed--but policymakers spent considerable time pondering what might happen over the next few months, and how policy could evolve.
Borrowing by local authorities from the Public Works Loan Board, used to finance capital projects-- and arguably dubious commercial property acquisitions--has surged this year.
China's Loan Prime Rate was unchanged this month, at 4.15%, with consensus once again expecting a reduction to 4.10%.
Politics are once again encroaching on the economic story in the Eurozone. At the ECB, this week has so far been a tumultuous one.
The Fed's announcement, at 11.30pm Wednesday, that it will establish a Money Market Mutual Fund Liquidity Facility--MMLF--to support prime money market funds, is another step to limit the emerging credit crunch triggered by the virus.
In the wake of the unexpectedly weak September Empire State survey, released Monday, we are now very keen to see what today's Philadelphia Fed survey has to say.
The government now has a 50:50 chance of getting the Withdrawal Agreement Bill--WAB--through parliament in the coming weeks, despite Letwin's successful amendment and the extension request.
The Fed has given itself and markets clear guidance on the minimum requirements for a rate hike-- maximum employment, and inflation at 2% and on track "moderately" to exceed that pace "for some time"--but has offered no clues at all on the drivers of its other key policy tool, namely, the pace of asset purchases.
Growth appears to have accelerated in the first quarter in Mexico, as NAFTA-related uncertainty abated, inflation started to fall, and the MXN rebounded.
If Congress passes another Covid relief bill early next month, as we fully expect, it will have to be financed quickly via increased debt issuance.
Hard data released in Argentina over recent weeks showed that the economy was resilient in Q1 and early Q2.
Friday's inflation data in Brazil confirmed that the ripples from the truckers' strike in May were still being felt at the start of the third quarter.
For now, we're happy with our base-case forecast that growth will be nearer 3% than 2% this year, and that most of the rise in core inflation this year will come as a result of unfavorable base effects, rather than a serious increase in the month-to-month trend.
Sterling is well below its $1.57 average of the last five years, despite rallying this month to about $1.45, from a low of $1.38 in late February. But hopes that cable will bounce back to its previous levels, after a vote to remain in the E .U., likely will be dashed.
The economic and political backdrop to this week's Monetary Policy Committee meeting is significantly more benign than when it last met on September 19.
The stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
So far, the MPC has been more timid with unconventional stimulus than other central banks. At the end of May, central bank reserves equalled 29.7% of four-quarter rolling GDP in the U.K., compared to 32.7% in the U.S. and 46.7% in the Eurozone.
ADP's reported 158K increase in private payrolls was very close to our model-based estimate, so it doesn't change our 220K forecast for todays official payroll number, well above the 177K consensus.
Always expect the unexpected in a bonus month for Japanese wages.
Emerging evidence suggests that the economy has passed the period of peak Covid-19 pain.
The 351K net increase in payrolls reported Friday--a 261K October gain and a 90K total revision to August and September--puts the labor market back on track after the hurricanes temporarily hit the data.
The Chancellor's Budget today looks set to prioritise retaining scope to loosen policy if the economy struggles in future, rather than reducing the near-term fiscal tightening. In November, the OBR predicted that cyclically-adjusted borrowing would fall to 0.8% of GDP in 2019/20, comfortably below the 2% limit stipulated by the Chancellor's new fiscal rules.
We are not political analysts or psephologists, but we note that each of the nine separate election forecasting models tracked by the New York Times suggests that Hillary Clinton will be president, with odds ranging from 67% to greater than 99%.
We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.
Friday's German new orders data were sizzling. Factory orders jumped 3.6% month-to-month in August, pushing the year-over-year rate up to a nine-month high of 7.8%, from an upwardly-revised 5.4% in July.
Resistance is futile.
The Chancellor's Summer Statement contained a targeted package of measures aiming to sustain employment and support the ailing hospitality sector. In total, these measures could inject up to £30B into the economy, depending on take-up by households and firms.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
The sharp fall in markets' expectations for Bank Rate over the last month has partly reflected the perceived increase in the chance of a no-deal Brexit. Betting markets are pricing-in around a 30% chance of a no-deal departure before the end of this year, up from 10% shortly after the first Brexit deadline was missed.
Chancellor Sunak faces a tough first gig on Wednesday, when he delivers the long-awaited Budget.
The key aspects of the ECB's policy stance will remain unchanged at today's meeting.
The continued gradual rise in new confirmed cases of Covid-19 lends more weight to the idea that the economy already has reopened as much as possible while containing the virus.
We are revising down our forecasts for quarteron-quarter GDP growth in Q1 and Q2 to 0.3% and 0.2%, respectively, from 0.4% in both quarters previously, to account for the likely impact of the coronavirus outbreak.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
The PBoC cut its seven-day reverse repo rate to 2.20%, from 2.40%, while making a token injection; the Bank only moves these rates when it injects funds.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
The MPC likely will raise interest rates on Thursday, for the first time since July 2007, in response to the uptick in GDP growth and the upside inflation surprise in Q3.
The MPC won't stand idly by on Thursday, despite having moved decisively to support the economy in March.
The initial pace of the Fed's balance sheet run-off, which we expect to start in October, will be very low. At first, the balance sheet will shrink by only $10B per month, split between $6B Treasuries and $4B mortgages.
Argentina's economy was improving late last year, albeit slowing at the margin, according to the latest published indicators. GDP data confirmed that the revival continued during most of Q4, with the economy growing 0.4% month-to-month in November.
It's hard to overstate the geopolitical importance of Friday's assassination of Qassim Soleimani, architect of Iran's external military activity for more than 20 years and perhaps the most powerful man in the country, after the Supreme Leader.
The surge in the broad money supply in March, as the U.K.'s lockdown began, suggests that businesses are in relatively good shape to survive a multi-month period of greatly depressed demand.
Speculation mounted yesterday that the MPC will follow the U.S. Fed and cut interest rates before its next meeting on March 26.
Recent hard data have confirmed the severe shock from Corona to the Chilean economy in Q2.
The economy will endure a sluggish recovery from Covid-19 this year, even if a second wave of the virus is avoided, partly because monetary stimulus is not filtering through powerfully to households.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
Polls suggest that Ivan Duque has comfortably beat Gustavo Petro to become Colombia's president.
After a slew of media reports in recent days, we have to expect that the president will today announce that Fed governor Jerome Powell is his pick to replace Janet Yellen as Chair.
Gilt yields have risen sharply over the last month, even though the Monetary Policy Committee is just one-third of the way through the £60B bond purchase programme announced in August. Government bond yields in other G7 economies also have increased, but not as much as in Britain.
The 0.1% dip in the core CPI in March was the first outright decline in three years, but we expect another-- and bigger--decline in today's April numbers.
Chancellor Sunak's "temporary, timely and targeted" fiscal response to the Covid-19 outbreak, and the BoE's accompanying stimulus measures, won't prevent GDP from falling over the next couple of months.
Investors likely will be caught out by the extent to which gilt yields rise this year. Forward rates imply that the 10-year spot rate will rise by a mere 20bp to just 1.45% by the end of 2018. By contrast, we see scope for 10-year yields to climb to 1.60% by the end of this year.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
In the olden days, by which we mean the 15 years or so leading up to the financial crisis, a 100bp rise in long yields would be enough to slow GDP growth by about three percentage points, other things equal, after a lag of about one year.
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
Analysis of the economy's potential to recover later this year from extreme weakness in Q2 has focussed largely on the extent to which virus-related restrictions will be lifted.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
The collapse in oil prices was the immediate trigger for the 7.6% plunge in the S&P 500 yesterday, but the underlying reason is the Covid-19 epidemic.
We would be surprised, but not astonished, if the Fed were to announce a shift to explicit yield curve control at today's meeting.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
Lacklustre economic data and persistent no deal Brexit risk mean that the MPC won't rock the boat at this week's meeting.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
We expect the Budget today to underwhelm investors who are eager to see a quick and powerful government response to the coronavirus outbreak.
It's just not possible to forecast the reaction of businesses and consumers to the coronavirus outbreak.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
Korean credit markets have begun tentatively to recover after the rise in global interest rates at the end of last year.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
At first glance, the latest labour market data appear to be contradictory.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
We have been quite bullish on U.S. economic growth this year.
The Covid-19 crisis has turned the tables on the Spanish economy.
Hot on the heels of yesterday's news that the NAHB index of homebuilders' sentiment and activity dropped by two points this month -- albeit from December's 18-year high -- we expect to learn today that housing starts fell last month.
The establishment of the Fed's commercial paper funding facility, announced yesterday, replicates the first wave of asset purchases undertaken after the crash of 2008.
ADP's measure of May private payrolls undershot the official estimate by 5.6 million, surprising everyone after it nailed the April catastrophe.
The BoE has lived up to its reputation again as one of the most unpredictable central banks.
We argued a couple of weeks ago that the stock market could suffer a relapse, on the grounds that valuations hadn't fallen far enough from their peak to reflect the extent of the hit to the economy; that hopes for an early re-opening were likely to prove forlorn; and that investors were likely to be spooked by the incoming coronavirus data.
In recent client "meetings" we have been emphasizing the idea that a sustained recovery in the economy over the summer depends on the solidity of a three-legged stool.
We agree with the majority of economists that the MPC will announce on Thursday another £100B of asset purchases, primarily of gilts, once it has completed the £200B of purchases it authorised on March 19.
The BoJ left its policy levers unchanged at the Monetary Policy Committee meeting on Friday. At the press conference, Governor Kuroda was repeatedly asked about the status of the ¥80T annual asset purchase target and what the exit strategy would be.
Friday's data added further colour to the September CPI data for the Eurozone.
Our base case is that the core CPI rose 0.2% in December, but the net risk probably is to the upside. We see scope for significant increases in sectors as diverse as used autos, apparel, healthcare, and rent, but nothing is guaranteed.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
The 20bp increase in 10-year yields over the past month doesn't live up to the hype; bondmageddon it was not.
Sterling leapt to $1.27, from $1.22 last week, amid some positive signals from all sides engaged in Brexit talks.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
A 45bp rise in long-term interest rates--the increase between mid-August and last week's peak--ought to depress stock prices, other things equal.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
Ahead of the release of the retail sales report for December 2018, markets expected to see unchanged non-auto sales.
The rate of growth of nominal core retail sales substantially outstripped the rate of growth of nominal personal incomes, after tax, in both the second and third quarters.
Yesterday's final CPI estimate in Germany confirmed that inflation fell to a 15-month low of 1.4% year-over-year in February, down from 1.6% in January.
We don't often picks fights with Nobel prize winners and former Treasury secretaries. But right now we think that Paul Krugman and Larry Summers, leading lights of the view that the Fed should not begin to raise rates "until you see the whites of inflation's eyes", are dead wrong.
The recent jump in Treasury yields, despite more carnage in the stock market, can't be allowed to continue as economic activity collapses.
Rising mortgage rates appear to have triggered the start, perhaps, of a tightening in lending standards, even before Treasury yields spiked this month and stock prices fell.
With just over six weeks to go, opinion polls continue to suggest that the E.U. referendum will be extremely close. Noisy interventions in the public debate from the Treasury, independent international bodies, President Obama, and from the Prime Minister again today have had no discernible positive impact on the support for "Bremain" relative to "Brexit"
Fed Chair Powell broke no new ground in his Senate Testimony alongside--virtually--Treasury Secretary Mnuchin yesterday, maintaining the cautious tone of his recent public statements.
Analysts have fiercely debated the consequences of the U.S. Treasury's plan to break the bank in Q2 with a whopping €3T issuance of new debt to cover the initial costs of Covid-19.
Treasury Secretary Mnuchin's five-line letter to House Speaker Pelosi on last Friday--copied to other Congressional leaders--which said that "there is a scenario in which we run out of cash in early September, before Congress reconvenes", introduces a new element of uncertainty to the debt ceiling story.
Sterling has rallied against both the dollar and the euro over the last week on the assumption that interventions by the U.K. Treasury and President Obama in the Brexit debate have shifted public opinion towards remaining in the E.U.
After a disappointing run of monthly data, the huge surplus on the main "PSNB ex ." measure of borrowing in January must have been greeted with relief at the Treasury.
The Treasury has tried to dampen expectations for Tuesday's Spring Statement, which has replaced the Autumn Statement since the Budget was moved last year to November.
Former Treasury Secretary and thwarted would-be Fed Chair Larry Summers has been arguing for some time that the Fed should not raise rates "...until it sees the whites of inflation's eyes". As part of his campaign to persuade actual Fed Chair Yellen of the error of her intended ways, he argued at the World Economic Forum in September that the strong dollar has played no role in depressing inflation. Never one to miss an opportunity to diss the competition, he wrote that Stanley Fischer's view that the dollar has indeed restrained inflation is "substantially weakened" by the hard evidence. Dr. Summers' view is that inflation is being held down by other, longer-lasting factors, principally the slack in the lab or market, rather than the "transitory" influences favored by the Fed.
Debt issuance by Eurozone non-financial firms is soaring, consistent with the ECB's hope that adding private debt to QE would boost supply. Our first chart shows that the three-month sum of net debt sold in the euro area jumped to a new record of €60.3B in May. A short-term decline in issuance is a good bet after the initial euphoria in firms' treasury departments.
Sterling will be under the spotlight again today when four members of the Monetary Policy Committee, including Governor Mark Carney, answer questions from the Treasury Select Committee about the recent Inflation Report.
The Bank of England will be dragged into the political arena on Thursday, when it sends the Treasury Committee its analysis of the economic impact of the Withdrawal Agreement and the Political Declaration, as well as a no-deal, no- transition outcome.
The Chancellor is likely to announce plans for additional public sector asset sales in today's Autumn Statement, to help arrest the unanticipated rise in the debt-to-GDP ratio this year. But privatisations rarely improve the underlying health of the public finances, partly because assets seldom are sold for their full value. And the Chancellor is running out of viable assets to privatise; the low-hanging, juiciest fruits have already been plucked.
Chief U.S. Economist Ian Shepherdson discussing the latest from the Fed
Where will EURUSD go in Q2? How about nowhere
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