On INR, liquidity has been progressively easing to a deficit of 100K crore. RBI today announced a second VRRR of Inr 50K crore as overnight rates drop towards the lower end of the interest rate corridor. Weighted Average Overnight Call rates were seen at 6.35% yesterday. RBI will announce the monetary policy decision tomorrow. More to follow on the next posting on India Rate Outlook.
I posted the below chart post the NFP release and US yields were seen pulling back on a solid $54 bn 3Y Auction. The next auction is scheduled for Wednesday $42 bn in 10Y and $ 25 bn in 30Y. Risk sentiment stabilized and USD index pulled back from 104.60 highs. No other data of note today. On Friday, we have the U.S CPI revisions followed by CPI release next week.
The NY Community Bancorp continued to fall , down 60% since Jan 30 and the KBW Regional Bank Index down 12% since Jan 30.
Fed's Mester comments reiterated the post FOMC narrative. She stated that "If the economy evolves as expected, I think we will gain that confidence later this year, and then we can begin moving rates down. My base case is that we will do so at a gradual pace so that we can continue to manage the risks to both sides of our mandate." She also stated that Fed is implementing monetary policy via an ample reserves operating regime. The current statistics around the same are:
|
Fed Facility |
Last Reported |
Maximum Utilized |
▲ in Usage |
|
|
Overnight Reverse Repo Agreements |
in bn USDs |
532 |
2,554 |
-2,021 |
|
Overnight Reverse Repo Rate |
in % |
5.30 |
- |
- |
|
Fed Balance Sheet Size |
in trn USDs |
7.63 |
8.97 |
-1.34 |
|
Reserve Balances |
in trn USDs |
3.49 |
4.19 |
-0.70 |
|
BTFP |
in bn USDs |
165.24 |
167.77 |
-2.53 |
She also said, as balance-sheet runoff continues and ON RRP volume reaches a minimum level, reserves will begin declining, too, and more redistribution of reserves will need to occur across institutions. As our balance-sheet reduction plan noted, the FOMC will slow and then stop the runoff when reserve balances are somewhat above the level it judges is consistent with ample. This will help ensure that we can continue to reduce our balance sheet to its efficient size for effectively implementing monetary policy and move toward our longer-run goal of holding primarily Treasury securities, thereby minimizing the allocation of credit across sectors of the economy. I note that the runoff pace pertains to how we implement monetary policy and not to the stance of monetary policy. Our main tool of monetary policy is the fed funds rate target, and balance-sheet runoff can continue even after we begin to lower the funds rate.
Kashkari said that he needed more information to come to a firm decision on interest-rate steps moving forward. “I am not ready to say we are in a good place,” Kashkari said.
The implied Fed Fund Pricing for 2024 moved 6 bps lower with market now pricing in 122 bps of cumulative rate cuts in 2024 and for the March policy , pricing was seen at 5.375 bps.
|
Yields |
High |
Low |
Close |
DoD ▲ |
|
US 2Y |
4.48 |
4.38 |
4.41 |
-6.80 |
|
US10Y |
4.17 |
4.08 |
4.10 |
-5.80 |
|
US2s10s |
-0.30 |
-0.32 |
-0.30 |
1.00 |
|
US30Y |
4.35 |
4.29 |
4.30 |
-3.80 |
|
JGB 10Y |
0.73 |
0.71 |
0.73 |
1.20 |
|
DE10Y |
2.34 |
2.28 |
2.28 |
-3.60 |
Comments from Reserve Bank of Australia were slightly seen hawkish and the cash rate was unchanged at 4.35%.
For UK, the construction PMI came in stronger than expected at 48.80. However, retail sales rose 1.40% yoy from prior 1.90%.
Japanese Household spending shrunk 0.90% mom.
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