Bloomberg 12/16/22

Fed Officials Reinforce Hawkish Message on Need for Higher Rates
Federal Reserve officials, hammering home an
unapologetically hawkish message, said that they won’t relent on
tighter policy until inflation is under control.
New York Fed President John Williams and San Francisco Fed
chief Mary Daly both stressed the central bank’s commitment to
lowering inflation back to their 2% target and the need for
clear evidence of easing price pressures.
“We’re going to have to do what’s necessary,” Williams said
Friday during an interview on Bloomberg Television with Kathleen
Hays.
Referring to the central bank’s forecast that rates will
peak above 5% next year, he said “it could be higher than what
we’ve written down” if that’s what it takes reduce inflation.

FOMC Press Conference 12/14/22

>> CHAIRMAN POWELL: So if I -- I think I got your question. So, you know, one thing to say is I think our policies in getting into a good place were restrictive and we're getting close to the level of sufficiently restrictive we laid out today what our best estimates are to get there. And I mean, it boils down to how long we think the process is going to take. And of course we're -- we welcome these better inflation reports for the last two months. They're very welcome but I think we're realistic about the broader project. So that's all -- that's the point I'd make. You know, we see goods prices coming down. We understand what will happen with housing services. But the big story would really be the rest of it and there is not much progress there, and that's going to take some time. I think my view and my colleagues' view is this will take time and we'll hold policy for a sustained period so -- so two good monthly reports are, you know, very welcome. Of course they're very welcome. But we need to be honest with ourselves that there is inflation, 12-month core inflation is 6% CPI. That's three times the 2% target. Now it's good to see progress but let's understand we have a long ways to go to get back to price stability.

Bloomberg 3/8/2023

The bond market is doubling down on the
prospect of a US recession after Federal Reserve Chair Jerome
Powell warned of a return to bigger interest-rate hikes to cool
inflation and the economy.
As swaps traders price in a full percentage point of Fed
hikes over the next four meetings, the yield on two-year
Treasury notes touched 5.08% on Wednesday, its highest level
since 2007. Critically, longer-dated yields remained stalled,
with the 10-year rate remaining relatively unchanged under 4%
and 30-year bonds having barely budged since Friday.
As a result, the closely-watched spread between 2- and 10-
year yields this week showed a discount larger than a percentage
point for the first time since 1981, when then-Fed Chair Paul
Volcker was engineering hikes that broke the back of double-
digit inflation at the cost of a lengthy recession.





Washington (AP) 12/14/22

-- The Federal Reserve reinforced its inflation fight Wednesday by raising its key interest rate for the seventh time this year and signaling more hikes to come. But the Fed announced a smaller hike than it had in its past four meetings at a time when inflation is showing signs of easing.
The Fed boosted its benchmark rate a half-point to a range of 4.25% to 4.5%, its highest level in 15 years. Though lower than its previous three-quarter-point hikes, the latest move will further increase the costs of many consumer and business loans and the risk of a recession.
The policymakers also forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023. That suggests that the Fed is poised to raise its benchmark rate by an additional three-quarters of a point and leave it there through next year.
In its updated forecasts, the Fed’s policymakers predicted slower growth and higher unemployment for next year and 2024. The unemployment rate is envisioned to jump to 4.6% by the end of 2023, from 3.7% today. That would mark a significant increase in joblessness that typically would reflect a recession.
Consistent with a sharp slowdown, the officials also projected that the economy will barely grow next year, expanding just 0.5%, less than half the forecast it had made in September.



Bloomberg 12/13/22

A dovish post-CPI repricing in the Fed-dated swaps market has seen the odds now favoring a downgrade to a 25bp rate hike move as early as the February policy meeting.
Swaps are still solidly pricing in a 50bp move for Wednesday’s policy announcement, little changed on the day but now an additional 84bp of hikes are priced for the February meeting, down from 91bp Monday close
An 84bp hike premium for the meeting consistent with a 50bp move for December and then 34bp additional priced for the Feb. decision
Further out, Fed peak policy rate has now dropped to around 4.82% consistent with below 100bp of additional hikes; consistent with the Fed pausing in the May meeting next year after 50bp, 25bp and 25bp hikes over the next three meetings

Bloomberg 12/15/22

The Bank of England raised interest rates for a ninth time in a row to a 14-year high of 3.5%, pressing ahead with efforts to tame sky-high inflation.
The nine-member Monetary Policy Committee split three ways on the decision as officials tried to balance the risk of inflation getting entrenched against squeezing too hard on growth just as the economy enters a recession.
Six members including Governor Andrew Bailey voted for the half-point rise. Catherine Mann favored three-quarters of a point, while Silvana Tenreyro and Swati Dhingra backed leaving rates unchanged.

Bloomberg 12/13/22

A dovish post-CPI repricing in the Fed-dated swaps market has seen the odds now favoring a downgrade to a 25bp rate hike move as early as the February policy meeting.
Swaps are still solidly pricing in a 50bp move for Wednesday’s policy announcement, little changed on the day but now an additional 84bp of hikes are priced for the February meeting, down from 91bp Monday close
An 84bp hike premium for the meeting consistent with a 50bp move for December and then 34bp additional priced for the Feb. decision
Further out, Fed peak policy rate has now dropped to around 4.82% consistent with below 100bp of additional hikes; consistent with the Fed pausing in the May meeting next year after 50bp, 25bp and 25bp hikes over the next three meetings

IFX - 10/19/2023

"More than 75 million tonnes of Russian oil have already been
supplied to China this year, which is 25% more than last year," he said.
"This year exports of Russian gas to China will reach a new historic
high - more than 30 billion cubic meters of gas will be supplied. New
possibilities are being discussed in the area of transporting Russian
natural gas to China, including through the territory of Mongolia," Sechin
said.
China also became the largest buyer of Russian coal last year, with
shipments growing by a quarter to 67 million tonnes, he said.




...Bloomberg 12/8/22

Xi Says China Willing to Boost Crude Oil Trade With Saudi Arabia

China is willing to strengthen energy policy coordination, expand crude oil trade, and strengthen cooperation in energy exploration and development with Saudi Arabia, Chinese president Xi Jinping told Saudi’s Crown Prince Mohammed bin Salman at a meeting on Thursday, according to a statement by Chinese foreign ministry.
China supports the kingdom’s Vision 2030 and Middle East Green initiatives while implementing connection of the vision with China’s Belt and Road Initiative
China willing to deepen cooperation in construction of production capacity and infrastructure, improve trade, investment and financial cooperation, expand cooperation in e-commerce, digital economy, clean energy, advanced technology, and aerospace research and development

Bloomberg 12/9/22

Xi Says China to Make Efforts on Oil & Gas Trade Yuan Settlement

China is willing to make efforts with Gulf Cooperation Council (GCC) countries in the next three to five years in key areas including energy cooperation “new pattern”, President Xi Jinping said in a speech at the China-GCC summit in Riyadh on Dec. 9, CCTV reports.
China willing to make efforts in the following areas: continue to increase import of crude oil and liquified natural gas from GCC countries
Use Chinese currency for oil & gas trade settlement
Set up joint forum on the peaceful uses of nuclear technology
Build up co-investment federation to support cooperation of sovereign investment funds
Co-build big data and cloud computing center and implement 10 digital economy projects
Cooperate on aerospace area; welcomes astronauts of GCC countries to enter Chinese space station and study the establishment of joint lunar and space exploration center

Bloomberg 12/20/22

Australia’s central bank considered pausing
its policy tightening cycle this month but decided against it as
incoming economic data didn’t yet warrant a change of stance,
minutes of the Dec. 6 meeting showed.
The Reserve Bank’s board raised interest rates by a
quarter-percentage point to 3.1% two weeks ago after considering
three options –- 25 basis points, 50 or a pause, the minutes
released Tuesday in Sydney showed.
This is the first time during the RBA’s eight-month
tightening cycle that board members put the case for no change
on the table. The discussions come as a majority of economists
see two more quarter-point hikes in 2023, taking the cash rate
to 3.6%.

Bloomberg 12/6/22

Australia’s central bank raised its key
interest rate for an eighth consecutive month and said it
expects to tighten policy further as it seeks to cool the
hottest inflation in three decades.
The Reserve Bank increased its cash rate by a quarter-
percentage point to 3.1%, the highest level since November 2012,
at its final meeting of 2022. Tuesday’s widely anticipated
decision brings the RBA’s cumulative hikes since May to 3
percentage points, the sharpest annual tightening since 1989.
“The board expects to increase interest rates further over
the period ahead, but it is not on a pre-set course,”

Dow Jones 12/7/22

The Bank of Canada on Wednesday raised its main interest rate by a half-percentage point to contain elevated inflation, and signaled it's at or near the end of its rapid-fire tightening campaign because of slowing growth.
The Bank of Canada increased its target for the overnight rate by a half-percentage point from 3.75% to 4.25%, the highest level in nearly 15 years. The Bank of Canada said any future policy decisions would be guided by incoming data.
"Looking ahead, the governing council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target," the central bank said in a statement outlining its decision.

Bloomberg 12/2/22

EU Agrees to Set $60 Price Cap Level for Russian Oil Exports

The European Union agreed to put a price cap on Russian oil at $60 a barrel, paving the way for a wider Group of Seven deal, according to a Polish diplomat.
The price is higher than where Russia already sells most of its crude. That’s because one of the main aims of the measure is to try to keep Russian oil flowing to global markets. But it’s less generous than an earlier proposal after pressure from Poland and the Baltic countries.
After long negotiations, those countries succeeded in securing additional conditions aimed at punishing Moscow, including a mechanism that would allow for revisions of the price every two months, There’s also a plan to make sure any resetting of the cap should leave it at least 5% below average market rates.

Bloomberg 2/24/23

European bonds tumbled and money market traders added to European Central Bank rate hike bets after data showed the US economy is running hotter than expected.
German two-year yields — among the most sensitive to changes in monetary policy — rose as much as 13 basis points on Friday to above 3% for the first time since 2008. Money markets now price the ECB deposit rate to peak at around 3.87% later this year compared to around 3.5% at the beginning of the year.


Bloomberg 12/15/22

*LAGARDE: ECB NEEDS TO DO MORE ON RATES THAN MARKETS PRICE
*LAGARDE: MARKET RATE BETS DON'T ALLOW ECB TO REACH 2% GOAL
*LAGARDE: ANYONE THINKING ECB IS PIVOTING IS WRONG

Yet more tough language from Lagarde as she again flags the possibility of several 50 basis points hikes. It shouldn’t be regarded as the new normal, but in current circumstances it’s the right approach, she says. “We need to take this fight and continue the battle against inflation.”

In response to Alex’s first question whether 3% is a fair assumption for a terminal rate, Lagarde says that staff projections do not allow a return to 2% inflation target in a timely manner. More needs to be done and as a result new market expectations will “hopefully” be embedded in future projections, she says.

ECB Monetary policy statement 12/15/22

The key ECB interest rates are the Governing Council’s primary tool for setting the monetary policy stance. The Governing Council today also discussed principles for normalising the Eurosystem’s monetary policy securities holdings. From the beginning of March 2023 onwards, the asset purchase programme (APP) portfolio will decline at a measured and predictable pace, as the Eurosystem will not reinvest all of the principal payments from maturing securities. The decline will amount to €15 billion per month on average until the end of the second quarter of 2023 and its subsequent pace will be determined over time.

Bloomberg 12/13/22

A dovish post-CPI repricing in the Fed-dated swaps market has seen the odds now favoring a downgrade to a 25bp rate hike move as early as the February policy meeting.
Swaps are still solidly pricing in a 50bp move for Wednesday’s policy announcement, little changed on the day but now an additional 84bp of hikes are priced for the February meeting, down from 91bp Monday close
An 84bp hike premium for the meeting consistent with a 50bp move for December and then 34bp additional priced for the Feb. decision
Further out, Fed peak policy rate has now dropped to around 4.82% consistent with below 100bp of additional hikes; consistent with the Fed pausing in the May meeting next year after 50bp, 25bp and 25bp hikes over the next three meetings

Bloomberg 11/30/22

Treasuries Pare Losses After Powell; Target Peak Priced Below 5%

Treasuries pare declines, led by front and belly of the curve, after Fed Chair Jerome Powell says the time for moderating hike pace may come as soon as December.
Treasury yields flip to richer on the day at the long-end of the curve, while 2-year yields moved to be 1bp up on the day and and well off session highs; 2s10s and 5s30s spreads pared earlier flattening move although remain tighter on the day
Over the release volumes spike with around 40k March 10-year note futures trading in move from around 112-21 up to 113-01 -- price action remains inside session range however
Swaps showed a dialing back of expectations for Fed terminal rate to just under 5%, down from level pre-remarks and similar to end of prior day

FT
In a wide-ranging speech about the outlook for monetary policy, Powell said that in order to bring inflation back down to the Fed’s 2 per cent target, the labour market must become substantially softer and there would need to be a “sustained period of below-trend growth”. He said that job gains still remain far too high, at about 290,000 positions per month over the past three months. And wage growth remains well above than the figure that would correspond to inflation falling back to target, he added.

1/19/23 Market Watch

Lagarde tells traders they are wrong to bet on slower pace of ECB interest rate rises

Benchmark European bond yields rose and the euro was firm after Christine Lagarde told traders they were wrong to bet the European Central Bank is about to slow the pace of interest rate rises.
The ECB president pushed back against reports earlier this week that suggested the central bank might trim its interest rate hikes from 50 basis points to 25 basis points at its next meeting on February 2nd in response to signs inflationary pressures were easing.
"I would invite [financial markets] to revise their position; they would be well advised to do so," Lagarde told a panel at Davos.

ECB Account of December monetary policy meeting

A large number of members initially expressed a preference for increasing the key ECB interest rates by 75 basis points, as inflation was clearly expected to be too high for too long and prevailing market expectations and financial conditions were plainly inconsistent with a timely return to the ECB’s 2% inflation target. Hence, the worsened inflation outlook required an interest rate hike larger than that priced in by markets. Failing to exceed market expectations could be regarded as confirming market views on the future policy path, which could result in the yield curve not shifting upwards to the extent required to bring inflation back to target. It was argued that, given the unfavourable data and inflation outlook that had become available with the December projections, the Governing Council’s data-dependent, meeting-by-meeting approach required an interest rate increase of the same size as in October to counter an unwarranted loosening of financial conditions and the monetary policy stance. It was maintained that a 75 basis point increase would speak for itself and was preferable to relying on the alternative approach of a 50 basis point move accompanied by strengthened communication on the way forward. A risk management approach to addressing persistent inflation pressures was also seen as calling for decisions that erred on the side of determined action to prevent an unanchoring of inflation expectations. Raising interest rates by less than 75 basis points would send the wrong message and risked being perceived as inconsistent with the 2% inflation target in the medium term, thereby reinforcing the perception of an asymmetry in the Governing Council’s reaction function.
Some of these members, nonetheless, expressed their willingness to agree on a 50 basis point rate rise if a majority were to support the proposal put forward by Mr Lane, taking into account the strengthened communication on the Governing Council’s policy intentions and the enhanced message that the Governing Council would continue raising rates significantly at a sustained pace, which were also part of the proposal. This was in some ways seen as broadly equivalent to raising rates by 75 basis points at the present meeting, because a less frontloaded but steadier approach to bringing interest rates to restrictive levels could be seen as consistent with the more persistent nature of the inflation process and continued elevated uncertainty.
Taking all into account, a broad majority of members supported Mr Lane’s proposal to raise the key ECB interest rates by 50 basis points and to communicate that interest rates would still have to rise significantly at a steady pace to reach levels that were sufficiently restrictive to ensure a timely return of inflation to the ECB’s 2% medium-term target.

Bloomberg 11/25/22

Eurozone Bonds Drop as More Hawkish ECB Comments Stall Rally

A rally in European bonds ground to a halt
on Friday, with investors betting on a faster pace of interest
rate hikes as they digested more hawkish comments from central
bank policy makers.
German 10-year yields rose as much as 13 basis points to
1.98%, trimming what’s set to be the third weekly drop in
yields.
European Central Bank policymaker Isabel Schnabel signaled
on Thursday that it may be premature to scale back rate
increases, pushing back against a market watching for signs that
global monetary policy tightening can ease. ECB Governing
Council member Madis Muller echoed the sentiment on Friday,
saying that the main risk in the battle to quench record
inflation is halting the hiking process too soon.

Bloomberg 11/26/22

Federal Reserve officials concluded earlier
this month that the central bank should soon moderate the pace
of interest-rate increases to mitigate risks of overtightening,
signaling they were leaning toward downshifting to a 50 basis-
point hike in December.
“A substantial majority of participants judged that a
slowing in the pace of increase would likely soon be
appropriate,” according to minutes from their Nov. 1-2 gathering
released Wednesday in Washington.
In addition, while Chair Jerome Powell said during his
post-meeting press conference that rates will probably
ultimately go higher than officials’ September forecasts
indicated, Wednesday’s report gave a more nuanced take:
“Various” officials -- a descriptor not commonly used in the
minutes -- had concluded that rates would ultimately peak at a
higher level than previously expected.

Bloomberg 11/22/22

The European Central Bank will deliver
another “robust” interest-rate increase next month, though it’s
premature to settle on its size just yet, according to
Bundesbank President Joachim Nagel.
Inflation data due before the Governing Council’s Dec.
14-15 meeting and new economic projections through 2025 will be
key to determining whether a third straight 75 basis-point hike
is needed to tackle record inflation, or whether a half-point
step is sufficient, Nagel told journalists in Frankfurt.
Either way, the ECB’s efforts on rates should be
complemented by a reduction in the stash of bonds it bought as
stimulus during recent crises, starting early next year, he
said.

Bloomberg 12/20/22

Bank of Japan Governor Haruhiko Kuroda just
gave investors a glimpse of what to expect when the world’s
boldest experiment with ultra-loose monetary policy comes to an
end.
In the face of sustained market pressure, Kuroda shocked
markets Tuesday by saying he’ll now allow Japan’s 10-year bond
yields to rise to around 0.5%, double the previous upper limit
of 0.25%.
Whether this is a strategic tweak to buy time for his
yield-curve control settings until his decade-long term ends in
April or the start of the end for his unprecedented monetary
easing remains to be seen.
But one thing is clear: a crack has opened that markets
around the world will keep prising in the weeks and months
ahead.
“This is a step toward an exit, whatever the BOJ calls it,”
said Masamichi Adachi, chief Japan economist at UBS Securities
and a former BOJ official. “This opens the door to a chance of a
rate hike in 2023 under a new governorship.”

Bloomberg 11/17/22

Fed Daly Says Rate Peak Between 4.75%-5.25% a Reasonable Range

Federal Reserve Bank of San Francisco President Mary Daly said 4.75% to 5.25% was a “reasonable” range for where the US central bank could lift interest rates and then go on hold.
“Somewhere between 4.75 and 5.25 seems a reasonable place to think about as we go into the next meeting,” Daly said in a Wednesday interview on CNBC. “And so that does put it in the line of sight that we would get to a point where we would raise and hold.”

Reuters 11/21/22

Kevin McCarthy, the Republican leader in the U.S. House of Representatives, said on Sunday he would form a select committee on China if he is elected speaker of the chamber, accusing the Biden administration of not standing up to Beijing.
"China is the No. 1 country when it comes to intellectual property theft," he told Fox News in an interview.
"We will put a stop to this and no longer allow the administration to sit back and let China do what they are doing to America."

Bloomberg 11/10/22

Treasuries rise sharply to fresh highs of the day, soaring after October CPI data prints below estimate. Fed-dated OIS market drops sharply, almost pricing in a 50bp move at the December Fed meeting instead of another 75bp hike.
Futures volumes surge with almost 100k 10-year note contracts trading in the post-CPI bid; 10-year yields drop to around 3.94%, richer by 15bp on the day while 2s10s spread re-steepens
Fed-dated OIS pricing in 52bp rate hikes for the December meeting vs 58bp priced Wednesday close; further out Fed peak drops to 4.88% by May next year, down from 5.05% prior close

That's why I've said it's appropriate to slow the pace of increases. So that time is coming. And it may come as soon as the next meeting or the one after that. No decision has been made. It is likely we'll have a discussion about this at the next meeting, a discussion. To be clear, let me say again, the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive which will be our principle focus.

POWELL:
That's meant to put that question really as the important one now going forward. I've also said that we think that the level of rates that we estimated in September, the incoming data suggests that that's going to be higher. That's been the pattern. I would have little confidence that the forecast, if we made a forecast data, if we did SEP today, one after another that will go up. That will end when it ends. There's no sense that inflation is coming down. If you look at the -- I have a table of the last 12 months of 12-month readings, there's really know pattern there. We're exactly where we were a year ago. Okay. So I would also say it's premature to discuss pausing. It's not something that we're thinking about. That's really not a conversation to be had now. We have a ways to go. The last thing I'll say is that I would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. I control those messages. That's my job.