Bloomberg 9/7/22

The Bank of Canada delivered a fourth consecutive outsized interest-rate hike in a bid to slow the nation’s economy and drag inflation down from four-decade highs.
Policy makers led by Governor Tiff Macklem raised the benchmark overnight rate by 75 basis points to 3.25% on Wednesday, giving Canada’s central bank the highest policy rate among major advanced economies. Officials said they expect to continue raising rates, keeping the door open for more hikes in coming months.
“Given the outlook for inflation, Governing council still judges that the policy interest rate will need to rise further,” officials said in the statement.
The jumbo hike into the restrictive range points to a central bank still uncomfortable with sticky inflation, but sets the stage for policy makers to start fine-tuning borrowing costs as price pressures are brought to heel.
While dropping any references to “front-loading,” the statement suggests the Bank of Canada has shifted to thinking about smaller adjustments to policy, and is looking at where officials can start winding down the tightening campaign.
“As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target,” the bank said.

Bloomberg 9/6/22

Australia’s central bank delivered its
fourth consecutive half-percentage point interest-rate increase
and reinforced that it’s not on a “pre-set path” in its drive to
rein in inflation.
The Reserve Bank raised the cash rate to 2.35%, the highest
level since 2015, from 1.85% at Tuesday’s meeting.

Bloomberg 9/19/22

US 10-Year Yield Rises to 3.5% for First Time Since 2011

The 10-year Treasury yield briefly rose above 3.50% for the first time since 2011 on Monday, with the bond market extending its bearish run ahead of another jumbo rate hike expected this week by the Federal Reserve to bring down inflation.
The 10-year yield jumped as much as 6.6 basis points to 3.516%, breaking above a psychological level that held in mid-June. Still the main selling pressure in the Treasury market remained focused on the policy sensitive two-year note with the benchmark rising as much as 9 basis points to 3.96%, marking a fresh high since October 2007.

Bloomberg 8/26/22

Federal Reserve Chair Jerome Powell issued a
fresh warning to investors doubting his resolve to fight
inflation: interest rates are heading higher and will stay there
“for some time.”
The message from Jackson Hole -- hammered home by Powell in
a terse five-page speech Friday and endlessly repeated by his
colleagues -- is that the central bank will not blink in the
fight to cool prices.
“Restoring price stability will likely require maintaining
a restrictive policy stance for some time,” Powell told the
audience at the Fed’s annual retreat in Wyoming’s Grand Teton
National Park. “The historical record cautions strongly against
prematurely loosening policy.”
“Higher for longer is the new watchword,” said Peter
Hooper, global head of economic research for Deutsche Bank AG.

Bloomberg 8/26/22

Some European Central Bank officials want to begin a debate by year-end on when and how to shrink the almost 5 trillion euros ($5 trillion) of bonds accumulated during recent crises.
Deciding how to go about the process -- known as quantitative tightening -- is the logical next step after the ECB raised interest rates for the first time since 2011 in July, people familiar with the plans said, asking not to be identified as the deliberations aren’t public.
The Governing Council hasn’t discussed the issue yet, and it’s unclear when the best moment would be to start reducing the balance sheet, given the increasing likelihood of a recession in the 19-member euro zone, according to the people.
ECB staff are currently studying how the Federal Reserve and the Bank of England are managing QT, one person said.

Bloomberg 8/26/22

China stepped up its economic stimulus with
a further 1 trillion yuan ($146 billion) of funding largely
focused on infrastructure spending, support that likely won’t go
far enough to counter the damage from repeated Covid lockdowns
and a property market slump.
The State Council, China’s Cabinet, outlined a 19-point
policy package on Wednesday, including another 300 billion yuan
that state policy banks can invest in infrastructure projects,
on top of 300 billion yuan already announced at the end of June.
Local governments will be allocated 500 billion yuan of special
bonds from previously unused quotas.

Bloomberg 8/16/22

China’s embattled developers surged in the
stock and bond markets Tuesday on news that authorities are
planning to help some raise fresh financing, adding to signs of
official support for an industry grappling with a debt crisis
and slumping home sales.
Notes from Country Garden Holdings Co., CIFI Holdings Group
Co. and Longfor Group Holdings Ltd. soared at least 11 cents on
the dollar Tuesday, according to Bloomberg-compiled prices, set
for the biggest gains since March. Their shares surged more than
9% in Hong Kong and a Bloomberg Intelligence gauge of the sector
gained 2.4%, the most in three weeks.
Chinese authorities have told several property developers
that state-owned credit support provider China Bond Insurance
Co. will give full guarantees for some of their upcoming onshore
bond offerings, according to people familiar with the matter.
The first batch of private developers to be included in the plan
include Longfor, Seazen Group Ltd., CIFI, Country Garden and
Gemdale Corp., the people said, asking not to be identified
because the matter is private.

Bloomberg 8/16/22

Heightened activity seen in SOFR spreads Tuesday including a large Mar23/Sep23 steepener, blocked mid-morning. Front-end spreads are starting to indicate Fed rate cut pricing shifting out of early next year and deeper into 2023 and 2024.
At 10:28am ET 15,000 SOFR Mar23/Sep23 spread was bought via block at -28.5bp; DV01 on the trade is $375k

Bloomberg 8/4/22

The pound reversed gains against the US dollar and UK bonds rallied after the Bank of England warned of a long recession and said its monetary policy path was not pre-set.
That took the shine off a widely expected 50 basis-point interest-rate hike for pound investors. The currency fell as much as 0.5% to $1.2084, having gained by that much before policy makers raised interest rates to 1.75%. Ten-year gilt yields dropped as much as eight basis points and part of the yield curve briefly inverted to reflect fears of an economic slowdown.
While delivering its biggest rate rise in nearly 30 years, the BOE suggested it could be less forceful in raising rates in the coming months. It warned the UK is heading for more than a year of recession under the weight of soaring inflation, leading traders to pile into gilts as a haven.

Reuters 8/15/22

China slashed holdings of U.S. Treasuries for a seventh consecutive month in June, Treasury department data released on Monday showed, with investors closely tracking this measure in the wake of tensions between the world's two largest economies involving Taiwan.
China's stash of U.S. government debt dropped to $967.8 billion in June, the lowest since May 2010 when it held $843.7 billion. In May, the world's second biggest economy had $980.8 billion in Treasuries, data showed. China's hoard of U.S. debt has seen multiple 12-year lows the last few months.

Bloomberg 8/5/22

US Secretary of State Antony Blinken accused
China of seeking to change the status quo in the Taiwan Strait
with missile tests and military drills following House Speaker
Nancy Pelosi’s visit to the island.
Blinken made the remarks at a regional summit in Cambodia
on Friday that was also attended by Chinese Foreign Minister
Wang Yi and Russian counterpart Sergei Lavrov.

The Washington Post 8/4/22

China launches military exercises around Taiwan after Pelosi visit

The Global Times, a state-run nationalist tabloid, quoted an anonymous Chinese military expert describing the drills as a “new beginning” for PLA activities around Taiwan, which would not be limited to their previous areas and would instead “regularly take place on Taiwan’s doorstep.”

Bloomberg 8/3/22

*DALY: MARKETS ARE AHEAD OF THEMSELVES ON FED CUTTING RATES
*DALY: 3.4% IS A REALLY REASONABLE PLACE TO GET TO BY YEAR END
*DALY: JUNE SEP REMAINS A `REASONABLE GUIDE'
*DALY: ESTIMATE OF NEUTRAL RATE IS LITTLE OVER 3%, MAYBE 3.1%
*DALY: WE'RE NOT EVEN UP TO NEUTRAL RIGHT NOW
*DALY: OPTIMISTIC TO GET INFLATION DOWN WITHOUT A DEEP RECESSION
*DALY: WON'T BRING RATES DOWN IN JUST A FEW MONTHS
*DALY: BRING RATES UP TO LONGER THAN 6 MONTHS, MAYBE A YEAR
*DALY: 3% INFLATION STILL TOO HIGH, WHY WE HAVE A 2% AVG GOAL
*DALY: WE'RE DELIVERING ON 2% HOPEFULLY BY LATE '23, EARLY '24


“We’re going to have to see convincing evidence across the board of headline and other measures of core inflation all coming down convincingly before we’ll be able to feel like we’re doing enough,” St. Louis Fed President James Bullard says.
“We’ve still got some ways to go here to get to restrictive monetary policy,” he says in interview on CNBC. “We should get to 3.75 to 4% this year.”
“We’re going follow the data very carefully here and I think we will get it right,” he says
“I’ve liked front-loading. I think it enhances our inflation fighting credentials, keeps inflation expectations under control,” Bullard says
US economy “is not in a recession,” he says. “It’s hard to say that there was a recession with a flat unemployment rate at 3.6%. It’s hard to say there’s a recession”
Second-quarter slowdown was “more concerning,” first-quarter contraction “probably a fluke”
“We’ll get positive GDP growth in the second half”
“We’ll have a reasonably good third quarter here and so I think jobs will also hold up over the second half of the year job growth is slowing, but it’s slowing to a trend pace”

Swap markets indicate that the likely outcome of the September Federal Reserve policy meeting is now a coin toss between a 50-basis-point hike and a bigger increase of 75 basis points.
The rate on swap contracts tied to the date of the September Fed meeting on Wednesday rose as high as 2.958%, some 62.8 basis points above the current effective fed funds rate of 2.33%. That implies a hike of at least 50 basis points is seen as definite and a more than one-in-two chance that it could be three-quarters of a percentage point.
Traders have ramped up their expectations in recent days for the amount of Fed tightening at the next meeting in the wake of comments from various central bank policy makers indicating that they are firmly focused on combating inflation even as risks to growth loom over the horizon.

Bloomberg 8/8/22

Fed’s Bowman Backs More Large Rate Hikes Until Inflation Eases

The Federal Reserve should keep considering
large hikes similar to the 75 basis-point increase approved last
month until inflation meaningfully declines, Governor Michelle
Bowman said.
“My view is that similarly-sized increases should be on the
table until we see inflation declining in a consistent,
meaningful, and lasting way,” Bowman said Saturday in remarks
prepared for an event organized by the Kansas Bankers
Association.

Bloomberg 8/2/22

Bonds Fall as Fed’s Daly Revives the Outlook for Higher Rates

The bears are taking leadership in the bond market again.

Two-year yields are up around 10 bps after Fed Bank of San Francisco President Mary Daly said the central bank’s work on inflation is “nowhere near” being almost done. The comments echo remarks from Minneapolis Fed Bank President Neel Kashkari, who said central bank is “a long way away” from its inflation goal. If other Fed officials strike the same tone, July’s bond rally will turn into an August selloff.

*EVANS: SEES 3.75%-4% FUNDS RATE BY 2Q 2023 AS SUFFICIENTLY HIGH
*EVANS: HOPEFUL 3.25%-3.5% FUNDS RATE BY YR-END STILL REASONABLE
*EVANS: 50 BPS AT SEPT MEETING REASONABLE, BUT 75BPS COULD BE OK
*EVANS: SEES JOBLESS RATE STAYING BELOW 4% THIS YEAR
*EVANS: HOPEFUL 25 BPS HIKES AFTER SEPT FOMC STILL REASONABLE
*US TREASURY 3-YEAR YIELD RISES 15 BASIS POINTS TO 2.95%

The Federal Reserve is committed to bringing inflation under control, because it’s “a foundational piece of a healthy economy,” Cleveland Fed President Loretta Mester says.
“That’s what we’re about, what we’ve been about this year and will continue to be about until we get inflation under control,” Mester, who is a voter this year on the rate-setting Federal Open Market Committee, says in virtual interview with the Washington Post
Mester forecasts that US economy will grow below trend in 2022, which is necessary to slow price increases
Cleveland Fed chief would want to see “very compelling evidence” month-to-month changes in inflation are moving down in determining when the tightening cycle has accomplished its goal on prices
“We’re very focused on making sure that we bring inflation down, because that is the bedrock of making sure that we will have sustainable healthy labor markets over the medium and the longer run”

Washington Post 8/22/22

Just days before House Speaker Nancy Pelosi was expected
to visit Taiwan, Chinese President Xi Jinping had a request of President
Biden: Find a way to keep Pelosi from visiting.

Xi's request in a July 28 call with Biden, described by a senior White House
official who spoke on the condition of anonymity to discuss a sensitive
conversation, followed myriad warnings Chinese officials made to U.S.
counterparts of what China might do in retaliation for Pelosi's visit to the
self-governing island that Beijing considers part of its territory.

But Biden told Xi he could not oblige, explaining that Congress was an
independent branch of government and that Pelosi (D-Calif.), as with other
members of Congress, would make her own decisions about foreign trips, the
official said. Biden also warned Xi against taking provocative and coercive
actions if the House speaker were to travel to Taiwan, the official said.

Bloomberg 8/22/22

Taiwan’s export orders unexpectedly
contracted in July as demand from Chinese customers plunged, and
officials are now warning of further declines to come.
Orders slumped 1.9% in July compared to the same month last
year, according to a Monday statement from Taiwan’s Ministry of
Economic Affairs. That was worse than even the most bearish
forecast in a Bloomberg survey of economists. The median
estimate was for a 6.2% increase.
A 22.6% decline in orders from China and Hong Kong --
which, combined, are the second-largest source of demand after
the US -- was the main driver of the surprise fall, ministry
data show. A 6.9% increase in orders from the US was
insufficient to offset the difference.

Dow Jones 8/2/22

Trending: RBA Raises Cash Rate for Fourth Straight Month

Australia's central bank is the most mentioned entity over the past 12 hours, according to Factiva data, after it raised its benchmark cash rate target by 50 basis points to 1.85%. This marks the fourth time the Reserve Bank of Australia has raised the rate in as many months. Prior to May, the RBA hadn't raised the rate since November 2010.

Bloomberg 8/2/22

Australia’s central bank gave itself wriggle
room to adjust the pace of interest-rate increases if the
economic outlook deteriorates after delivering the sharpest
policy tightening in a generation.
“The board expects to take further steps in the process of
normalizing monetary conditions over the months ahead, but it is
not on a pre-set path,” Governor Philip Lowe said after hiking
by 50 basis-points for a third straight month to 1.85%.

Bloomberg 7/29/22

Treasury Yields Bounce as Traders Reminded of Inflation Risks

A combination of data showing an ongoing acceleration in US inflationary pressures and commentary from a Federal Reserve official helped draw a line, for now, under the recent plunge in Treasury yields.
The yield on two-year Treasury notes climbed as much as 9 basis points to 2.95%, before moving back to around 2.91%.
Already up on the day, the rate climbed to a session high after data from the US personal income and spending report showed the PCE deflator -- a gauge that the Fed watches -- climbing 1% month-on-month, more than the 0.9% median estimate of economists. Earlier, Atlanta Fed President Raphael Bostic said the US economy was “a ways” from entering a recession and the central bank had further to go in raising interest rates to get inflation under control.

FOMC Statement

We anticipate that ongoing increases in target range increases for the federal funds rate will be appropriate. The pace of those increases will continue to depend on the incoming data and evolving outlook for the economy. Today's increases in the target range is the second 75 basis point increase in as many meetings. While another unusually large increase could be appropriate at our next meeting. That is a decision that will depend on the data we get between now and then.

Bloomberg 7/27/22

Stocks Surge, Bond Yields Sink on Powell’s Remarks: Markets Wrap
Powell says unusually large hike to be data-dependent
Fed to offer less ‘clear guidance’ on rate moves

Stocks rallied and bond yields tumbled after Jerome Powell said the Fed will offer less “clear guidance” on rate moves and that it will likely be appropriate to slow rate hikes at some point.
The Federal Reserve’s boss said the central bank is moving “expeditiously” when it comes to dealing with price pressures and reassured it has the tools to do the job. Powell also noted that another unusually large boost in rates would depend on data after officials raised rates by 75 basis points for the second straight month.
Expectations for the pace of Fed rate increases eased back -- with swap markets showing around 58 basis points of tightening priced in for the next meeting in September and the expected peak for the cycle dropping to around 3.3% -- with that kind of level seen toward the end of this year or early in 2023.

Chair Powell press conference

There's so much uncertainty. These aren't normal times. There's significantly more uncertainty about the path ahead and ordinarily it's quite high. The only data point I have for you is the June SEP, which, I think, is just the most-recent thing the economy's done. Since then, inflation is coming higher at economic activity, coming in weaker than expected, but at the same time, I'd say that's probably the best estimate of where the committee's thinking, which is still that we'd get to a moderately restrictive level by the end of this year. Somewhere between 3 and 3.5% and where the committee sees further rate increases in 2023. We'll update that at the September meeting, but that's really the best I can do on that.

Bloomberg 8/18/22

Schnabel Flags Big ECB Hike Ahead Amid Strong Inflation
Several indicators suggest ‘elevated risk of de-anchoring’
Markets are betting on 50 basis-point hike in September

The inflation outlook hasn’t improved since the European Central Bank raised rates by half a point in July, Executive Board member Isabel Schnabel said in a Reuters interview, suggesting that another hike of similar magnitude may be coming next month.
Price pressures won’t vanish quickly and might in fact accelerate further in the short run, Schnabel said. While most gauges of inflation expectations remain anchored, she warned that “a number of indicators are pointing toward an elevated risk of de-anchoring.”
In September, “any decision is going to be taken on the basis of incoming data,” she said. “If I look at the most recent data, I would say that the concerns we had in July have not been alleviated.”
Schnabel’s remarks are the most concrete yet about the ECB’s future interest-rate path after policy makers decided last month to no longer flag the size of upcoming hikes. A worsening inflation outlook prompted officials to act more forcefully at their last meeting than they previously communicated, triggering a debate about the merit of precomitting when uncertainty is high.

Bloomberg 7/25/22

The European Central Bank may not be done
with big increases in interest rates after surprising with an
initial half-point hike last week, according to Governing
Council member Martins Kazaks.
“I would not say that this was the only front-loading,”
Kazaks, one of the ECB’s most-hawkish officials, said in an
interview in Frankfurt. “I would say that the rate increase in
September also needs to be quite significant.”

Bloomberg 7/25/22

The European Central Bank will follow a
step-by-step approach in raising borrowing costs, according to
Governing Council member Ignazio Visco.
“We will see depending on data how to go on, but this does
not mean that we are not going to proceed in a gradual way,” the
Italian central bank governor said in an interview with
Bloomberg Television. Gradualism “means moving step by step, not
being very slow.”
He added that “there is no way now to say now” whether the
ECB’s next step should be a quarter-point or half-point
increase.

Bloomberg 7/25/22

European Central Bank President Christine Lagarde said interest rates will be increased as much as is required to bring inflation back to 2%.
“We are sending a clear message to companies, employees and investors: inflation will return to our target value of 2% in the medium term,” she said in an op-ed for Germany’s Funke Mediengruppe. Measures taken so far “are already having an impact on interest rates across the euro area.”
The comments come a day after the ECB raised rates more than expected, ending eight years of negative interest rates to fight inflation that hit 8.6% in June and is expected to accelerate further. The 50 basis-point hike brought the deposit rate to 0%, ending eight years of negative rates. Investors see about 113 basis points of addition ECB rate increases by year-end, according to market bets.
“We will raise interest rates for as long as it takes to bring inflation back to our target,” Lagarde added. The Governing Council will “decide on the right pace for our next steps based on the newly available data.”

Bloomberg 7/14/22

Federal Reserve Governor Christopher Waller said he supports a three-quarter percentage-point increase in the benchmark lending rate later this month after seeing the latest jump in the consumer price index, but could vote for more aggressive action if coming economic reports point to further inflation risks.
“With the CPI data in hand, I support another 75 basis-point increase,” Waller said Thursday in remarks to a Global Interdependence Center event in Victor, Idaho.
While the CPI figures were a “major league disappointment,” Waller stressed that his vote is contingent on additional data due before the July 26-27 Fed policy meeting, citing retail sales and housing.
“If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down,” said Waller, who will answer questions from Bloomberg’s Michael McKee following his prepared remarks.

Bloomberg 7/21/22

ECB Raises Main Refinancing Rate By 50BPS to 0.5%; Est. 0.250%

European Central Bank raised its main refinancing rate more than economists expected.
Main refinancing rate raised to 0.5% (estimate 0.250%)
38 of 46 economists in Bloomberg's survey expected 0.250%

Dow Jones 7/21/22

ECB Surprises as It Hikes Interest Rate by Half Percentage Point

The European Central Bank announced a larger-than-expected interest-rate increase of half a percentage point and outlined a new plan to buy the debt of Europe's most vulnerable economies, taking bold action to protect the currency union as it navigates the twin threats of skyrocketing inflation and slowing economic growth.
The ECB's surprise move on Thursday takes its key interest rate to zero and ends the bloc's controversial eight-year experiment with negative interest rates.
It suggests that the bank's top officials are increasingly concerned about the threat of persistently high inflation in the eurozone. Officials had telegraphed for weeks that the bank would likely raise rates by only a quarter percentage point this month.
The ECB said it would continue to increase rates toward a more normal level. It also said it had created a new bond-buying program, known as the Transmission Protection Instrument, which will ensure that the bank's interest rates are transmitted smoothly across the currency union. The scale of purchases under the new program will depend on the severity of the risks, the ECB said.

Bloomberg 7/21/22

The euro rallied and European bonds extended declines after the European Central Bank raised rates by 50 basis points.
German 2-year yields rise 17bps to 0.78%

Reuters 7/19/22

European Central Bank policymakers are considering raising interest rates by a bigger-than-expected 50 basis points at their meeting on Thursday to tame record-high inflation, two sources with direct knowledge of the discussion told Reuters.
To cushion the impact of the higher borrowing costs, policymakers are also expected to announce a deal to help indebted countries like Italy on the bond market. The deal will require they stick to European Commission rules on reforms and budget discipline, the sources said.

Bloomberg 7/19/22

The euro jumped to a two-week high and
short-dated bonds slid across Europe as markets priced in a more
aggressive pace of interest-rate hikes from the European Central
Bank.
The common currency rose more than 1.2% after reports that
ECB policy makers may consider a 50-basis-point rate hike at
their meeting on Thursday, larger than the quarter-point move
signaled in June.
That led money markets to bet on almost 50% odds of a half-
point hike this week and more than a percentage point by
September. Shorter maturity bonds led a selloff, with German
two-year yields -- among the most sensitive to changes in policy
-- surging as much as 12 basis points to 0.64%.

Bloomberg 7/17/22

An oil-price cap initiative to mitigate global inflation
while punishing Russia over what she calls “horrific
consequences” of the war in Ukraine has been high on the agenda
for US Treasury Secretary Janet Yellen, but a non-starter for
others like China and India. Indrawati said she will discuss the
proposal with Indonesia’s energy-related ministries.
Treasury said in a statement Yellen held a number of
bilateral meetings including sessions with Saudi Arabia’s
Finance Minister Mohammed Al-Jadaan, Australian Treasurer Jim
Chalmers, South African Minister of Finance Enoch Godongwana and
Singapore’s Deputy Prime Minister Lawrence Wong. The statement
didn’t include details with how ministers responded to Yellen’s
appeal on the oil price cap.

Reuters 7/21/22

Lavrov said geographical realities had changed since Russian and Ukrainian negotiators held peace talks in Turkey in late March that failed to produce any breakthrough.
At that time, he said, the focus was on the Donetsk and Luhansk People's Republics (DPR and LPR), self-styled breakaway entities in eastern Ukraine from which Russia has said it aims to drive out Ukrainian government forces.
"Now the geography is different, it's far from being just the DPR and LPR, it's also Kherson and Zaporizhzhia regions and a number of other territories," he said, referring to areas well beyond the Donbas that Russia has wholly or partly seized.
"This process is continuing logically and persistently."