FED: Atlanta's Bostic: "No Time For Significant Shifts" In Policy
Atlanta Fed President Bostic largely reiterates previous commentary on current monetary policy (including at Monday's MNI event) in a speech in Frankfurt (link):
- "A period characterized by such widespread uncertainty is no time for significant shifts in monetary policy." "That is especially the case against the backdrop of a still resilient macroeconomy, which offers space for patience."
- "I fully support the Committee’s wait-and-see policy prescription at our latest meeting. I believe the Committee must await more clarity rather than move in a policy direction that it might need to quickly reverse."
- "what do we do if measures of both price stability and maximum employment are migrating away from target? The Committee would have to choose which of the two needs to be the primary concern in the moment.
- If both mandated objectives are moving in the wrong direction, then it is incumbent upon the Committee to redouble efforts to divine the true, underlying course of inflation and labor markets. That means sifting the data as carefully as possible in order to determine which of the mandates merits the more aggressive pursuit."
- He doesn't directly address the latest nonfarm payrolls report, saying "The pace of hiring has slowed, and it is taking job seekers longer to find work. At the same time, layoffs and unemployment remain at low levels, and I don't yet see signs of serious labor market deterioration."
- He said at the MNI event that his latest Dot Plot submission had 1 rate cut in 2025 and 3 cuts in 2026.
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PIPELINE: Corporate Bond Update
- Date $MM Issuer (Priced *, Launch #)
- 06/03 $3B #AfDB: $2B WNG 3Y SOFR+33, $1B WNG 10Y SOFR+64
- 06/03 $2B #Prov. of Ontario: 10Y SOFR+95
- 06/03 $1.5B *CPPIB 5Y SOFR+54
- 06/03 $1.25B *Kommuninvest +3Y SOFR+39
- 06/03 $1B #Hong Kong 5Y Green +50
- 06/03 $500M IADB 2030 tap SOFR+40
- 06/03 $500M Autodesk WNG 10Y +120a
- 06/03 $Benchmark Bank of NY Mellon 3NC2 +75a, 3NC2 SOFR, 11NC10 +100a
- 06/03 $Benchmark GE Healthcare +5Y +110a, 10Y +135a
- 06/03 $Benchmark NAB 3Y +65a, 3Y SOFR, 5Y +75a
- 06/03 $Benchmark Corebridge 5Y +100a
- Expected Wednesday:
- 06/04 $Benchmark IDA 5Y SOFR+46a
- 06/04 $Benchmark British Colombia 10Y SOFR+98a
US TSYS/OVERNIGHT REPO: SOFR Remains Elevated Amid Coupon Settlement Impact
Secured rates remained slightly elevated Monday with SOFR at 4.35%, unchanged from Friday's month-end figure.
- Large Treasury net cash raising (via coupon auction settlements of a net $94.5B) will have kept rates underpinned (indeed even a slight uptick in rates may well have been expected), though BGCR and TGCR dipped 2bp apiece.
- Tuesday (today) should see rates subside, both with month-end out of the way and $24B in Treasury bill paydowns.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.35%, no change, $2771B
* Broad General Collateral Rate (BGCR): 4.32%, -0.02%, $1080B
* Tri-Party General Collateral Rate (TGCR): 4.32%, -0.02%, $1046B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $113B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $271B
US TSY OPTIONS: Large 10Y At-the-Money Put Buy
- over +28,500 TYN5 110.5 puts, paying 37 ref 110-17, total volume over 39,500 ref 110-18.5
- 0.48% delta and appr 6.48% implied vol on options that expire June 20.
