TURKEY: CBRT Raises RRRs on Banks' Short-Term Liabilities
May-26 06:50
- Over the weekend, the CBRT raised the reserve requirement ratios on banks’ short-term liabilities abroad in a bid to discourage local banks from seeking cheap lira from offshore markets, as Turkish banks are able to use offshore repo transactions and loans to access lower-cost lira funds abroad.
- Accordingly, the reserve requirement ratio was raised to 18% for maturities as long as 1 month in TRY-denominated funds from repo transactions and loans obtained from abroad, and to 14% for maturities as long as 3 months. Previously, the reserve requirement ratio was 12% for maturities of as long as 1 year for repo transactions and loans abroad.
- Foreign Minister Hakan Fidan will travel to Russia for a two-day visit at the invitation of his Russian counterpart, Sergey Lavrov. In his meetings with top Russian officials, Fidan is expected to discuss bilateral relations and cooperation in key areas such as trade, energy and tourism. He is expected to reiterate Turkey’s commitment to achieving lasting peace in the Ukraine war and to reaffirm Turkey’s readiness to continue playing a facilitating role in peace negotiations.
- President Erdogan speaks in Ankara and will chair a party executive meeting this afternoon. Looking ahead to the rest of the week, April trade balance and 1Q GDP data take focus on Thursday and Friday, respectively.
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Apr-25 20:32
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Apr-25 20:25
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
Apr-25 20:22
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
