ISRAEL: Central Bank Expected To Keep Base Rate Unchanged Today
Jan-06 09:36
The Bank of Israel (BoI) is expected to keep the base rate unchanged at 4.50% later today, with the decision set to be announced at 14:00GMT/16:00IST. There was just one dissenter in Bloomberg's poll of analysts calling for a 25bp rate cut.
- Bank of New York Mellon noted that the BoI will "continue to find it difficult to reference easing in the current environment, especially with expenditures still at very elevated levels" as "the 2025 deficit is expected to remain above 5% of GDP this year, well above the government target even accounting for the special reserve allocation." They believe that the changing US rate outlook has constrained the room for adjustment for the BoI in the near term.
- Goldman Sachs expect the BoI to stay on hold today, noting that "the main developments since the November MPC have been the reduction of hostilities in Lebanon and a below-consensus inflation print in December, which are both incrementally dovish." They remind that despite this, "BoI Governor Amir Yaron ruled out cuts in the near term." Goldman believe that the BoI "will emphasise the need for the government to finally pass a (sufficiently fiscally prudent) budget and that more conclusive evidence of inflation moderating is required before a cutting cycle recommences." They expect the BoI to "maintain its forecast for the cutting cycle to recommence only in Q3."
- JP Morgan wrote that while the central bank will likely stand pat on rates, "the discussion will evidently move in a more dovish direction, as the ILS has strengthened, recent inflation prints have been constructive, while geopolitical risk premia moderated." They expect 50bp worth of cuts in 2H2025 but believe that risks are "increasingly skewed toward earlier start and deeper easing cycle in Israel."
- USD/ILS trades marginally lower on the session at 3.6403 at typing. The TA-35 Index has added 0.5%, refreshing cyclical highs.
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MNI UST Issuance Deep Dive: Dec 2024 (2/2)
Dec-06 21:53
Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.
- Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
- Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
- MNI's review includes a calendar of upcoming auctions and buyback operations.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)
Dec-06 21:51
MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):
November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”.
- Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
- The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
- Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”
US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting
Dec-06 21:05
Our latest Employment Insight has just been published and emailed to subscribers.
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