ECB: June Accounts: A Few Members Saw A Case For No Cut
Jul-03 11:43
The below are excerpts from the ECB Accounts of the June 4-5th meeting (in full here):
- Taking stock of conditions prior to the June meeting, "It was contended that, after seven rate cuts, interest rates were now firmly in neutral territory and possibly already in accommodative territory."
- “It was argued that cutting interest rates by 25 basis points at the current meeting would leave rates in broadly neutral territory. This would keep the Governing Council well positioned to navigate the high uncertainty that lay ahead, while affording full optionality for future meetings to manage two-sided inflation risks across a wide range of scenarios. By contrast, keeping interest rates at their current levels could increase the risk of undershooting the inflation target in 2026 and 2027."
- "At the same time, a few members saw a case for keeping interest rates at their current levels. The near-term temporary inflation undershoot should be looked through, since it was mostly due to volatile factors such as lower energy prices and a stronger exchange rate, which could easily reverse. It remained to be seen whether and to what extent these factors would translate into lower core inflation.”
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PIPELINE: Corporate Bond Roundup: $1.25B Kommuninvest +3Y SOFR Launched
Jun-03 11:41
- 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 $500M IADB 2030 tap SOFR+40
- 06/03 $Benchmark Hong Kong 5Y Green +50
- 06/03 $Benchmark NAB 3Y +65a, 3Y SOFR, 5Y +75a
BOE: Key takeaways from today's TSC testimony
Jun-03 11:32
Bailey, Breeden, Dhingra and Mann have concluded their testimony to the Treasury Select Committee. Here are the key highlights:
- Breeden's view: We learned that Breeden would have voted for a 25bp cut in May irrespective of global factors and she didn't describe the decision as close. She also explicitly noted that the Minutes stated not all members who voted for a 25bp cut held this view. So she seems to have distanced her view a little from Lombardelli and Breeden and is tilted a little more to the dovish direction. She noted that nothing had changed to challenge the Agents' pay settlements expectations.
- A popular line amongst MPC members now is that the direction of the rate path is downwards but the timing and terminal point are very uncertain. We have seen this line in other recent MPC appearances, and expect it to continue making appearances going forward.
- There was no discussion of June and a cut then appears off the table. There was also no steer to either August or beyond, so knowing that Breeden is a bit more dovish is the key takeaway view here - particularly as she doesn't speak that much and so we can assume that unless something materially evolves in terms of pay settlements that she is likely to be at least as dovish if not more so than Governor Bailey.
- Rate projections: Governor Bailey said that using market paths in the rate projections made little sense and seemed to suggest that eventually market paths probably wouldn't be used at all but that there was quite a bit of work for the BOE staff to do before they could get to this point.
- On scenarios: All of the members agreed that the scenarios and model improvements had improved the MPC's discussions and that they enabled them to quantify effects and run different aspects through the model (Mann used an example of the steepness of the Phillips curve).
- Labour market data: Both Bailey and Breeden pointed to relying more on the HMRC data as well as other labour survey data given LFS issues.
- Surveys to get namechecked by Bailey: Agents and DMP surveys (both are BOE surveys), PMIs, CBI surveys, Lloyds Bank survey.
LOOK AHEAD: Tuesday Data Calendar: Factory Orders, JOLTS Jobs, Fed Speakers
Jun-03 11:26
- US Data/Speaker Calendar (prior, estimate)
- 03-Jun 1000 Factory Orders (3.4% rev, -3.0%), ex-Trans (-0.4% rev, 0.2%)
- 03-Jun 1000 Durable Goods Orders (-6.3%, -6.3%), ex-Trans (0.2%, 0.2%)
- 03-Jun 1000 Cap Goods Orders Nondef Ex Air (-1.3%, -1.3%), ship (-0.1%, -0.1%)
- 03-Jun 1000 JOLTS Job Openings (7.192M, 7.100M)
- 03-Jun 1000 JOLTS Job Openings Rate (4.3%, --)
- 03-Jun 1000 JOLTS Quits Level (3.332M, 3.271M), rate (2.1%, --)
- 03-Jun 1000 JOLTS Layoffs Level (1.558M, 1.614M), rate (1.0%, --)
- 03-Jun 1130 US Tsy $60B 6W bill auction
- 03-Jun 1245 Chicago Fed Goolsbee moderated Q&A
- 03-Jun 1300 Fed Gov Cook economic outlook (text, Q&A)
- 03-Jun 1530 Dallas Fed Logan, Fed listens event (text, no Q&A)
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