US: NY Fed: Weekly Economic Index (WEI)
NY Fed explains the latest WEI decline to 0.64% from 1.30% the week prior " is due to falls in steel production, tax withholding, and fuel sales, which more than offset increases in retail sales, consumer confidence, and railroad traffic, and a decrease in initial unemployment insurance claims. Electricity output was not updated due to data unavailability."
NY Federal Reserve/MNI
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US TSYS: Market Roundup: 30YY Sub 4% Post-PPI
Tsys trade firmer, off post-PPI gap bid highs ahead midday but headed back in that direction as 30YY holds below 4.0% (3.9562% low).
- Lower than forecasted PPI (MoM +0.2% vs. 0.4% est; YoY +8.0% vs. +8.3% est) saw Tsys extend early rally past last Thursday's post-CPI levels, yield curve mixed, short end flatter (-57.839 low).
- BLS: The index for final demand goods moved up 0.6 percent in October, the largest advance since a 2.2-percent rise in June. Most of the October increase can be traced to a 2.7 percent jump in prices for final demand energy.
- FI support scaled back over the next hour as Philly Fed Harker, Fed Gov Cook and lastly Atlanta Fed Bostic offered cautionary opinions/outlooks: Harker: doesn't like to "base policy on a couple headline number", yet sees the Fed "going on hold some point next year". Cook: HAVE TO BE CAREFUL HOW MONETARY POLICY IS WIELDED, Bbg. Bostic: sees "glimmers of hope" that inflation is cooling, but expects more hikes as tighter money has not yet constrained business activity enough to seriously dent inflation.
- Year end pivot/hike step-down gains traction: Fed funds implied hike for Dec'22 steady at 49.8bp vs 50.9bp earlier, Feb'23 cumulative 84.2bp vs. 86.0bp earlier to 4.697%, terminal funds rate slips to 4.88% in May'23/Jun'23 (5.08% pre-CPI).
OPTIONS: Expiries for Nov16 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0200-10(E1.8bln), $1.0250-55(E1.0bln), $1.0500(E508mln)
- USD/JPY: Y137.50($500mln), Y140.00-10($777mln), Y140.75-00($840mln), Y147.90-00($1.1bln)
- USD/CNY: Cny7.2000($2.6bln), Cny7.3000($3bln)
ECB: TLTRO Repayments Coming Friday, But How Much?
The first set early ECB TLTRO repayments are due Friday. Counterparties required to tell their respective national central banks Wednesday if they want to avail themselves of early repayment, while we get the results of the operation on Friday (1205CET), with settlement on Nov 23. A full forward calendar of repayment dates is available here.
- Recall that at the October ECB meeting, TLTRO terms were changed retroactively "for monetary policy reasons" (in Lagarde's words), with interest paid on the loans to be indexed to average key ECB rates from Nov 23 onward - hence 3 additional voluntary early repayment dates so banks can exit the loans if they choose.
- We will assemble a list of sell-side expectations for TLTRO repayments later this week. Those we have seen vary widely on the takeup: most we have read suggest a range of E500-800bln in total repayments by end-2022 (vs E2.1trn outstanding, of which E1.3trn is due by June 2023).
- Some see this week's operation making up the bulk of that amount (eg E500-600+bln), with risks to the downside, while others think the December repayment in a few weeks' time will be bigger, as banks take more time to assess regulatory and liquidity considerations.
