EM CEEMEA CREDIT: South Africa: Jun budget data out

• A reminder the MNI tracking from state-level data that equates to 89.1% weighting of the national flash print estimates that national CPI (non-HICP print) rose by around 2.0-2.1% Y/Y (2.1% prior) and rose 0.0-0.1% M/M with current tracking of Core CPI (ex-energy and food, based on 50% of the national index) implies around 2.6% Y/Y (2.8% prior).

The ECB's strategy review (overview here) did not bring too any large surprises. The symmetric 2% target was maintained and the ECB believes "the general lessons from recent experiences suggest that all tools should remain in the toolkit – with their use subject to a comprehensive cost-benefit analysis to ensure proportionality". There were no further details on the ECB's structural bond portfolio/longer-term refinancing operations. With excess liquidity still around E2.7trln, there doesn't appear to be too much urgency within the bank to get this ball rolling yet. Some other highlights from the overview on specific topics below:

On monetary policy responses to supply shocks 

• "The potential for large deviations of inflation from target becoming entrenched and destabilising long-term inflation expectations is a key factor limiting the case for “looking-through” temporary shocks. Pre-emptive action to avert de-anchoring may be necessary because it is very costly to counteract once it has occurred"
• "Large shocks may also create non-linearities, amplifying the transmission of shocks to inflation but also improving the trade-off between inflation and output, thus weakening a key rationale for looking through temporary shocks".
• "Other channels such as hysteresis, non-linearities linked to financial frictions and household heterogeneity instead strengthen the case for looking through shocks, subject to inflation expectations being well-anchored. Some of these channels can create aggregate demand amplification to adverse supply shocks, thereby supporting the case for looking through shocks if inflation expectations are well-anchored". 

On  monetary policy at the effective lower bound:

• "Policy action along the forcefulness or persistence dimensions may help to address the constraint imposed by the effective lower bound (ELB) on nominal interest rates, especially if the full range of policy instruments is considered".
• "Early, forceful action on policy rates – including by means of negative interest rate policy – can provide effective stimulus. Decisive action on rates early on is also likely to be more effective than communicating rate paths far into the future, where credibility issues might dampen effectiveness".
• "There is also an inherent temporal dimension in the choice between forcefulness and persistence. Once the ELB is reached, only persistence through forward guidance remains as an option for interest rate policies. However, it is important to be clear in communication that persistence is a means of overcoming the ELB rather than a promise to keep rates permanently low".
• "Asset purchases or longer-term refinancing operations can enhance the forcefulness or persistence of the policy response, thereby mitigating ELB costs and enabling an earlier rate lift-off.  

• Date $MM Issuer (Priced *, Launch #)
• 06/30 $Benchmark SMFG 6NC5 +110a, 6NC5 SOFR, 8NC7 +125a, 11NC10 +130a, 21NC20 +130a
• 06/30 $Benchmark  SoftBank 5Y +120a, 10Y +140a
• 06/30 $Benchmark ABN Amro 3Y +70a, 3Y SOFR
• 06/27 No new issuance Friday, $54.375B total on week