BOE: STR Usage Rises To Fresh Record High; Focus On Saporta Next Week
Jun-05 10:39
BOE STR usage rose to a fresh record high of GBP68.1bln at today’s weekly operation. Take-up has been increasing steadily since the start of 2024, with BOE QT progressing and reserve balances steadily declining.
- Reserve balances were GBP693bln as of May 28.
- In her speech earlier this week, BoE MPC member Mann noted that “the estimated range for minimum demand for reserves lies between £385 billion and £530 billion”.
- The lower and upper bound of this range is higher than the GBP345-490bln range provided by Vicky Saporta – the BOE’s Executive Director for Markets – in July last year.
- Saporta is due to speak on “Approaches to QT – How to transition to the steady state?” next Wednesday. It will be interesting to see whether Mann’s PMRR (Preferred Minimum Reserve Range) is re-iterated here, or if the BOE's “house view” remains the previously-stated lower range of GBP345-490bln.
- An upward revision to the range would imply the equilibrium level of reserves is closer than previously thought, indicating a faster transition from an abundant to ample reserve regime.
- These speeches should be viewed in the context of the September BOE decision, where the Bank will decide the target reduction in the stock of gilts within the APF (current pace GBP100bln per year, with active sales of GBP13bln). Recent turmoil at the long-end of global bond markets including gilts adds an additional factor to consider, especially after the BOE made an operational decision to replace a long-maturity bucket sale with a short-maturity back in April.
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EUR: EURGBP found resistance at the Trendline
May-06 10:38
- EURGBP has again found some small resistance at the trendline (see chart), Merz Falling short in First Round Of Chancellor Voting has dampened the EUR somewhat, and Cable edging back towards its earlier high is also providing some pressure into the EURGBP.
- The Immediate support is still at that retracement level of ~0.8481, printed a 0.8482 and 0.8480 last Week.
(Chart source: MNI/Bloomberg).
CHF: Weakest in G10 After Schlegel Commentary
May-06 10:37
- The Swiss Franc prints on the bottom of the G10 leaderboard today following Schlegel commentary this morning highlighting it has appreciated 'really a lot', referring to the CHF April move which has seen its REER push through 2024 highs. Schlegel is usually not known for such pronounced commentary on Franc valuations. Domestic sight deposit data recently did not indicate material SNB FX intervention.
- Today's weakness follows yesterday's Swiss April CPI, which came in at 0.0% Y/Y, 0.2pp below consensus (and 0.3pp below the SNB's Q2 forecast). While volatile travel-related services did have a particularly negative impact this time, the overall deceleration did appear broad-based.
- At 0.8259, USDCHF continues to trade below the key 0.8333 resistance, the 2023 low and breakdown point. Initial support stands at the late April lows around 0.8200, before cycle lows at 0.8040.
- Goldman Sachs think "risks are skewed to further CHF appreciation vs both EUR and the Dollar, especially if a recession starts to look imminent".
PIPELINE: Corporate Bond Roundup: Standard Chartered on Tap
May-06 10:36
- Date $MM Issuer (Priced *, Launch #)
- 05/06 $Benchmark Standard Chartered 6NC5 +165a, 6NC5 SOFR
- 05/06 $Benchmark Gold Fields 7Y +210a
- $13.8B Priced Monday
