RIKSBANK: Thedeen Speech Sets The Stage For Rate Tweaks Later This Year (1/2)
Sep-16 12:14
An interesting and important speech from Riksbank Governor Thedeen last week set the stage for a number of secondary rate tweaks later this year. While the policy rate is unsurprisingly the primary point of interest for most Riksbank watchers (particularly with next week’s decision a very close call between a hold and a 25bp cut), these proposed tweaks concern the lending rate, deposit rate and supplementary liquidity facility (SLF) rate. The speech is here .
- The deposit rate is currently set 10bps below the policy rate, with the lending rate set 10bps above (creating a 20bp wide corridor within which the monetary stance is managed). The SLF rate, which allows banks to borrow funds using lower grade collateral than required by the lending rate, is set at 75bps above the policy rate.
- With excess liquidity continuing to decrease, the Riksbank wants to promote more active liquidity management in the interbank market without stigmatizing the use of its liquidity facilities when banks require.
- To facilitate such a shift, Thedéen suggested the Riksbank is considering (i) widening the deposit/lending rate corridor (to support more interbank activity) and (ii) lowering the interest rate premium for use of the SLF (to make sure banks are not afraid to access CB liquidity if needed).
- SEB believe the proposed policy changes could “could lead to more short-end volatility, higher demand for short-dated SGBs/T-bills and [a] wider Stibor/OIS spread”.
- These changes certainly won’t be made at the September decision. Thedéen notes that “if we decide to proceed with one or more of these points, we will first send the proposal out for consultation to the relevant market participants”. However, we wouldn’t rule out such tweaks at the November or December meetings.
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AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries
Aug-15 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 15:17 BST Aug 15
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
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