The growth rate of capital being poured into retail money market funds (MMFs) is at its highest level in several decades
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This chart shows that money markets have raised policy-easing wagers since the middle of October: by September 2024, the FED should have cut by 70 basis points, the ECB by 65 basis points and the BoE by 40 basis points. (pricing is derived from swap rates tied to policy-meeting dates) Source: Bloomberg
Unsurprisingly, many of these countries are located in Asia and Sub-Saharan Africa—two of the world’s fastest growing regions.
However, ugly auctions on Thursday came as a harsh remainder of the unfavourable supply/demand situation faced by US Treasuries. On the supply side, there is a tsunami of notes and bonds that is going to flood the market. And it is occurring while the Fed, under its QT program, is letting about $60 billion a month in maturing Treasury securities roll off the balance sheet without replacement. With the Fed reducing its holdings, that tsunami of notes and bonds being issued will have to find buyers, and those buyers will have to be enticed by yields. Unless inflation and growth slow down meaningfully, yields are unlikely to drop aggressively. Source: www.wolfstreet.com, Bloomberg