Nikkei reported BOJ conducted a gensaki (reverse repo with JGB collateral) operation Monday for the first time in about a month.
*Article cited broad upward pressures on rates amid heightening expectations of an imminent BOJ rate hike, leading traders to conclude the measure was meant to prepare for market reactions Source: C.Barraud https://lnkd.in/e8c8ubcx
Central banks are hoarding gold like never before...
Source: BofA
Central banks demand matters a lot more than ETF flows for gold
Source: Bob Elliott, Bloomberg, Macrobond, The Daily Shot
The Atlanta Fed's gauge of sticky inflation has risen to about 5% on a 3-month annualized basis.
Inflation is moving in the wrong direction for the Fed, so it's interesting that the market's base case is still that the Fed is going to cut rates by about 100bp by January 2025. Source: Bloomberg, Lisa Abramowitz.
WARNING: Reverse Repo is falling off a cliff.
And has declined from more than $2500 billion to less than $500 billion since 2023. Source: Game of Trades
ECB’s Lagarde signals June rate cut w/2% inflation in sight.
Markets agree and price in 97bps cut for 2024. Source: Bloomberg, HolgerZ
Bank of Japan boj now owns nearly 60% of the entire Japanese government bonds
Source: Game of Trades
As expected, the ECB lefts rates unchanged.
The European Central Bank approach continues to follow a data-dependent approach in determining rate path. THE STATEMENT • Inflation forecasts by ECB staff have been lowered, especially for 2024, largely due to reduced energy price pressures. Inflation is now expected to average 2.3% in 2024 and to stabilize around 2.0% in the following years; core inflation projections also revised downwards. They nevertheless say that domestic price pressures remain high, partly due to wages. They say that domestic price pressures remain high, partly due to wages. • Growth projections for 2024 have been downgraded to 0.6%, with a gradual recovery anticipated, leading to 1.5% growth in 2025 and 1.6% in 2026. • The ECB believes current interest rates, if maintained, will significantly contribute to reducing inflation and has committed to keeping rates at restrictive levels as needed. MARKET REACTION • EUR/USD is weaker on the news (to 1.0875) and EUR rates extend their move lower (they were already down every day this week, and prior to the ECB announcement). German 10y is down -7bp to 2.25% at the time we write • Rate cuts expectations are slightly increased for this year, but not massively so far (still four 25bp rate cuts by the end of the year when rounding the probabilities) OUR TAKE • Overall, this is a rather dovish statement for now - let see if Lagarde press conference will reinforces the dovish reading or if she counterbalances the message from the downward revisions on growth in inflation. Source: chart: Bloomberg
