People’s Bank of China open market operations are one tool used to manage liquidity
- rates may be cut this month reports the CSJ
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China Securities Journal is a national securities newspaper – part of official Xinhua News Agency.
Archives of “Banking” tag
rssGlobal central bank co-ordinated interest rate cut coming on Wednesday 4 March
A coordinated global interest rate cut by the top central banks will happen this Wednesday, March 4.
- So says economist for the U.S. bank lobby Bill Nelson, chief economist at the Bank Policy Institute
Nelson, formerly at the Federal Reserve (worked on the Fed’s responses to the 2007-2008 financial crisis):
- It will happen before the U.S. stock market opens, either 7 a.m. or 8 a.m. ET (1200 or 1300 GMT)
- It will be half a percentage point at least
- “The only way to get a positive market reaction is to deliver more than expected”
- will include “forward guidance”
Here is the link for more: Don’t keep your powder dry
China Securities Journal reports PBOC may conduct an MLF this week at a lower rate
MLF is medium term lending facility, 6 to 12 month loans to banks
Lowering the rate would be another effort at stimulus from the People’s Bank of China in the wake of the coronavirus outbreak. There is MLF maturing this week.
Here are all the changes in the FOMC statement (blink and you’ll miss it)
This is how the statement from the Federal Open Market Committee changed in January from December.
Sheesh. Not much. What there is is slightly more dovish (but its a bit of a hair-split isn’t it?)
Pres. Trump: Fed should get smart and lower the rate to make US rates competitive
The FOMC decision is set for tomorrow at 2 PM ET
As the FOMC today meeting gets underway today, with the decision due at 2 PM ET/1900 GMT tomorrow, Pres. Trump is adding his two cents into the discussion.
He says:
- The Fed should get smart and lower the rate to make our interest competitive with other countries
- If Fed lowers interest rates, we would then focus on paying off and refinancing the US debt
Of course the Fed only controls the shorter-term interest rates. Longer term interest rates have the shorter-term interest rates as a function, but it is not the end all be all for the shape of the yield curve. In fact, rates could increase further out the curve and increase treasury borrowing obligations.
Your guide to China’s ‘big bang’ 2020.100% foreign ownership in financial industry.
China will accelerate opening up of its commercial banking and securities sectors, among others, next year.
For example:
- foreign insurers can apply to set up 100%-owned units offering life insurance (this segment accounts for three-quarters of the Chinese insurance market)
- from January 1 overseas firms will be allowed to set up their own entities to trade futures
- offshore firms will be able to apply for licenses to start wholly owned mutual fund management firms in April
And, plenty more here at the link
Moody’s cut German banking outlook to negative from stable as profitability weakens
Deposits are proving to be costly for German banks
Moody’s just revised their outlook for the German banking industry to ‘negative’ from ‘stable’, as they expect German banks’ profitability and overall creditworthiness to weaken in a low interest rate environment.
It’s not exactly blockbuster news but again, it just reaffirms the fact that Germany is resigned to some troubling times ahead as the economy continues to slow down further. In that regard, the lack of fixed income alternatives is also hurting banks.
What are the biggest risks to markets in 2020?
Deustche Bank chief economist, Torsten Slok, weighs in with his list
There’s plenty to talk about on the list but certainly US-China trade will not play out as straightforward as many would hope. And that’s one of the fancier headlines that will surely grip markets throughout the whole of next year.
Among the other items on the agenda, Brexit uncertainty will still remain a key factor in driving the pound as we move towards negotiations on the future trade relationship – if a Brexit deal can be sorted out that is.
The risks associated with the repo and the Fed will also be something to note, although it isn’t that highly debated after the brief scare in September.
What do you think is the biggest risk to markets in 2020? Anything not on the list that you think is relevant? Feel free to share them in the comments.
Big German banks warn against further rate cuts (expected from the ECB this week)
Both Deutsche and Commerzbank Banks have weighed in against forecast further cuts from the European Central Bank this week:
- would benefit those with assets
- further burdening savers.
- neither sustainable, nor responsible
The central bank is expected to cut as [part of measure to support the Eurozone economy. As an example of the slowing of the EZ economy was the data from Germany last week:
- Germany July industrial production -0.6% vs +0.4% m/m expected
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European Central Bank policy meeting is on September 12,
Its an amusement to debate who wins, who loses, and what the ECB should of should not do. Nothing wrong with that. Its also of more direct to use to traders to debate will the ECB will or will not do. I’ll have previews of what to expect upon approach to the meeting, but for now, here is something for EUR bulls and bears:
- EUR/USD to stay weak, ECB next week
- Risk for EUR is positive for next week’s ECB meeting – BAML
Brexit becomes a Dog’s Breakfast as Dollar’s Correction Continues
The Dollar Index fell the most in three months yesterday and is experiencing mild follow-through selling today. With hopes that Hong Kong has turned a corner, news that in-person US-China talks will resume next month, and a no-deal Brexit is well on the way to being averted, investor risk appetites are robust today. Global equities are higher as are benchmark yields, while gold is being pushed back below $1550. Most Asia Pacific equities advanced, though India and Malaysia were exceptions and Hong Kong saw a bout of profit-taking after yesterday’s surge. In Europe, the Dow Jones Stoxx 600 is advancing for the third consecutive session and the fifth in six sessions to trade at one-month highs. The S&P 500 has been crisscrossed the 2820-2950 range several times in recent weeks and is poised to gap above the top today. Interest rates are backing up, and the 10-year yields are 3-5 bp higher. The dollar is edging lower against most major and emerging market currencies. Among the majors, the yen and the Swiss franc are experiencing minor losses, while among the emerging markets, the Turkish lira is off about 0.25%. The lira may snap a three-day, five percent advance as Prime Minister Erdogan weighs in again on the need for aggressive rate cuts to ambitious growth hopes.
Asia Pacific
The PBOC’s dollar reference rate has been extremely stable in around CNY7.0850, and it is the market that blinked first. The dollar’s broad pullback yesterday saw the model projections eased below CNY7.0940. The onshore and offshore yuan has also converged near 7.1460. Chinese officials have been slower to roll-out additional stimulus than many observers have expected. We had thought there was a good chance of a cut in reserve requirements over the summer. Nevertheless, the State Council appears to be hinting of action soon, and a window of opportunity is seen before the October 1 national holiday.
With the latest round of tariffs and counter-tariffs in the US-China spat going into effect on the start of the month, securing face-to-face meetings proved difficult. This had contributed to the pessimism. However, now Chinese officials will come to the US next month, according to reports. Still, the prospects of a deal are remote. Trust between the two at a low ebb after two tariff truces were ended by the announcement of new action on Twitter, and China shows reluctance to change fundamental behaviors. Separately, the US trade figures show that China was the third-largest buyer of US crude oil in June and July (buying 5.7 mln barrels and 7.1 mln barrels respectively). South Korea was the largest buyer, followed by Canada. China puts a 5% levy on US crude as of September 1.