Liquidity Insights Overview

Liquidity Insights

Discover our vast array of liquidity insights covering global investment news and trends that may impact your cash portfolios

LATEST LIQUIDITY COMMENTARY

Reserve Bank of Australia: A third pause for reflection

At their last monetary policy meeting of the year on 5 December, the Reserve Bank of Australia (RBA) left the Overnight Cash Rate (OCR) unchanged at 4.35%. This was in line with market expectations.

ECB and Minimum Reserve Requirements

Market attention has veered towards other policy options that are at the disposal of the ECB’s Governing Council (GC). One such option, the remuneration of Minimum Reserve Requirements (MRR), has recently come under particular focus. While not widely understood, adjustments to this rate could have significant implications for short term interest rates and liquidity demand.

RBA: one more (and done?)

At its monetary policy meeting on the 7 November, the Reserve Bank of Australia (RBA) decided to raise the Overnight Cash Rate (OCR) by 25bps to a 12-year high of 4.35%. The rate hike, which follows a five-month hiatus was widely anticipated by economists following stronger than expected economic data.

Bank of England keeps rates unchanged but doesn’t want to appear dovish

At its November Monetary Policy Committee meeting, the BoE voted to maintain the Bank Rate at 5.25%. The BoE’s Governor Andrew Bailey noted that inflation has fallen, and is expected to fall further this year and next year, while monetary policy is viewed as restrictive.

Is the ECB out after a count of 10?

At its monetary policy meeting on 26 October 2023, the European Central Bank (ECB) kept all key interest rates on hold, the first pause after 10 consecutive rate rises.

Monetary Authority of Singapore: Policy sufficiently tight to pause

At its semi-annual monetary policy meeting on 13 October, the MAS decided to maintain its prevailing monetary policy stance Fig 1a for a second meeting - following five previous upward adjustments. The decision was In-line with expectations, with the central bank leaving the slope, band width, and mid-point of SGD NEER unchanged.

RBA: New Governor, similar policy stance

At Michele Bullock’s first monetary policy meeting as the Governor, the Reserve Bank of Australia (RBA) decided to leave the Overnight Cash Rate unchanged at 4.10%. This was the fourth pause in the central bank’s rate hiking cycle.

Proceed with caution: Fed keeps rates on hold

The FOMC unanimously decided to make no changes to the 5.25%-5.50% federal funds target range. Interest on reserve balances (IORB) and the overnight reverse repurchase agreement (RRP) rate were also left unchanged at 5.40% and 5.30%, respectively

Time to step out

The rise in interest rates over the last two years has been dramatic. UK interest rates have risen at the sharpest pace since the 1980s, while rates in Europe have rapidly increased from negative territory to the highest level since the inception of the euro. Evidently, this sharp rise in rates is good news for corporate treasurers.

BoE hits pause on hikes for now

At its September 2023 meeting, the Monetary Policy Committee (MPC) maintained Bank Rate at 5.25% in a split 5-4 decision, while unanimously deciding to reduce the stock of UK government bond purchases by £100 billion over the next twelve months.

ECB raises rates once more, taking the deposit rate to a record high

At its monetary policy meeting on 14 September 2023, the European Central Bank (ECB) tightened monetary policy further, increasing key interest rates by 25 basis points (bps).

China banks navigate property downturn

For the past three decades, the property sector has been a key driver of Chinese economic growth. While the recent property downturn in China has created challenges for the banks’ operating environment, the banks’ credit profiles likely remain resilient in the future.

PBoC RRR cut – A strong dovish policy signal

On 14 September 2023, the People’s Bank of China (PBoC) announced a broad based 25bps Reserve Requirement Ratio (RRR) rate cut. The timing and the shortness of the notice period was unexpected.

RBA: Unchanged at Governor Lowe's last call

At Governor Lowe’s last monetary policy meeting as head of the RBA, the bank decided to leave the Overnight Cash Rate unchanged at 4.10%. This was widely expected by economists following slightly softer economic data and a recent decline in monthly inflation.

PBoC cuts MLF again as economic data continues to disappoint

On 15 August 2023, the People’s Bank of China cut its 1-year Medium Term Lending Facility by 0.15% to 2.50% and its 7-day open market operation repo rate by 10bps to 1.80%.

On the Fitch Downgrade

On August 1, 2023 Fitch downgraded the United States of America’s long-term credit rating one notch, from AAA to AA+.

BoE slows the pace of hikes with rates rising to 5.25%

The Bank of England (BoE) opted to raise Bank Rate by 25 basis points (bps) to 5.25%, as a recent cooling in both inflation and the economic outlook allowed it to moderate the magnitude of its hike from the 50bps delivered in June.

Reserve Bank of Australia – Pausing on optimistic forecasts

At its monetary policy meeting on 1 August 2023, the Reserve Bank of Australia decided to leave the Overnight Cash Rate unchanged for a second month. This follows a cumulative 400bps of rate hikes over the previous fifteen months, which has taken base rates to a decade high of 4.10%.

ECB raises rates once more, but future decisions look finely balanced

At its monetary policy meeting on 27 July 2023, the European Central Bank (ECB) tightened monetary policy further, increasing key interest rates by 25 basis points (bps).

Patient and resolute

The Federal Open Market Committee (FOMC) unanimously voted to raise interest rates 25bps. The new target range is 5.25%-5.50%—the highest level in more than 22 years—yet we may not have reached the peak.

European Commission report finds MMFs remained resilient during recent market stresses

On 20 July 2023, the European Commission published its report to the Council and the European Parliament on the adequacy of the European Union Money Market Fund Regulation.

New money market fund rules from the US SEC

On 12 July 2023, the US Securities and Exchange Commission (SEC) announced amendments to its rules governing money market funds (MMFs). The new rules will lead to changes for US domiciled MMFs, as well as specific changes impacting institutional (prime and tax exempt) MMFs, and government, Treasury and retail MMFs.

Reserve Bank of Australia – A pause to assess

At its monetary policy meeting on the 4th of July, the Reserve Bank of Australia left the overnight cash rate unchanged at 4.10%. This represents the second pause in the central bank’s current hiking cycle.

BoE switches back up a gear as rates hit 5.00%

The Bank of England (BoE) raised Bank Rate by 50 basis points (bps) to 5.00% as recent upside in data indicated more persistent inflationary pressures and justified a 13th consecutive increase.

Don’t call the Fed’s action a pause (or a skip)

The FOMC kept the target range for the federal funds rate at 5.00%-5.25%. The interest rate on reserve balances (IORB) and the overnight reverse repurchase agreement (RRP) rate were also left unchanged at 5.15% and 5.05%, respectively.

ECB hikes for an eighth time

At its 15 June 2023 monetary policy meeting, the ECB increased all three key interest rates by 25bps, bringing the refinancing rate to 4.00%, the marginal lending facility to 4.25% and the deposit facility rate to 3.50%.

PBoC reinforces its dovish stance

In a widely anticipated move, the Peoples Bank of China cut its 1-year Medium-Term Lending Facility by 10bps to 2.65% on the 15th of June. The action follows a 7-day Repo cut and a Standing Lending Facility rate cut last week and highlights the central bank’s decisively dovish pivot as the authorities seek to stabilize China’s faltering economic recovery.

PBoC’s small, yet clear dovish signal

At its 13th June Open Market Operation, the People’s Bank of China (PBoC) cut its 7-day Reverse Repo Rate by 10bps to 1.90%. The repo rate is a key tool used by the central bank to ensure adequate market liquidity, this also represents the first repo rate cut since August 2022.

The RBA surprises as inflation trumps growth

At its 6 of June Monetary Policy Meeting the Reserve Bank of Australia (RBA) raised its Overnight Cash Rate (OCR) by 25bps to a new cycle high of 4.10%. The rate hike surprised investors, who were expecting additional rate hikes following the RBA’s hawkish pivot at its May Monetary Policy Committee (MPC) meeting but remained uncertain as to the exact timing of any RBA action.

What happens when Hong Kong’s Aggregate Balance hits zero?

Since February this year, the Hong Kong Dollar (HK$) has hit the weak side of its convertibility versus the US Dollar (US$) on multiple occasions. This has necessitated ongoing foreign exchange intervention by the Hong Kong Monetary Authority (HKMA) to support the HK$.

BoE hike in May, recession gone away

The Bank of England (BoE) raised the Bank Rate by 25 basis points (bps) to 4.50% in a split 7-2 vote as the Monetary Policy Committee (MPC) believes persistent inflationary pressures and a tight labour market justified a twelfth consecutive increase.

ECB slows hikes, but has “more ground to cover”

At its 4th of May monetary policy meeting, the ECB increased all three key interest rates by 25bps, bringing the refinancing rate to 3.75%, the marginal lending facility to 4.00% and the deposit facility rate to 3.25%.

The U.S. debt ceiling: Latest thoughts and updates

The U.S. federal government reached its debt limit - Commonly called the “debt ceiling”, the debt limit is the maximum amount of debt that the U.S. Department of the Treasury can issue to the public or to other federal agencies.

The RBA’s narrowing path to a soft landing

At its monetary policy meeting on May 3, the Reserve Bank of Australia (RBA) surprised the market by hiking its Overnight Cash Rate by 25bps to 3.85%. Justifying its abrupt volte-face, the central bank said “inflation… is still too high and it will be some time yet before it is back in the target range”.

MAS pauses as growth outlook dims

Following its semi-annual monetary policy meeting on April 14, the Monetary Authority of Singapore (MAS) left its prevailing monetary policy unchanged – including the slope, width and center-point of the band – unchanged. This represents the central bank’s first pause since it began tightening its policy in October 2021.

RBA - On hold for now

On 4 April, the Reserve bank of Australia (RBA) decided to leave the Overnight Cash Rate unchanged at 3.60%. This represents the first pause by a major central bank and follows a cumulative 350bps of hikes over the past ten consecutive meetings.

The Fed’s balancing act

The FOMC maintained its firm stance against inflation by raising interest rates 25bps to 4.75%-5.00%, despite heightened financial stability risk. Interest on reserve balances (IORB) and the overnight reverse repo rate (RRP) were also increased by equivalent amounts to 4.9% and 4.8%, respectively.

Bank of England keeping options on the table

At its March 2023 meeting, the Monetary Policy Committee (MPC) raised the Bank Rate by 25bps to 4.25%, the highest level since November 2008. The increase was largely expected by the market despite recent global financial market volatility.

PBOC RRR cut – Front Loading Policy Support

On Friday 17th March, the People’s Bank of China (PBOC) announced a broad-based 25bps Reserve Requirement Ratio (RRR) rate cut, releasing additional liquidity into the banking system and reducing commercial bank funding costs.

ECB sticks with 50bps hike, despite market turmoil

The European Central Bank (ECB) acted on February’s forward guidance by increasing key interest rates by 50 basis points (bps), despite current market volatility.

Reserve Bank of Australia - A pivot to less hawkish

At its monetary policy meeting on the 7th of March, the Reserve Bank of Australia (RBA) hiked its Overnight Cash Rate by 25bps to an eleven-year high of 3.60%. The rate hike was widely anticipated following last month’s hawkish pivot.

Hong Kong Interest Rates – rational confusion

The HKMA intervened to defend the peg and purchased HKD 19bn on February 14-15. This has reduced its aggregate balance to HKD 77bn, the lowest level in almost three years.

RBA – No pause yet

At its first monetary policy meeting of 2023, the Reserve Bank of Australia (RBA) raised its Overnight Cash Rate by 25bps to 3.35%. The move represents the ninth consecutive hike in the current cycle, and the accompanying statement was more hawkish than expected.

ECB stays the course towards inflation reduction

The European Central Bank raised its key interest rates by 50 basis points, in line with expectations to a 15-year high of 3.00%. In the accompanying statement and subsequent press conference, the ECB maintained its hawkish tone, signalled an intention to increase rates by a further 50 bps in March.

UK turns a corner but risks remain large

The Bank of England raised the Bank Rate by 50 basis points to 4.00% in a split 7-2 vote as a tight labour market and continued domestic wage and price pressures justified a tenth consecutive increase.

On The U.S. Debt Ceiling

To prevent the United States from defaulting on its payment obligations, the Treasury will now be forced to utilize its cash balances and take steps towards “extraordinary measures.”

Downshift, but still hiking

The FOMC unanimously decided to downshift to a smaller but, in the words of Fed Chairman Jerome Powell, “still historically large increase” of 50 bps.

RBA – debating hikes and lags

At their final monetary policy meeting of 2022, the Reserve Bank of Australia raised its Overnight Cash Rate by 25bps to a decade high of 3.10%.

PBoC cuts RRR – A renewed dovish signal

On Friday 25 November, the People’s Bank of China announced a 25bps Reserve Requirement Ratio cut. In the accompanying statement, the PBoC confirmed the RRR cut was part of a package of measures to support economic growth.

Stepping out for the Fed pivot

After a series of jumbo rate hikes, it appears most investors are anticipating a pivot from the US Federal Reserve. However, the elevated level of inflation and resilience of the economy mean that rate cuts are unlikely for some time.

RBA committed to a slower cadence

At its monetary policy meeting on 1 November, the RBA raised the Overnight Cash Rate by 25bps to 2.85%. This was the seventh hike in the current cycle, taking base rates to a nine-year high.

Monetary Authority of Singapore - Leaning against price pressures

At its semi-annual monetary policy meeting on 14 October, the MAS re-centered the mid-point of the S$NEER up to its prevailing level – approximately a 2% increase – while keeping the slope and width of the policy band unchanged.

RBA: A commitment to guidance to balance inflation and growth

At its monetary policy meeting on 4 of October, the Reserve Bank of Australia raised its Overnight Cash Rate by 25 basis points to 2.60%

A divided Bank of England delivers 50bps as rates rise to 2.25%

The Bank of England raised the Bank Rate by 50 basis points to 2.25% in a split 5-3-1 vote as the tight labour market, higher wages and higher domestic inflation justified a seventh consecutive hike.

RBA’s latest rate hike: Peak hawkishness?

The front-loading of rate hikes and belief that inflation is expected to peak later this year and then decline back towards the 2–3% range does suggest that the RBA may have reached peak hawkishness.

HKMA - defending the currency peg to the last breath

The recent, aggressive Fed interest rate tightening policy, combined with Hong Kong’s weak economic outlook, moribund Chinese growth and subdued local market sentiment, has pushed the HKD towards the weak side of its convertibility. The HIBOR-LIBOR spread has also widened the most since 2019.

PBOC attempts to jump-start the economy

On August 15, the People’s Bank of China announced a MLF rate cut of 10bps to 2.75%. Although small in size, the rate cut confirms the PBOC’s desire to jump-start the economy and sends an important monetary policy signal with significant implications for interest rates and RMB cash investors.

When does unusually large become usual?

On July 27, the Federal Open Market Committee (FOMC) raised its Federal Funds Rate target range by 75 basis points (bps) to 2.25% - 2.50%. There were no dissenters.

The Monetary Authority of Singapore – an expected surprise of S$NEER hike

On July 14, the MAS announced it would tighten monetary policy by re-centering the S$NEER policy band upwards. While the timing of the MAS statement was a surprise, the market was expecting further policy actions.

The Reserve Bank of Australia delivered back-to-back 50bps rate hikes

At its monetary policy meeting on July 5, the RBA hiked its overnight cash rate by 50bps to 1.35%. This was also the third rate hike in the current cycle, and the first time ever the central bank has executed back-to-back 50bps hikes, reinforcing its inflation fighting credentials.

The Reserve Bank of Australia: moving ahead of the curve?

On June 7, the RBA surprised the market by raising the Overnight Cash Rate by 50bps to 0.85%. This is the second rate hike in the current cycle, following a 25bps move in early May. The size of the rate hike also affirms the RBA’s desire to get ahead of the inflation fighting curve.

The Reserve Bank of Australia’s hawkish turn

The RBA hiked its Overnight Cash Rate for the first time in over a decade at its 3rd May monetary policy meeting. The hike was more hawkish than expected.

Monetary Authority of Singapore – affirming its inflation fighting credentials

At its semi-annual policy meeting on 14 April, the MAS announced its decision to further tighten monetary policy. The announcement and upward revision to the MAS's growth and inflation outlook will have important implications for Singapore interest rates and cash investment opportunities.

Reserve Bank of Australia: From patience to pragmatism

At its monetary policy meeting on Tuesday 5th of April, the RBA left base rates unchanged at a record low of 0.1% whilst acknowledged that “inflation has picked up and a further increase is expected” in the accompanying comments. Its hawkish tilt and giving a clear hint to potential rate rises in the coming months.

Fed lift-off

On 15-16 March, the Federal Open Market Committee (FOMC) held its two-day meeting and raised its federal funds rate target range by 25 basis points (bps) to 0.25%-0.5%, with one dissenting member calling for a 50bps increase.

The Reserve Bank of Australia: Stressing patience, confirming plausibility

At their first monetary policy meeting of 2022, the RBA acknowledged that the economy “remains resilient” despite the recent Omicron outbreak which has not derailed the recovery.

A surprise, pre-emptive policy hike by the Monetary Authority of Singapore

Singapore’s de-facto central bank hiked the slope of the S$NEER policy band, increasing the pace of appreciation. The unexpected hike was triggered by the strong inflation uptrend in recent days as well as a reassessment of Singapore’s growth and inflation expectations in 2022 by the MAS.

The PBOC's reluctant policy pivot - another 50bps Reserve Requirement Ratio cut

On December 7, the PBoC announced an unexpected 50bps Reserve Requirement Ratio (RRR) cut. The broad based cut will release significant liquidity into the financial system, while the resultant confirmation that policymakers are focused on stabilizing growth has boosted investor sentiment. CNY cash investors should pay attention to the PBoC’s rapid pivot from neutral to dovish monetary policy and the implications.

Inflation in Asia Pacific - A different phenomenon

Rising inflation concerns are amplifying developed market rate hike expectations; in contrast APAC central banks have benefitted from more muted CPI. The rationale for this difference has important implications for investors.

The Reserve Bank of Australia’s Crisis of Confidence

During October, the yield on the RBA’s yield curve control (YCC) target reference bond spiraled upwards and closed at 0.775%, well beyond the central bank’s 0.10% target. This was an unexpected reversal for a bond which was historically very stable with minimal central bank interventions, since the RBA first introduced the YCC program in March 2020.

MAS policy decision - a hawkish normalization

At its semi-annual monetary policy meeting, the Monetary Authority of Singapore surprised the market by raising slightly the slope of the S$NEER policy band, from zero percent previously.

RBA Tentative Tapering

The RBA announced its first tentative step towards tapering and eventual policy normalization.

PBOC latest deposit price reform – limited implications for cash investors

In June 2021, the People’s Bank of China (PBoC) announced changes to commercial banks’ mechanism for setting the time deposit ceiling from a multiplier method to a basis points method.

PBoC RRR Cut - A dovish policy signal

On 9 July 2021, the PBoC announced a 50bps RRR cut that will reduce bank funding costs and unleash a substantial quantity of liquidity support. The size of the rate cut surprised the market and confirmed the authority’s dovish pivot.