- FOMC Minutes: Many participants assessed higher rates would likely be necessary if inflation did not fall
- US Treasury auctions off $18 billion of 20-year bonds at a high yield of 5.204%
- Trump tells reporters US and Canada reached a deal, suggests Iran negotiations continue
- Precious metals surge after surprise US Treasury announcement to support longer-dated securities
- EIA weekly US crude oil inventories +4.405M vs +0.200M expected
- Canadian dollar rises to new highs after Trump’s tariff TACO, US Treasury announcement
- US Treasury is increasing the size of liquidity support buyback operations for longer-dated securities
- RBI minutes show different inflation concerns and a case for a rate hike
If it wasn’t for a surprise US Treasury announcement, it would have been a very boring session given the lack of data and notable news releases.
The US Treasury announced that it would at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities, from $2 billion to at least $4 billion per operation. The move provided immediate support to the long end of the Treasury curve.
The announcement also sent precious metals higher and the US dollar lower. The move is not equivalent to quantitative easing, but its market impact is directionally similar at the margin as it eases financial conditions, which had been tightening and limiting the inflation shock.
The FOMC minutes of the July meeting revealed a more hawkish internal debate, as widely expected and did not trigger notable market moves. The market mostly ignored the minutes given its stale nature after the soft NFP and CPI reports.
While most participants supported keeping rates unchanged, several favoured a hike, with many arguing that higher rates could become necessary if inflation fails to fall. Some participants also questioned whether financial conditions were sufficiently restrictive to bring inflation back to the Fed’s 2% target.
This article was written by Giuseppe Dellamotta at investinglive.com.