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The main fuel oil contract continued its decline, turning from gains to losses during the day, and is currently down 0.95%, last quoted at 4177 yuan/ton, after rising more than 4% earlier.On August 20th, following SK Hynixs US IPO and the subsequent plunge in AI-related stocks, the financing costs for global investors to leverage their investments in SK Hynixs Korean shares have halved in recent weeks. According to sources, several banks, including Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase, are offering clients exposure to SK Hynix through swap transactions at a premium of approximately 150 to 300 basis points above the Secured Overnight Financing Rate (SOFR). In mid-June, some banks were offering clients seeking to establish or renew SK Hynix swap contracts at rates exceeding SOFR by 1000 basis points. Since May 1st, SOFR has fluctuated between 3.50% and 3.69%. Previously, banks quoted extremely high financing rates to allocate limited quotas among clients to meet the demand for new SK Hynix swap transactions, and in some cases, even rejected client requests outright. At that time, the AI boom had driven SK Hynixs Korean shares to rise 11-fold in the 12 months ending June 22nd. As market sentiment becomes extremely bullish, banks are concerned that their portfolios are overly concentrated in these stocks, potentially driving up their financing costs in the repurchase market. Sources say that some banks that previously rejected client requests are now actively seeking new business.The European-Mediterranean Seismological Centre reports a 4.2-magnitude earthquake in Chiapas, Mexico.The Indonesian rupiah rose to 17,790 against the US dollar.According to Reuters, shipping data in the Strait of Hormuz shows that the geopolitical stalemate between the United States and Iran has not improved.

The Devil Is In The Details: Gold Analysis - Federal Reserve Minutes

Larissa Barlow

Apr 07, 2022 10:33

Analyses of Federal Reserve Minutes 

While both the FOMC statement and Chairman Powell's press conference provide market participants with information about the FOMC's updated and revised monetary policy, it is the release of the minutes that provides investors with significantly greater clarity and understanding. The devil, as they say, is in the details.

 

The Federal Reserve issued the official minutes from its March FOMC meeting today, providing insight into the central bank's current plans to begin unwinding its balance sheet assets. Beginning in March 2020, the Federal Reserve will add around $4.6 trillion to its balance sheet by purchasing $120 billion monthly in mortgage-backed securities ($40 billion) and US Treasury securities ($80 billion), bringing their total to just over $9 trillion.

 

According to Federal Reserve Governor Lael Brainard, the Fed intends to employ a mix of interest rate rises and a quick run-off of the balance sheet to bring US monetary policy closer to neutral later this year.

 

However, the minutes released today imply that the Federal Reserve will unwind around $3 trillion over the next three years, reducing its $9 trillion balance sheet to $6 trillion. While the Fed appears to be indicating a quick runoff of its balance sheet, the reality is that the Federal Reserve's balance sheet will be nearly $2 trillion larger than it was prior to the epidemic.

 

"Participants continued their discussion on plans to reduce the size of the Federal Reserve's balance sheet in a manner consistent with the methodology outlined in the Committee's Principles for Reducing the Size of the Federal Reserve's Balance Sheet, announced following its January meeting."

 

Additionally, the minutes stated, "While no decision was made regarding the Committee's plan to reduce the Federal Reserve's balance sheet at this meeting, participants agreed that significant progress had been made on the plan and that the Committee was well positioned to begin the process of reducing the balance sheet's size as soon as after the conclusion of its upcoming May meeting."


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