Yields on one-year US Treasury bills are hitting levels not seen since the financial crisis, driven by a combination of tighter Federal Reserve policy and looser fiscal policy. The one-year Treasury bill yielded 2.052 per cent in afternoon trading on Friday. The last time they were so high was in 2008, when the Fed was cutting rates aggressively to fight the worsening US financial crisis. Nearly a decade later, market prices suggest that traders overwhelmingly expect a policy tightening when the Fed meets on March 21, which would mark the sixth quarter percentage point shift higher in the overnight borrowing rate in the current cycle. The steady tightening of Fed policy — the central bank has decided to shrink its balance sheet as well — has contributed to the rise in Treasury yields. The cryptocurrency, whose meteoric rise has been labelled a bubble by many critics, fell as much as 31.8 per cent from its Thursday evening peak to $10,775 per coin, according to Bloomberg data, before climbing more than 34 per cent to $14,400 by Friday afternoon in New York. This afternoon the ECB decided to leave all interest rates unchanged, but warned that when conditions will worsen it will expand the QE-programme. ECB is seeing economic improvements but still dampened due to sluggish reforms. Economic growth isn't seen yet in rising salaries or prices. Inflation is not expected to pick up the next months, but will rise in the medium long term. Italian government made a deal to bailout the troubled bank for an amount of €5.4 billion euro. This is besides the earlier rescue of €17 billion to unwind the different Veneto banks by the Italian government. The EU approves this state bailout because of the transfer of bad loans to a bad bank and capping the salaries of senior managers. There will be a 5 year restructuring plan being announced later today. Brussels was accused of undermining EU efforts to end taxpayer bank bailouts after it allowed Italy to provide nearly €17bn in state aid for the wind-up of two stricken regional lenders. The European Commission and Italian authorities hammered out a plan over the weekend to liquidate Veneto Banca and Banca Popolare di Vicenza, with part of their assets and liabilities being sold to Intesa Sanpaolo, Italy’s largest bank. Senior bonds are shielded from losses as part of the plan. Junior creditors and shareholders will be wiped out by the rescue. “The promise that the taxpayer will not stand in to rescue failing banks any more is broken for good.” The FED announced a +0.25% rate hike to 1.00%-1.25% on Wednesday as expected. The central bank last increased its benchmark rate in March. It now believes inflation will fall well short of its 2 percent target this year.The statement gave more detail on how it will unwind its $4.5 trillion balance sheet. The European Central Bank has trimmed its medium-term inflation forecasts despite acknowledging the strength of the eurozone’s accelerating economic growth. However, the bank confirmed that it would continue the quantitative easing programme until the end of the year or beyond if necessary and left interest rates unchanged at 0 per cent for the base rate and minus 0.4 per cent for the bank deposit rate. |
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March 2021
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