The Federal Reserve reduced its reverse repo program, which resulted in the transfer of funds from its balance sheet to the banking system.
In USAfinancing markets in dollarsare full of optimism for the end of the current year, since demand continues to exceed supply, according to a report fromand JPMorgan.
The document, cited by the Bloomberg agency, ensures that operations with one-day repurchase commitments with a general guarantee for the last business day of the year remain stable, although in turbulent times this activity would increase.given that financial organizations reduce their balance sheets.
Base swaps between currencies, the cost of exchanging euros and yen to dollars, the most used currency in the world in times of financial uncertainty, remain stable, after having expanded at the end of September. Thus, the differential between financial commercial paper and overnight index swaps only rose slightly.
End of the year closing: alterations and optimism
The end of the year is usually turbulent for the marketsas banks refrain from offering one-day financing for fixed income investments and other transactions intended to shore up their regulatory balance sheets. However, this year the banks are not obliged to reduce financing so much, since they have sufficient reserves, after having been paying high interest rates to contain the flight of deposits.
Besides, The US Federal Reserve has been reducing its reverse repurchase instrument, which also caused money to come out of its balance sheet and into the banking sector. This brought calm to some strategists’ fears that short-term funding markets would come under pressure and spreads would widen.
Likewise, short-term financing markets were boosted by competitively high interest rates on assets covering from US Treasury bills and repos, to corporate promissory notes, where yields are higher than 5%. The short duration for these instruments constitutes a refuge for investors concerned about the decline in prices in other markets.
JPMorgan analysts also acknowledged that most companies financing in the note market are ahead of where they typically are in terms of securing financing through the end of the year.
Thus, the bank estimates that around 60% of bank commercial bills and outstanding certificates of deposit do not mature until 2024, a higher percentage than in recent years. Additionally, issuers of asset-backed commercial paper have 37% of outstanding debt maturing at the end of the year, a higher figure this time last year, and Tier 2 issuers (companies with a higher short-term credit rating low) are also far ahead in securing funding at the end of the year compared to the last two years.
However, JPMorgan analysts estimate that banks still have around $570 billion in unsecured notes and certificates of deposit that still need to be renewed through 2024, almost half of which is concentrated among Japanese, French and French banks. Canadians.
Source: Ambito
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