6:45 AM 6/7/2018 LONDON (Reuters) - World stocks hit a three-week high on Thursday and the euro and German Bund yields also rose as investors priced in a potentially earlier-than-expected wind-down of stimulus from the European Central Bank. The selloff in safe-haven Bunds drove money into riskier assets, especially financial stocks, despite investors’ anxiety over how a G7 leaders summit that kicks off on Friday will pan out in view of global trade concerns. Bank stocks, which tend to gain from higher bond yields, drove European shares up in early trade. The pan-European banks index .SX7P jumped 1.4 percent, helping the STOXX 600 .STOXX gain 0.5 percent. Banks remain the worst-performing sector in Europe year-to-date, however, having been dented by a selloff triggered by political risk in Italy. MSCI's index of world stocks rose 0.3 percent to its highest since May 14, helped by Asian shares which climbed to an 11-week high overnight. The euro EUR= and Germany's benchmark 10-year bond DE10YT=TWEB both climbed on signs that the ECB could soon call an end to its stimulus programme. Data on Thursday showed German industrial orders plunged unexpectedly in April, a fourth consecutive monthly drop.
The drift of Fed funds rate towards the top of the band 5. What’s the interest on excess reserves (IOER) rate? Starting in 2008, Congress allowed the Fed to pay banks for the surplus cash they store at the central bank. As Fed officials prepared for "lift off,” they realized that IOER could be a useful tool for managing rates. In theory, if the fed funds rate were to climb above the IOER rate, firms would withdraw reserves and lend them to other financial institutions at that higher rate. But that increase in the supply of reserves available for loans would then push the fed funds rate back down to the IOER level. Since it began raising rates, the Fed has kept the top of its target range aligned with the IOER. (It created another mechanism, called the overnight reverse repurchase agreement facility, to act as an interest rate floor.) 6. Why is the fed-funds rate rising toward the top of the band? No one is 100 percent sure. But a prevailing theory, one shared by Fed officials, is that a big burst of Treasury bill sales -- nearly $350 billion in the first quarter, partly to fund tax cuts and a surge in government spending -- flooded an already saturated short-end market, fueling a spike in bill yields. That pushed other key overnight rates higher, especially in the market for repurchase agreements. As these other short-term assets became more attractive alternatives to lending reserves to other banks, the availability of funding lessened, putting upward pressure on the Fed effective rate. 7. Why does this matter? While the fed effective rate trading a few basis points above IOER wouldn’t be that meaningful, NatWest Markets strategist Blake Gwinn says there’s a credibility concern with the Fed missing a range that’s 25 basis points wide. Fed funds settling above IOER could erode confidence in the central bank’s ability to control interest rates just as bank reserves are beginning to decline and the Fed begins to unwind the balance sheet increases from QE. “They will need this confidence as they eventually start to shift into whatever long-run policy framework” they decide on, Gwinn said. The other issue is that higher rates may indicate that the market is already signaling a scarcity of reserves, which could hinder how much the Fed ultimately decides to shrink its balance sheet. 8. What is the Fed doing about it? In an effort to nudge the effective rate back toward the middle of their band, officials are mulling lowering the interest on excess reserves rate relative to the upper bound of the fed target range by 5 basis points. With a rate hike all but certain at the conclusion of this week’s policy meeting, that would mean raising the IOER rate by only 20 basis points. Trading in fed funds futures suggests markets now see such a change as likely. It sets the stage for a shift in short-end pricing whether the Fed decides to pull the trigger or not. 9. Will it work? The Fed obviously thinks so, though they acknowledged in their latest meeting minutes that additional adjustments to the IOER rate could become necessary as the central bank continues to unwind its balance sheet. Others, like Credit Suisse’s Zoltan Pozsar, aren’t so sure. They argue that because the cause of the drift is the result of a glut in short-end supply, only coordination with the Treasury can really solve the problem. Ultimately, if the fed funds rate does continue to creep higher relative to the top of the target band, officials will have to decide if a post-normalization environment requires a new policy framework, or perhaps the return to an old one. https://www.bloomberg.com/news/arti...or-control-of-its-key-interest-rate-quicktake
Bob Proctor - Creating the right Image in your mind! ME & MONEY We think in pictures. When something is mentioned eg. your car and image of it comes on the screen of your mind. When most people think of themselves and money picture of poverty comes up on the screen of their mind. We want to build brain cells so that when you think of yourself and money an image of properity comes up on the screen of your mind. You must build cells of recognition in your mind. If you have no cells of recognition of success or of money and abundance you must build them.
"Do not give dogs what is sacred; do not throw your pearls to pigs. If you do, they may trample them under their feet, and turn and tear you to pieces. Matthew 7:6
Lingering trade concerns are likely to weigh on the markets as tariffs on $34 billion worth of Chinese imports to the U.S. and a matching $34 billion worth of U.S. exports to China are due to take effect on July 6th.
European Shares Rise As Merkel Averts Coalition Crisis 7/3/2018 6:19 AM ET European stocks were broadly higher on Tuesday after German Chancellor Angela Merkel reached a deal with her interior minister over the migration policy, helping avert a political crisis in the country. The pan-European Stoxx Europe 600 index was up 0.8 percent at 379.59 in late opening deals after declining 0.8 percent Monday on concerns over global trade and political instability in Germany. The German DAX was up over 1 percent and France's CAC 40 index was gaining 0.9 percent while the U.K.'s FTSE 100 was rising half a percent ahead of the July 6 deadline for the Trump Administration's planned imposition of tariffs on Chinese imports. http://www.rttnews.com/2910581/euro...erkel-averts-coalition-crisis.aspx?type=uscom