Hot Features
Premium
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
On May 29, the US Treasury will launch its first bond buyback program since 2002. With this move, there has been talk of a return of QE to the markets.
But that’s not exactly the case.
The central bank is not exactly printing money or monetizing debt. These buybacks are just a short-term injection of liquidity, which will be withdrawn later.
Where did this initiative come from?
The Treasury market has run into a liquidity problem due to a sharp increase in issuance and the withdrawal of large investors. Some feared it could trigger a crisis.
To alleviate this situation, the Treasury has launched the Repurchase Program to remove old, illiquid securities from the market and replace them with new, liquid ones.
So, these weekly buybacks of up to $2 billion per share in nominal coupon securities and up to $500 million per share in TIPS should not significantly shake things up.
But what will be driving the market these days?
With the quarterly earnings season coming to an end, all eyes are on macroeconomic data. Here’s what’s in store this week on the economic calendar:
– In the eurozone, we expect May CPI data on Friday, which should give us a preview of possible interest rate cuts by the European Central Bank in June.
In the US, we will be watching for underlying consumer spending data on Friday. April is expected to rise 0.3%, with the annual rate cooling to 2.7% from 2.8%.
If inflation comes in lower than expected, it could spark some optimism among regulators about the need to tighten monetary policy, which could also rub off on investors.
And remember that Friday is also the last day Fed officials can speak before their “lock-up period” takes effect. For now, members of the regulator seem akin to hawkishness.
