Federal Funds Effective Rate, FEDFUNDS

Auszug

"The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. (1) The rate that the borrowing institution pays to the lending institution is determined between the two banks; the weighted average rate for all of these types of negotiations is called the effective federal funds rate.(2) The effective federal funds rate is essentially determined by the market but is influenced by the Federal Reserve through open market operations to reach the federal funds rate target."

https://fred.stlouisfed.org/series/FEDFUNDS

 

 

Fed funds futures traders are now pricing the Fed funds rate to hit a peak of 5.395% in September, and expect it to stay above 5% for the year, compared with the current target rate of 4.5-4.75%. The markets have also priced in rate hikes over the next three meetings.

https://www.reuters.com/markets/currencies/...en-volatile-2023-02-24/  

Interessante Beobachtung aus einer Kinross Analyse vom 5.2.

https://seekingalpha.com/article/...gher-if-my-gold-thesis-is-correct


Fed Funds Forward 2 Jahre / Gold

Auszug

"Hence, it is no surprise that gold and silver prices are negatively correlated to the 2Y forward of Fed funds rates.

   If investors expect rates to increase, gold falls.
   If investors expect lower rates down the road, gold soars.

Chart

An even more fascinating chart is the one below, as it clearly shows that forward rate expectations are driving the price of gold. In mid-2018, rate expectations peaked. Back then, global economic growth peaked as well. So, expecting lower rates makes sense. Gold immediately bottomed back then at roughly $1,200. Rate expectations dropped to 0.0% in mid-2020 when global growth slowing was made worse by the pandemic. Gold peaked the moment rate expectations bottomed. Gold had soared to roughly $2,100. That's a 75% return in just a few years.

And guess what? That relationship still holds. Gold has been on a tear lately, which is entirely driven by market participants pricing in a more dovish Fed."



 

The market is not yet convinced by this weekend's actions, but it's getting there as Michael Hartnett notes:

   "The market stops panicking when central banks start panicking"

Equity futures are higher, but are fading back...


https://www.zerohedge.com/markets/...n-all-higher-after-fed-snb-panic  

March 19, 2023
Coordinated central bank action to enhance the provision of U.S. dollar liquidity

For release at 5:00 p.m. EDT

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

To improve the swap lines' effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April.

The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.

https://www.federalreserve.gov/newsevents/...es/monetary20230319a.htm