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Corporate Treasury Data insights from October

Andrew Hollins
Andrew Hollins
Director of Corporate Treasury Proposition, Refinitiv

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you a round-up of the latest Corporate Treasury Data Insights, including the latest movements in the bonds market, the Fed’s continued efforts to keep a lid on inflation and analysis of the potential replacements for EURIBOR®.

  1. The enduring pressure from inflation has caused yields in the bonds market to rise. What prospects are there of the Fed changing its course of raising interest rates?
  2. Refinitiv Lipper’s analysis of environmental, social, and governance (ESG) investments in the UK market
  3. A look at the state of the metals market amid the slowdown in the global economy.

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Chart of the Month

UK 30-year gild yield

Source: Refinitiv Datastream

The bonds market is at the epicentre of pretty much everything that’s going on in financial markets at the moment.

We started the year believing that inflation was going to be transitory, with most focused-on supply side constraints and a temporary spike in energy prices. Yet persistent high inflation has been the main driver for the recent upward moves in yields.

The market has responded by being far more price sensitive to central bank actions. Given the stubbornly high levels of global inflation, there is recognition that central banks are unlikely to dial-down their hawkish response – at least in the immediate future. For now, at least, 75bps is the new 25bps.

As we approach the year end, the question on everyone’s (chapped) lips is ‘what might trigger a Fed pivot’?

The weak spot for financial markets, and crucially the real economy, is the level of leverage and debt which has built up over the last decade and more. As yields increase, this leverage puts businesses under growing pressure and is likely to be a key factor in determining what yield stabilising programmes and policy decisions we see from here on.

David Rickard, Director of Rates Trading Solutions at LSEG, discusses this in more detail in a new episode of Refinitiv’s The Big Conversation. Watch it here.

Monitor and understand yield movements with powerful data and analytical tools in Eikon

Fed crunch on global liquidity likely to continue

Inflation in the U.S. is still running hot, peaking in June and only slightly receding by September. The Fed’s response of raising interest rates may be limited by a continuation of tightness in the labour market.

The strength of the U.S. dollar has caused many central banks to shadow the Fed’s interest rate rises to combat inflation.

What is the impact of the Fed’s response to high inflation on the domestic and international economies, and how have other central banks reacted? Find out more.

Interest rate benchmarks: what comes after EURIBOR®?

While it has no cessation date, the working group on euro risk-free rates is responsible for outlining alternatives that could replace the EURIBOR®. Jacob Rank-Broadley explores these potential alternatives and how they could replace EURIBOR®. Read on.

Metals in an economy afflicted by a slowdown and conflict

As demand for iron ore slips because of lower demand from China and an energy crisis in Europe, and with steel production in Europe predicted to contract, what are the prospects for these commodities markets in this volatile environment? Our analysts explore.

Chart of the Week: Omens not looking good for UK housing

According to the Bank of England’s 2022 Q3 Credit Conditions Survey, lenders reported that the availability of secured credit (mortgages) to households declined in the June-August period. How has the availability of secured credit provided to households changed?

Everything Green Flows: Q1-3 2022

Over the first three quarters of the year, equity, bond, and mixed-assets funds have resisted the negative flows that have beset their conventional peers.

However, a waning tide will eventually see all boats lower, and that’s what we have seen in Q3, as flows went negative for ESG equities and bonds, with only mixed assets managing to keep a toehold in positive territory.

Explore Refinitiv Lipper’s analysis of environmental, social, and governance (ESG) investments in the UK market.

Refinitiv Corporate Treasury Newsbeat

  • Refinitiv to cease Tokyo Swap Rate (for swaps referencing TIBOR®) | Refinitiv announced that it will cease publication of Tokyo Swap Rate (for swaps referencing TIBOR®). The final publication will be at 15:30 (Tokyo time) on 31 March 2023. Read more here.
  • Refinitiv launches prototype forward-looking €STR term rate | Refinitiv commences publication of a prototype forward-looking euro-denominated interest rate – Refinitiv Term €STR. Read more here.
  • Refinitiv introduces digital onboarding solution to help businesses accelerate secure and frictionless new customer onboarding | Refinitiv announced the introduction of a secure, personalised, and frictionless global digital onboarding solution to help businesses streamline their approach to onboarding customers. Read more here.

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what might trigger a Fed pivot’?

The weak spot for financial markets, and crucially the real economy, is the level of leverage and debt which has built up over the last decade and more.