EUR/USD, USD/JPY, DXY flows - TGA mooted to cash roll buybacks, but just semantics
Brent stays limited by $95 out of latest exchanges; mkt waits on next key events
Speculation on TGA for buyback funding. Ultimately cash flow management for what are twist operations
US2s30s have flattened, but pivotally, and actions have not been making a good impression for the dollar
Fairly contained overnight. The mooted US Iran sanction plan proved fairly nonspecific and short of most draconian actions though Iran pledges retaliation and suggesting neither China nor Russia accepted the US move. Oil continues to consolidate, Brent front month still respecting the $95~ resistance and still easing back from that area at the start of the week.
While the market waits for PCE data, Nvidia and Warsh on Friday, the other main interest continues to circle around the buyback move. CNBC sources moot that the Treasury could use its General Account (currently near $1trn) to cash flow the buybacks. Ultimately that would just be cash management though and the purchases in any scale would still need to be funded by tbills at least, regardless of any short-term smoothing. Running down the TGA is also not without its implications either in terms of cash cushion into any future shutdown standoff or in terms of its impact on the market (though the Fed’s quantitative management balance sheet increases have allowed more room for TGA noise). Ultimately, if this route is adopted and the buybacks surprise to the upside, it is not a good look for the dollar. US2s30s have flattened back to just under 100bp from recent highs of 115bp, so while it has flattened the curve, it has done so with some short end pressure (2s back up to 4.25%), and ultimately concerns over over-interventionist policy weighing the dollar and potentially adding to challenges for the Fed.