PBOC Move ‘Could Mark Reversal’ in Reserve Demand for USTs: BofA
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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PBCZ CH (People's Bank Of China)
People
Carol Zhang (Bank of America Corp)
Shyam Rajan (Bank of America Corp)
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UUID: 7947283
(Bloomberg) -- Reserve demand for USTs has been “one of the biggest surprises” this year, but the PBOC’s removal of a reserve requirement for trading foreign currency forwards could reverse that trend, and was a “critical trigger” for this week’s selloff, BofA strategists Shyam Rajan and Carol Zhang say in note.
- USD weakness and strong inflows into emerging markets have helped reserve managers rebuild dollar portfolios, driving growth in Fed custody holdings of USTs
- PBOC’s eased capital controls may curb interventions, slowing inflows into USTs
- Separately, BofA sees risk to 5y-7y USD swap spreads from increased UST issuance that may result from tax cuts, odds of which should become clear in next 4 weeks if Congress passes a budget
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
PBCZ CH (People's Bank Of China)
People
Carol Zhang (Bank of America Corp)
Shyam Rajan (Bank of America Corp)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283