Group 1 - The core point of the articles highlights a significant decline in the reserves of the U.S. banking system, which has fallen below $3 trillion for the first time since January, indicating tightening liquidity conditions [1][3] - As of September 24, the reserves decreased by approximately $21 billion, reaching $2.9997 trillion, the lowest level in 2023 [1] - The decline in reserves is primarily driven by the U.S. Treasury's increased debt issuance since July to bolster cash reserves, which has absorbed liquidity from the Federal Reserve's balance sheet [3] Group 2 - The reduction in reserves is also influenced by the near depletion of the overnight reverse repurchase agreement (RRP) tool, leading to a decrease in bank reserves held at the Federal Reserve [3] - The tightening liquidity is gradually affecting the daily operations of the financial system, prompting the Federal Reserve to slow down its balance sheet reduction by decreasing the scale of maturing bond rollovers [3] - The effective federal funds rate has slightly increased to 4.09%, indicating upward pressure on financing costs, although it remains within the target range of 4% to 4.25% [3] Group 3 - Dallas Fed President Logan suggests abandoning the federal funds rate as the benchmark for monetary policy, advocating for a rate linked to the U.S. Treasury mortgage market to enhance policy stability and effectiveness [4]

Core Viewpoint - The Bank of England's Chief Economist Huw Pill advocates for a faster reduction of the central bank's large bond balance sheet accumulated under quantitative easing (QE), suggesting that the market is stronger than previously thought and that the central bank has robust tools to support it in case of market stress [1][2][5] Group 1: Market Dynamics - The current "UK bond storm" is primarily due to the loss of the Bank of England as a major buyer, leading to increased volatility and weaker demand for long-dated gilt bonds, particularly the 30-year bonds, which saw yields rise to a new high of 5.7% in early September [2][5] - Pill expressed dissent against the Monetary Policy Committee's (MPC) decision to slow the pace of quantitative tightening (QT) from £100 billion to £70 billion, arguing that market demand is stronger than other officials believe [2][5] Group 2: Quantitative Easing and Financial Impact - The Bank of England still holds nearly £600 billion in UK government bonds, despite ongoing QT efforts, which include actively selling bonds and not reinvesting the principal of maturing bonds [5][6] - Since the Bank of England raised the base rate above 2%, its asset portfolio has incurred losses of approximately £93 billion, erasing most of the £124 billion profit gained since 2009, and is projected to result in taxpayer losses exceeding £100 billion over the project's lifecycle [6][10] Group 3: Policy and Governance - Pill emphasized the need for well-designed government fiscal rules to address the large capital flows resulting from past QE decisions, indicating that the complexities arising from QE are not the central bank's responsibility [6][10] - The UK Treasury has lost 75% of the profits previously gained through QE, highlighting the significant financial implications of the current monetary policy environment [9]

Group 1: UK Market and Central Bank Policy - The UK FTSE 100 and 250 indices lag behind continental European markets as investors remain cautious ahead of the Bank of England's interest rate decision [1] - The Bank of England is expected to maintain interest rates unchanged for the remainder of 2025 due to inflation levels significantly above the 2% target [1] - A combination of rising unemployment claims and falling core inflation may lead to a market perspective that the Bank of England might need to adopt a more accommodative policy in the future [1] Group 2: Australian Employment Data - Australia's employment data showed a surprising decline with a change of -5,400 jobs, significantly below the expected +21,200 [3] - This marks the third substantial miss against market expectations in the past four months, raising concerns about similarities with the U.S. labor market [3] - The Australian dollar weakened against most currencies, with market expectations for a rate cut by the Reserve Bank of Australia in November rising to 61% [3] Group 3: Federal Reserve Outlook - The recent FOMC meeting conveyed a cautious tone, with 9 out of 19 officials expecting two more rate cuts this year, while 6 believe no further easing is necessary [4] - The division within the Federal Reserve highlights differing views on the future interest rate path, with market expectations for two rate cuts increasing from 70% to 85% [4] - Fed Chair Powell emphasized the need for caution regarding rapid rate cuts, reflecting concerns about inflation despite a weakening job market [4]

Core Viewpoint - The Bank of England is expected to maintain its benchmark interest rate at 4% during the upcoming monetary policy meeting, while also slowing down its quantitative tightening (QT) plan due to increased volatility in the government bond market [1][4]. Group 1: Interest Rate Decision - Economists anticipate that the Monetary Policy Committee (MPC) will keep the annual reduction of government bond holdings at £700 billion, down from £1 trillion [1]. - The MPC is expected to vote 7 to 2 in favor of maintaining the interest rate, as decision-makers await clearer signals regarding potential inflationary pressures from the labor market [5][7]. - The market currently sees only a one-third probability of further rate cuts by the end of the year, breaking the trend of quarterly cuts since August 2024 [7][10]. Group 2: Economic Performance - The UK economy showed better-than-expected performance, with a 0.3% growth in Q2, surpassing the previous forecast of 0.1%, making it the leader in growth among G7 countries [11]. - Despite positive economic indicators, the Bank of England remains cautious, predicting a 0.3% growth for Q3 and expressing concerns over persistent inflationary pressures [11]. Group 3: Inflation Concerns - The Bank of England expects inflation to peak at 4%, driven by temporary factors, but officials are wary of a potential "second-round effect" where rising wages could further elevate prices [11]. - The current inflation level remains significantly higher than that of the US and Eurozone, indicating ongoing challenges for the UK economy [11].

Core Viewpoint - The Federal Reserve has initiated its first interest rate cut of the year, reducing the target range from 4.25%-4.5% to 4.00%-4.25%, marking a total reduction of 125 basis points in the current easing cycle [1][9] Summary by Sections Interest Rate Decision - The Federal Reserve's decision to cut rates was widely anticipated, with a 96% probability of a 25 basis point cut reflected in futures markets prior to the announcement [1] - The Fed's updated projections indicate an increase in the expected number of rate cuts for the year from two to three, suggesting two additional 25 basis point cuts after the current one [1][12] Employment and Economic Outlook - Concerns regarding a slowdown in the job market have overshadowed inflation worries, prompting the Fed to adjust its focus on employment risks [2][3] - The Fed's statement highlighted that job growth has slowed and the unemployment rate has slightly increased, indicating heightened risks to employment [3] Voting Dynamics - In the recent FOMC meeting, 11 out of 12 voting members supported the 25 basis point cut, with only one member, newly appointed Stephen Miran, opposing it in favor of a 50 basis point cut [5][6] - The voting outcome did not reflect a significant division within the committee compared to previous meetings [7] Asset Reduction Strategy - The Fed reiterated its commitment to reducing its holdings of U.S. Treasuries and mortgage-backed securities, maintaining a slower pace of balance sheet reduction since April [4] Economic Projections - The Fed has revised its GDP growth forecasts upward for the next three years while adjusting unemployment and inflation expectations [14][15] - The updated median projections indicate a GDP growth rate of 1.6% for 2025, with inflation expected to return to the Fed's long-term target of 2% by 2028 [15]

Market Overview - The three major U.S. stock indices paused their upward momentum, with the S&P 500 down 0.13% at 6606.76 points, the Dow Jones down 0.27% at 45757.9 points, and the Nasdaq down 0.07% at 22333.96 points, as retail sales showed steady performance [1] - European indices also experienced declines, with Germany's DAX30 down 1.68%, the UK's FTSE 100 down 0.93%, and France's CAC40 down 1.00% [2] - The U.S. dollar index fell by 0.68%, closing at 96.639, while the euro and pound strengthened against the dollar [3] Commodity Insights - Gold prices reached a new high, with futures rising to $3,688.90 per ounce, supported by expectations of an upcoming Federal Reserve rate cut [4] - Oil prices increased, with light crude oil futures up 1.93% to $64.52 per barrel and Brent crude up 1.53% to $68.47 per barrel [2] Economic Data - U.S. retail sales for August rose by 0.6%, exceeding expectations, partly due to tariffs raising product prices [5] - Industrial production in the U.S. showed minimal growth in August, with manufacturing output increasing by 0.2% [7] - The U.S. housing market is expected to benefit from lower mortgage rates and anticipated Federal Reserve rate cuts, as indicated by the unchanged builder confidence index [8] Corporate Developments - Major U.S. tech companies announced plans to invest over $40 billion in AI infrastructure in the UK, with Microsoft committing $30 billion by 2028 and Google planning to invest $6.8 billion over the next two years [12] - PIMCO suggested that the Federal Reserve should halt the reduction of its mortgage-backed securities holdings to support the housing market [9] Analyst Ratings - Bernstein initiated coverage on Apple with an outperform rating and a target price of $290, while UBS raised its gold price targets for 2025 and 2026 [13]

Core Viewpoint - PIMCO suggests that the Federal Reserve should consider halting the reduction of its mortgage-backed securities (MBS) holdings to support the U.S. housing market [1] Group 1: Federal Reserve Actions - Since the beginning of the interest rate hike cycle in 2022, the Federal Reserve has been gradually reducing its MBS holdings through quantitative tightening (QT) [1] - The Fed has allowed the principal and interest payments from MBS to mature without reinvesting the proceeds [1] Group 2: Impact on Mortgage Market - PIMCO reports that the continuous reduction of MBS holdings over the past three years has led to an "abnormally wide" mortgage spread, which is the difference between Treasury yields and mortgage rates [1] - As of last Friday, this spread was approximately 230 basis points, nearing historical highs [1] - This situation has contributed to an increase in the average rate for the most common 30-year fixed-rate mortgage, which currently stands at 6.35% [1] Group 3: Proposed Solutions - PIMCO's Chief Investment Officer, Mark Sedna, and others argue that reinvesting the principal and interest payments from MBS could have a similar or even better effect on lowering mortgage rates compared to rate cuts [1]

Core Viewpoint - The Bank of England (BoE) is expected to maintain its key interest rate at 4% during the upcoming monetary policy meeting, while also slowing down its plan to reduce government bond holdings due to rising bond yields and economic challenges [1][2]. Group 1: Monetary Policy - The BoE lowered its key interest rate from 4.25% to 4% last month, continuing a gradual easing cycle that began in August 2024 to address economic slowdown following inflation spikes in 2022 [1]. - The BoE's current strategy involves a cautious and gradual approach, with rate cuts of 25 basis points every three months [1]. - There are indications that the BoE may not lower rates in the upcoming meetings in November or December, as four out of nine members of the monetary policy committee voted against a rate cut last month [1]. Group 2: Quantitative Tightening (QT) - The BoE is expected to slow down the pace of its quantitative tightening, having reduced its government bond holdings by £100 billion over the past 12 months, bringing the total from a peak of £895 billion to £586 billion by the end of August [2]. - The market anticipates that the QT pace will significantly slow to approximately £70 billion, as rising bond yields have increased government borrowing costs [2]. - The BoE's approach to reducing bond holdings primarily involves allowing bonds to mature without reinvestment, with some active sales, which differs from the strategies employed by the Federal Reserve and the European Central Bank [2].

Core Viewpoint - The upcoming "Central Bank Super Week" will see major central banks, including the Federal Reserve and the Bank of Canada, announce interest rate decisions, with expectations of a 25 basis point rate cut from the Fed to address a weakening labor market and respond to calls from the White House [1][3][4]. Group 1: Federal Reserve's Rate Decision - The Federal Open Market Committee (FOMC) is anticipated to announce a 25 basis point rate cut, marking the first reduction since Trump's second term began, influenced by pressure from the White House and signs of labor market weakness [4][5]. - Economic data, including retail sales and unemployment claims, will be critical indicators leading up to the Fed's decision, with expectations of a 0.3% increase in retail sales for August [5]. Group 2: Global Central Bank Actions - The Bank of England is likely to maintain its benchmark rate at 4%, focusing on its quantitative tightening plans amid recent market volatility [6]. - The Bank of Japan is expected to keep rates unchanged, signaling no immediate tightening actions despite a path towards policy normalization [6]. - The Bank of Canada is projected to follow the Fed's lead with a rate cut, reducing its overnight rate to 2.5% due to disappointing employment data and economic contraction [6]. Group 3: Emerging Markets Central Banks - Most emerging market central banks, including those in Indonesia, Brazil, and South Africa, are expected to adopt a cautious stance and maintain current interest rates, with Brazil's rate likely remaining at a 19-year high of 15% [7].

Report Industry Investment Rating - Not provided in the given content Core View - Similar to the Bank of Japan, the Fed's bond - buying policy was initially a tool for liquidity adjustment. In 2008, the sub - prime mortgage crisis led to systemic financial risks and exhausted traditional interest - rate cut space, prompting the Fed to turn to QE. In 2020, the COVID - 19 outbreak restarted QE. In the short term, the impact of the QE policy on Treasury yields evolves more through investors' expectations, while in the long term, the US QE significantly affects long - term Treasury yields. Large - scale bond purchases provide liquidity to the financial market and drive down interest rates to some extent [1][66]. Summary by Different Stages First Stage (Before 2008): Traditional Monetary Policy Tool for Providing Liquidity - **Macro Background and Policy Objectives**: To meet the continuous expansionary demand for base money, the Fed used open - market operations (permanent and temporary) to control the money supply and influence interest rates. Asset purchases mainly supported currency issuance, while repurchase transactions smoothed liquidity disturbances [14][15]. - **Bond - buying Method**: One - way purchases in the primary and secondary markets. The Fed usually conducted weekly bond - buying operations in the secondary market through the SOMA. From 2004 - 2006, it carried out 40, 24, and 39 cash - bond transactions respectively, with average single - time increases of $1.28 billion, $1.04 billion, and $0.92 billion [20]. - **Impact on the Bond Market**: The Fed's bond - buying had a relatively limited impact on the bond market as its core goal was to limit the impact on normal market functions and the purchase scale was generally small. US Treasury yields were mainly determined by market expectations of future economic growth, inflation, and policy rates [38]. Second Stage (2008 - 2014): Quantitative Easing after the Sub - prime Mortgage Crisis - **Macro Background and Policy Objectives**: The 2008 sub - prime mortgage crisis led to a liquidity crisis. The Fed implemented QE to stabilize the financial and real - estate markets, lower long - term interest rates, and stimulate the economy by purchasing assets and expanding its balance sheet [39][40]. - **Bond - buying Method**: Continuous purchases in the secondary market. The QE process included three rounds and a twist operation. QE1 (2008.11 - 2010.3) had a total scale of $1.725 trillion; QE2 (2010.11 - 2011.6) involved buying $600 billion of long - term Treasuries; the twist operation (2011.9 - 2012.12) sold short - term Treasuries and bought an equal amount of long - term Treasuries; QE3 (2012.9 - 2014.10) was an open - ended plan. The Fed started tapering in 2013 [41][44]. - **Impact on the Bond Market**: The actual bond - buying operations had inconsistent effects on bond yields. After the QE policy was introduced, the bond market traded more based on investors' expectations. In the long run, the QE policy significantly reduced US bond yields. From October 2008 to October 2014, the yields of 1 - year and 10 - year Treasuries dropped by 124BP and 166BP respectively [47][48]. Third Stage (2015 - 2018): Difficult Exploration of Normalization - **Macro Background and Policy Objectives**: With the US economy's moderate recovery, the Fed aimed to exit the ultra - loose policy through passive balance - sheet reduction to avoid asset price bubbles and financial risks [49][50]. - **Bond - buying Method**: No reinvestment after bond maturity. The Fed raised interest rates 9 times from the end of 2015 to the end of 2018 and started QT in October 2017, gradually reducing its bond holdings [51][52]. - **Impact on the Bond Market**: After the QT policy was implemented, US Treasury yields continued to rise. It is believed that balance - sheet reduction increased Treasury yields as it meant less demand for US Treasuries and occurred during the late stage of the interest - rate hike cycle [55]. Fourth Stage (2019 - 2022): Unprecedented Response to the Pandemic - **Macro Background and Policy Objectives**: The COVID - 19 outbreak in 2020 led to an economic slowdown and market panic. The Fed launched an "unlimited QE" to start the crisis - response mode [56][57]. - **Bond - buying Method**: Unlimited QE - Taper - Balance - sheet reduction. The Fed cut interest rates to zero in March 2020, launched a $700 billion QE plan, and then an "unlimited QE". It started tapering in November 2021 and planned to end QE in mid - 2022. Balance - sheet reduction started in May 2022 [58][60][61]. - **Impact on the Bond Market**: After the "unlimited QE" was announced, US bond yields declined. However, due to factors such as investors' expectations and economic fluctuations, the ultimate impact of the Fed's bond - buying was limited. In 2022, the Fed's bond - buying failed to lower bond yields [63][65].