STIR: Less Than 50bp Of BoE Cuts Now Priced Through December

• Q: Do you have a personal preference for the relative weights between the structural bond portfolio and the structural refinancing operations in the future?
• A: On structural liquidity, it is not just the size, but also the composition that matters. My personal preference is we should provide banks with sufficient liquidity in a structural way so that they have enough reserves to face unforeseen volatility, but also reserves they can count on to extend credit to the economy.

• Q: How does balance sheet runoff impact neutral rate estimates? Does that have an implication on rate setting?
• A: Sometimes I wonder why we spend so much time discussing r*. If you think monetary policy can influence real variables, then it can impact the neutral rate. People debate about that. If we don’t increase investment, we cannot impact potential growth. If interest rates impact. And if monetary policy has as an influence or interest free beyond investment, then you can, you can think that there is a channel from monetary policy to the real economy.

• SFRM5 95.56/95.68/96.00/96.12 Iron Condor, sold at 2.25 in 3k.
• SFRQ5 95.93^, bought for 34.5 in 2k.
• SFRU5 95.93^, sold at 37 and 36.5 in 8k total.
• SFRZ5 96.37/96.12/95.68p ladder, sold at 6.25 in 3k.
• 0QM5 96.06 with 2QM5 96.00 straddle strip, bought for 93 in 1.5k.

Repo reference rates softened slightly overall on Friday Feb 14, the most recent session for which we have data owing to Monday's holiday.

• While SOFR was unchanged at 4.33%, BGCR and TGCR saw 1bp dips to 4.31% each.
• Secured rates are seen picking up moderately this week, particularly today as it marks the month's Treasury refunding auctions settlement.
• Though of course, the main pressure is expected to come at end-month as usual, especially given unusually large auction settlements at the end of the month.
• Effective Fed funds as usual was unchanged at 4.33%.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.33%, no change, $2319B
* Broad General Collateral Rate (BGCR): 4.31%, -0.01%, $932B
* Tri-Party General Collateral Rate (TGCR): 4.31%, -0.01%, $913B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $91B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $268B