STIR: Sep'25 SOFR Call Sale

Lane's speech draws upon familiar themes from the ECB January press conference, with policy needing to track a "middle path" to "balance the risks of moving too slowly against the risks of moving too quickly". The familiar data-dependent and meeting-by-meeting approach was unsurprisingly repeated.

What is more notable is that another Executive Board member (after de Guindos earlier) has played down the relevance of the neutral rate in calibrating near-term policy.

• This comes ahead of the ECB staff paper on neutral rates this Friday, which is expected to contextualise the 1.75-2.25% range cited by President Lagarde ahead of the January press conference.

Excerpts from the speech:

• "In exiting a restrictive phase, much energy could be diverted towards creating a summary “restrictiveness” index. Any such index would have to incorporate at least nine factors"...."All of these factors enter our calibration of monetary policy (our assessment of the strength of monetary policy transmission has been highlighted as central to our reaction function) and cannot be summarised by a single indicator such as comparing the prevailing policy rate to a highly-uncertain estimate of the so-called neutral rate".
• "In terms of policy making, uncertainty about the level of the neutral rate and, more generally, about the strength of monetary transmission inescapably sits alongside uncertainty about the inflation outlook and uncertainty about the economic outlook".

• FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
  • Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $281B
• Earlier Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 4.33% (-0.02), volume: $2.344T
  • Broad General Collateral Rate (BGCR): 4.31% (-0.02), volume: $909B
  • Tri-Party General Collateral Rate (TCR): 4.31% (-0.02), volume: $894B
  • (rate, volume levels reflect prior session)

TIPS sizes were increased for the upcoming quarter as follows, as expected: "Over the February to April 2025 quarter, Treasury plans to maintain the February 30-year TIPS new issue auction size at $9 billion, increase the March 10-year TIPS reopening auction size by $1 billion to $18 billion, and increase the April 5-year TIPS new issue auction size to $25 billion." The quarterly auction schedule is here (PDF).

• And there is some note of the debt limit in the Bill Issuance section, though unsurprisingly there is very limited detail and nothing new: "Since January 21, 2025, Treasury has been using extraordinary measures to finance the government on a temporary basis. Until the debt limit is suspended or increased, debt limit-related constraints will lead to greater-than-normal variability in benchmark bill issuance and significant usage of CMBs."
• And as expected, Treasury is transitioning the 6-week cash management bill to benchmark status, expected for the Feb 18 auction.
• The latest buyback schedule was released (schedule, PDF) for the upcoming quarter, with the first operation on Feb 12 and the last on May 6. "Treasury anticipates that over the course of the upcoming quarter it will purchase up to $30 billion in off-the-run securities across buckets for liquidity support and up to $22.5 billion in the 1-month to 2-year bucket for cash management purposes."
• TBAC studied the effectiveness of the buyback programs and concluded (PDF): "The Committee found, and dealer feedback confirms, that the program is broadly meeting its stated objectives of liquidity support and cash management, and that there is no pressing need for change."