ENERGY: US Oil and Gas Rigs Up 1 on Week at 593: Baker Hughes

The New York Times reports that US Treasury Secretary Scott Bessent is expected to skip a G20 summit of finance ministers and central bankers in South Africa, next week. Should Bessent decline to attend the conference, it would forgo a key opportunity for Trump's Treasury team to meet with counterparts from China, Russia, India, and Brazil. Skipping the meeting appears to signal that the Trump administration sees little value in the kind of multilateralism championed by the G20.

• The Times notes that skipping, "such a major economic gathering is highly unusual for a Treasury secretary, particularly one who was just confirmed to his post three weeks ago... It follows a boycott of a similar meeting of foreign ministers this week in Johannesburg by Secretary of State Marco Rubio. Mr. Rubio said he was skipping the meetings because he had no interest in wasting taxpayer money an “coddling” anti-Americanism."
• The report comes amid a major diplomatic rupture between Washington and Pretoria over a new land expropriation law and legal actions related to the war in Gaza, culminating in a threat to suspend South Africa's participation in the African Growth and Opportunity Act.
• Semafor reported yesterday: "South Africa is preparing to dispatch a delegation of government and business leaders to Washington in an attempt to retain the country’s preferential access to the world’s largest economy — but only after similar trips to China and Europe."

As largely expected, secured rates saw some upside pressure Tuesday, coinciding with large Treasury coupon auction settlements from last week's refundings. SOFR rose 4bp to the highest level of February so far (4.37%), with BGCR and TGCR up 3bp. 

• It's anticipated that these rates will pull back later this week as the Treasury settlement impact subsides, though pressures are likely to return at the end of the month as usual.
• Effective Fed funds unsurprisingly remained unchanged at 4.33%, though there was some upside pressure at the extreme high end of the distribution (volume-weifghted 99th percentile up 5bp to 4.45%, joint-highest since the December Fed rate cut)

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.37%, 0.04%, $2452B
* Broad General Collateral Rate (BGCR): 4.34%, 0.03%, $936B
* Tri-Party General Collateral Rate (TGCR): 4.34%, 0.03%, $913B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $89B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $246B
 

The FOMC's hawks have generally been emboldened by post-January developments. 

• Two of the FOMC’s most hawkish members (Cleveland’s Hammack, Dallas’s Logan) have very subtly speculated about a possible rate hike as the Fed's next move. Hammack: “while it's not my base case that we would raise rates this year, there's a lot of uncertainty there about a broad swath of policies”, Logan: “in other scenarios, we'll need to hold rates at least at the current level for quite some time” – note the “at least”.
• Gov Bowman, a hawk, doesn’t quite go that far but likewise doesn't see the current rate level as "exerting meaningful restraint" and supports a "cautious and gradual approach to adjusting policy".
• We still haven't heard from two of biggest hawks - KC's Schmid and St Louis's Musalem - since the January FOMC, and both of them are 2025 voters.
• Musalem is due to speak next on Feb 20, with Schmid not scheduled to speak before the March FOMC meeting.

Centrists showed no urgency to cut. 

• Richmond's Barkin: "the case for wait and see is, you want to wait and see", and on whether the Fed will cut at some point this year, "we will see what happens.
• Atlanta's Bostic while pointing to an FOMC base case of 50bp of cuts this year noted "We're not in a hurry. We'll move when we have enough information to move."
• Minneapolis's Kashkari, whose monetary policy outlook has varied over time between dovish and hawkish, said "I would expect the federal funds rate to be modestly lower at the end of this year.”