A heavyweight conference has attracted market attention.
At the 10th US treasury bond bond market meeting of the New York Federal Reserve held on September 26, US Eastern Time, senior officials of the Federal Reserve, US Treasury Secretary Yellen and others made intensive noises and released many heavy signals.
Among them, New York Fed President Williams, who holds permanent voting rights in the FOMC and is the third in command of the Federal Reserve, announced that the New York Fed will establish an institution composed of private market participants to monitor the use of interest rate benchmarks or reference rates in financial markets, supporting the integrity, efficiency, and flexibility of their use.
On that day, Federal Reserve Chairman Powell was unable to attend in person, but recorded a video in advance to deliver the opening speech for the meeting. In his speech, Powell surprised the market by not discussing monetary policy or economic prospects in his opening remarks. Federal Reserve Vice Chairman Barr, who is responsible for financial regulation, revealed at the meeting that regulatory agencies are studying a requirement for large banks to establish "reserve and pre arranged collateral pools" at discount windows based on their small proportion of uninsured deposits, in order to maintain a minimum level of readily available liquidity.
During the conference, Yellen also expressed her latest views on multiple hot topics, covering various aspects such as the US economic situation, fiscal deficit, dollar intervention, and financial stability. In her speech, Yellen also launched a "bombardment" against Trump.
The Federal Reserve announces
On September 26th Eastern Time, New York Federal Reserve Chairman Williams, who holds permanent voting rights on the Federal Open Market Committee (FOMC) and is known as the "third in command of the Federal Reserve," announced that the New York Federal Reserve will establish an institution composed of private market participants to monitor the use of interest rate benchmarks or reference rates in financial markets, supporting their integrity, efficiency, and flexibility. The institution is called the Reference Rate Usage Committee and will start holding meetings in October.
When speaking at the 10th Annual treasury bond Market Conference of the New York Federal Reserve, Williams announced the above news of the establishment of the new institution.
It is reported that the Committee on the Use of Reference Rates will focus on key issues regarding reference rates, including how the use of these rates has evolved and how the market supporting these rates may change.
Williams stated that the group was convened by the New York Federal Reserve to promote best practices related to the use of reference rates, including recommendations from the Federal Reserve supported Alternative Reference Rate Committee. The reference interest rate is used as a benchmark for setting other interest rates.
He said that this group will also "promote" "best practices" related to the use of reference rates, including recommendations from the Federal Reserve backed Alternative Reference Rate Committee. The reference interest rate is used as a benchmark for setting other interest rates.
Patrick Howard, Deputy Chief Risk Officer of Morgan Stanley, will serve as the first chairman of the new committee. He said in a press release, "The financial industry and the public sector must work closely together to support the sustainable use of reference rates
In the United States, the Alternative Reference Rate Committee has chosen to create a new benchmark, namely, the Secured Overnight Financing Rate (SOFR), which is based on the overnight repurchase agreement with US treasury bond bonds as collateral.
The New York Federal Reserve proposed in July this year to modify the calculation method of SOFR. Wall Street strategists believe that these potential changes are necessary given the development of the repo market since the benchmark was introduced in 2018.
However, SOFR still has two drawbacks: firstly, the lack of a forward-looking yield curve, and secondly, the absence of credit components, both of which are important characteristics possessed by Libor and lacking in the new benchmark SOFR.
Williams said, "The relevant work will complement the efforts of the Bank for International Settlements and the Financial Stability Board in the use of interest rate benchmarks on an international scale, ensuring that we will not face issues similar to Libor again
Williams did not comment on the outlook for the US economy or monetary policy.
Powell's latest speech
On the same day, Fed Chairman Powell failed to attend the 10th US treasury bond market meeting of the New York Federal Reserve in person, but recorded a video in advance to deliver an opening speech for the meeting.
In his speech, Powell mentioned the opportunity of holding the annual meeting of the treasury bond bond market - the rare "flash crash" of liquidity in the treasury bond bond market nearly a decade ago.
It is worth noting that Powell did not discuss monetary policy or economic prospects in his opening speech, which surprised the market.
During the conference, Federal Reserve Governor Bauman delivered a speech on the economic outlook and monetary policy. Bauman pointed out that the discount window is designed for emergency situations, and its purpose of use is not the same as that of loans from the Federal Housing Loan Bank. It is important to recognize that there are some drawbacks to discount window borrowing, and it is crucial to repair the discount window through modernization. The Federal Reserve's regulation should focus on core risks. She said, "We are not responsible for ensuring that every bank can continue to exist
Bauman said, "I hope the Federal Reserve's balance sheet is as small as possible
Bauman is very satisfied with having a different perspective from the majority in the FOMC, saying, "Federal Reserve policy makers should be able to express different viewpoints. I hold a different opinion from many in the FOMC about how people, banks, and businesses operate in the economy. I have served on the committee for a long time and have become more confident in my views
Michael Barr, Vice Chairman of the Federal Reserve responsible for financial regulation, revealed that regulatory agencies are studying a requirement for large banks to establish "reserve and pre arranged collateral pools" at discount windows based on their small proportion of uninsured deposits, in order to maintain a minimum level of readily available liquidity. This requirement means that the regulatory authorities' new regulations will require banks to link uninsured deposits with minimum liquidity.
Yellen criticizes Trump
US Treasury Secretary Janet Yellen also attended the 10th US treasury bond bond market meeting of the New York Federal Reserve. During the meeting, she delivered the latest views on a number of hot topics, covering the US economic situation, fiscal deficit, US dollar intervention, financial stability and other aspects.
Firstly, regarding the state of the US economy, Yellen emphasized her optimism that the US economy is moving towards a "soft landing" and controlled inflation.
Yellen stated that indicators from various aspects such as the labor market, inflation, and economic growth indicate that the United States is moving towards a 'soft landing'. She also acknowledges that 'risks always exist', such as a slightly higher level of idleness in the labor market compared to before.
Yellen pointed out that the "last mile" of the current inflation reduction campaign includes housing costs. There is ample reason to believe that rental prices will continue to decline, ultimately achieving the 2% inflation rate desired by the Federal Reserve. If the US economy continues on its current path, she believes the Federal Reserve's policy rate will move closer to the neutral rate.
She revealed that in the future, the US government does need to adopt some deficit reduction measures to control debt pressure.
To the surprise of the market, Yellen also took the initiative to raise the issue of the value of the US dollar, emphasizing that "it should be decided by the market", but also adding a sentence that "it is imaginable to intervene in the US dollar in extreme situations".
In her speech, Yellen suddenly launched a "bombardment" against Trump.
Yellen stated that during the previous administration (Trump administration), the power of the Financial Stability Board was greatly weakened. By the time she took over, the entire committee had only a few digits of staff, and the finance department's analysis team responsible for monitoring systemic risks had already been disbanded. During her tenure, she completed the reconstruction of this committee and took decisive action in the Silicon Valley banking incident, reducing the risk of liquidity crisis contagion.