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Liquidity Fund Monthly


October proved a difficult month as the global geopolitical environment deteriorated with the Hamas attack on Israel. As worries mounted about an escalation in violence and the potential for other parties to get involved, investor sentiment appeared rattled. Oil prices spiked in the immediate aftermath before partially retreating, while gold prices rallied. Diminished risk appetite was most evident in a broad equity market sell-off.

A significant driver of markets continues to be central bank policy and the resilient nature of US data releases renewed speculation that the Fed will persist with high interest rates for longer. The situation was somewhat different in the euro area where weaker-than-expected data and a downside inflation surprise underpinned gains for eurozone sovereign bonds. UK bonds were weaker as inflation remained stubbornly high.

In many cases, short-term market rates ended the month largely unchanged from their starting positions, reflecting expectations that neither policy rate hikes nor cuts are deemed especially likely in the next few months.

State Street EUR Liquidity LVNAV Fund

European Central Bank: The ECB Governing Council left policy rates unchanged in October, as expected.

Market Rates: One-month EURIBOR rose to 3.88% from 3.85%, while the 12-month rate fell to 4.05% from 4.23%. *

Macro: Headline annual inflation fell more than expected to 2.9% in October from 4.3%, with the core rate dropping to 4.2% from 4.5%.

ECB Deposit Facility Rate: 4.00%
1-month Fund Yield (Gross): 3.96%
1-month Fund Yield (Net): 3.81%**

State Street GBP Liquidity LVNAV Fund

Bank of England: In the absence of a Monetary Policy Committee meeting, rates were unchanged in October.

Market Rates: The 1-month ICE Term SONIA rate was barely changed at 5.21%, with the 12-month rate down to 5.27% from 5.45%. *

Macro: Annual CPI inflation was stable at 6.7% in September, a touch higher than expected, while the core rate ticked down to 6.1% from 6.2%.

Bank Base Rate: 5.25%
1-month Fund Yield (Gross): 5.41%
1-month Fund Yield (Net): 5.21%**

State Street USD Liquidity LVNAV Fund

Federal Reserve: The Federal Open Market Committee did not meet in October; hence, the federal funds rate was unchanged.

Market Rates: The 3-month US Treasury Bill yield ended the month at 5.48%, up from 5.46%. The 12-month yield was unchanged at 5.47%. *

Macro: US headline annual CPI inflation was steady at 3.7% for a second month, although the core rate — which excludes energy and food — fell to 4.1% from 4.2%.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.63%
1-month Fund Yield (Net): 5.43%**

State Street USD Treasury Liquidity Fund

Federal Reserve: Although the Fed did not have a rate-setting meeting in October, its officials continued to flag that policy rates will likely remain high for longer than markets are pricing.

Market Rates: Yields on short-dated securities moved little in October – the 1-month US Treasury Bill yield edged up 3bps to 5.40% in the month. *

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, fell from 3.8% to 3.7% in September.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.44%
1-month Fund Yield (Net): 5.24%**

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