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With no Bank of England meeting scheduled for July, policy rates remained unchanged. The economy returned to growth in May, with data releases such as retail sales rising to pre-pandemic levels in June. Money markets were kept busy with euro commercial paper activity high, although yields continued to fall and curves flattened. Brexit trade talks in July did not appear as encouraging as discussions held in June.
There was no Bank of England (BoE) policy meeting scheduled for July. The last meeting took place on 18 June when the bank’s Monetary Policy committee (MPC) unanimously (9–0) decided to hold rates at 0.10%, while voting 8–1 to increase quantitative easing (QE) by £100 billion to a target level of £745 billion by the end of 2020. The BoE has only started to make inroads into the a forementioned £100 billion of QE purchases and with market conditions appearing orderly with yields pinned at low levels, no changes to current policy are expected at its 6 August meeting.
The economy returned to growth in May while data releases such as retail sales rose to prepandemic levels in June — this is more a measure of the success that policymakers had in mitigating the effects of the lockdown. The real test will arguably come as the economy navigates the speed bumps ahead caused by the phasing out of the government’s support schemes. Another obstacle in the shape of Brexit remains as trade talks in July appeared less encouraging than the discussions held in June. Although the MPC did not discuss negative interest rates at its June meeting, the market has continued to price in its likelihood, with UK gilt yields out to seven years moving deeper into negative territory. Consensus expectations remain that such a move would be a last resort and that additional quantitative easing remains the preferred route.
The purchasing managers’ indices for Services (from 47.1 to 56.6) and Manufacturing (from 50.1 to 53.6) both rose in June — readings above 50 are indicative of growth. Retail sales were down by 22% at the trough in April, but are now less than 1% below the pre-pandemic levels following a 13.9% rise in June. The £35.5bn rise in public sector borrowing (PSNB) in June was smaller than consensus expectations of £41.5bn and the downwardly-revised £45.5bn rise in May, which suggests that government support is starting to wind down as the economy reopens. However, this figure remains about five times higher than in June last year. Although employment saw the largest drop since September 2011, the 126,000 fall in headline employment was still well below the consensus estimate of 234,000. Total pay fell by 1.2% month-on-month in May as the 20% pay cut taken by many furloughed workers dragged it lower; headline annual pay growth fell from +1.0% to -0.3% as a result. CPI inflation saw a small rise, from +0.5% in May to +0.6% in June (consensus +0.4%), but this seems unlikely to be sustained for long, as additional measures such as VAT cuts take hold.
Money markets were kept busy with euro commercial paper activity high. Strong investor demand was evident as a number of issuers with incremental supply saw strong uptake during the period. GBP activity was buoyant with investors showing continued interest into 2021. In broad terms, curves moved tighter and flatter, with levels compressing across all currencies as opportunities to capture yield run thin. Activity was driven by the overall lack of supply across sectors and ratings, allowing issuers to continue improving execution through price tightening and maturity extension. The sterling curve became particularly flat with yields out to six-months trading on top of overnight Deposit and Repo levels at around 0.06%. The GBP Libour curve also continued to fall, with the three-to-12-months’ fixings ending the month between three and 13 basis points lower.
At the fund level, the weighted average maturity (WAM) was increased from mid-30-day range to a low 40-day range as selected high-quality investments were made within a six-month maturity. With a flat yield curve, most investments were placed within a one-month maturity. Liquidity was maintained at high levels at all times well in excess of minimum requirements. Fund liquidity was covered with a combination of government and supranational holdings, gilt repo and bank
deposits. The fund always maintained high credit quality.
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For four decades, these principles have helped us be the quiet power in a tumultuous investing world. Helping millions of people secure their financial futures. This takes each of our employees in 27 offices around the world, and a firm-wide conviction that we can always do it better. As a result, we are the world’s third-largest asset manager with US $3.05 trillion* under our care.
*This figure is presented as of June 30, 2020 and includes approximately $69.52 billion of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.
All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.
Past performance is not a guarantee of future results.
Index returns reflect capital gains and losses, income, and the reinvestment of dividends. Diversification does not ensure a profit or guarantee against loss.
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The above targets are estimates based on certain assumptions and analysis. There is no guarantee that the estimates will be achieved. The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EC) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor’s or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor. All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
These investments may have difficulty in liquidating an investment position without taking a significant discount from current market value, which can be a significant problem with certain lightly traded securities.
You should obtain and read a Key Investor Information Document and Prospectus relating to the SSGA Cash funds prior to investing. Further information, including the annual and semi-annual reports and the Key Investor Information Document and Prospectus describing the characteristics, charges, expenses and risks involved in your investments are available for residents of countries where SSGA cash funds are authorised for sale, at ssga.com/cash and from your local SSGA office.
For Investors in Switzerland: The collective investment scheme referred to herein is a collective investment scheme under Irish Law. Prospective investors may obtain the current sales prospectus, the articles of incorporation, the simplified prospectuses as well as the latest annual and semi-annual report free of charge from the Swiss Representative and Paying agent, State Street Bank GmbH Munich, Zurich Branch, Beethovenstrasse 19, 8027 Zurich as well as from the main distributor in Switzerland, State Street Global Advisors AG, Beethovenstrasse 19, 8027 Zurich. Before investing please read the prospectus and the KIID, copies of which can be obtained from the Swiss representative, or at ssga.com.
An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. The views expressed in this material are the views of Cash Portfolio Management through the period ended June 30, 2020 and are subject to change based on market and other conditions. This document contains certain
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You should obtain and read a Key Investor Information Document and Prospectus relating to the SSGA Cash funds prior to investing. Further information, including the annual and semi-annual reports and the Key Investor Information Document and Prospectus describing the characteristics, charges, expenses and risks involved in your investments are available for residents of countries where SSGA cash funds are authorized for sale, at www.ssga.com/cash and from your local SSGA office or by calling +44 (0)20 3395 2333.
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