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Liquidity Fund Monthly

MARKETS PONDER RATE PROSPECTS

Central banks remained under close scrutiny in March and while most once again left rates unchanged, there were some notable developments. The Bank of Japan ended the negative rate policy it had in place since 2016; while increasing from -0.10% to a new range of 0.00%-0.10% is not a particularly big hike, it marks a significant change. The only other major central bank to adjust rates was the Swiss National Bank, which surprised with a 25 basis point cut to lower its benchmark rate to 1.5%. Elsewhere, markets grew more comfortable that rates in Europe and the US won’t change until June/July.

In the US, the Fed’s decision was accompanied by the ‘dot plot’ of Fed member expectations on interest rates – which continued to project three cuts in 2024. Inflation in the US and elsewhere is still proving sticky but there was a decline in longer-term bond yields after a weak start to 2024. Shorter-term market rates continued to hover around existing levels in the absence of material near-term policy rate cut expectations.

State Street EUR Liquidity LVNAV Fund

European Central Bank: The ECB Governing Council left rates unchanged while indicating expectations of a June rate cut were reasonable.

Market Rates: One-month EURIBOR was barely changed at 3.86%, while the 12-month rate fell back to 3.67% from 3.75%. *

Macro: Headline eurozone annual inflation dipped to 2.4% in March from 2.6% in February, with the core rate down to 2.9% from 3.1%.

ECB Deposit Facility Rate: 4.00%
1-month Fund Yield (Gross): 4.01%
1-month Fund Yield (Net): 3.82%**

State Street GBP Liquidity LVNAV Fund

Bank of England: The Monetary Policy Committee voted 8-1 to leave rates unchanged, the first time since 2021 that no member voted to increase rates.

Market Rates: The 3-month ICE Term SONIA rate ticked modestly lower from 5.21% to 5.18% in the month. *

Macro: Both headline and core annual CPI inflation fell more than expected in February to 3.4% (from 4.0%) and 4.5% (from 5.1%), respectively.

Bank Base Rate: 5.25%
1-month Fund Yield (Gross): 5.35%
1-month Fund Yield (Net): 5.16%**

State Street USD Liquidity LVNAV Fund

Federal Reserve: The Federal Open Market Committee left rates unchanged, but signaled a midyear rate cut was plausible.

Market Rates: There was relatively little movement in market yields in the month, with US Treasury Bill yields largely stable across the curve. *

Macro: US headline annual CPI inflation ticked up from 3.1% to 3.2% in February, while the core rate – which excludes energy and food – dipped from 3.9% to 3.8%.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.55%
1-month Fund Yield (Net): 5.36%**

State Street USD Treasury Liquidity Fund

Federal Reserve: The Fed left rates unchanged as expected, and Jerome Powell indicated that recent high inflation prints did not alter its outlook on inflation trending lower.

Market Rates: The 1-month US Treasury Bill yield was relatively stable through the month, keeping within a tight range. *

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, stood at 2.8% in February for a second month.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.36%
1-month Fund Yield (Net): 5.22%**

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