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Liquidity Fund Monthly


As the concerns induced by bank-related jitters in March eased, investor appetite for risk improved. This was bolstered by a solid start to corporate earnings season and resilient economic data. Inflation remained well above central bank targets; headline rates are generally tracking lower on declining energy prices although core inflation has proved a bit stickier. Even as markets continued to price in policy rate hikes for May, there was a growing sense that the US Federal Reserve may pause thereafter while monetary policy in Europe may require more tightening before a terminal rate is reached.

Against this backdrop, there was some divergence in market rates between the US and Europe. While 10-year US Treasury yields dipped from 3.47% to 3.42%, similar-dated UK yields rose from 3.49% to 3.72%. Ten-year German yields ticked up modestly. Short-term cash rates generally moved higher to reflect expected policy tightening.

State Street EUR Liquidity LVNAV Fund

European Central Bank: In the absence of a meeting of the ECB’s Governing Council in April, policy rates were unchanged.

Market Rates: One-month EURIBOR rose to 3.05% from 2.92%, with the 3-month rate up to 3.27% from 3.04%. *

Macro: Headline inflation ticked up to 7.0% from 6.9% after a sharp fall in March. Core inflation (which excludes energy and food) edged off its record high to 5.6% in April.

ECB Deposit Facility Rate: 3.50%
1-month Fund Yield (Gross): 2.94%
1-month Fund Yield (Net): 2.79%**

State Street GBP Liquidity LVNAV Fund

Bank of England: The bank’s Monetary Policy Committee did not meet in April although markets priced in a rate hike for May.

Market Rates: The 1-month ICE Term SONIA rate rose from 4.17% to 4.34%, with the 12-month rate up from 4.58% to 4.81%.*

Macro: Annual CPI inflation remained in double digits, albeit while declining from 10.4% to 10.1% in March. The core rate was unchanged at 6.2%.

Bank Base Rate: 4.25%
1-month Fund Yield (Gross): 4.25%
1-month Fund Yield (Net): 4.05%**

State Street USD Liquidity LVNAV Fund

Federal Reserve: With no meeting of the Federal Open Market Committee, policy rates were thus unchanged.

Market Rates: Rates rose amid mixed views on when rate cuts might materialize. The 3-month Treasury Bill yield climbed from 4.81% to 5.06%, with the 12-month up to 4.77% from 4.69%.*

Macro: US headline annual CPI inflation fell to 5.0% in March from 6.0%. The core rate ticked up to 5.6% from 5.5%.

Fed Funds Target Rate: 4.75% - 5.00%
1-month Fund Yield (Gross): 5.12%
1-month Fund Yield (Net): 4.92%**

State Street USD Treasury Liquidity Fund

Federal Reserve: As April progressed, markets firmed up expectations for a rate hike of 25bps at the Fed’s May meeting.

Market Rates: Amid debt ceiling concerns, investor preference for short-dated securities helped drive the 1-month US Treasury Bill yield as low as 3.3% before ending April at 4.19% (down from 4.58% in the month). *

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, eased in March with the annual rate slowing from 4.7% to 4.6%.

Fed Funds Target Rate: 4.75% - 5.00%
1-month Fund Yield (Gross): 4.94%
1-month Fund Yield (Net): 4.74%**

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