Liquidity Fund Monthly


August proved to be a negative month for many risk assets as investors weighed evidence of slowing economic activity and hawkishness of central banks. With inflation remaining high, albeit amid some suggestions it may be peaking, sovereign yields continued to rise. Although the Federal Reserve and European Central Bank did not meet in August, 31 other central banks raised interest rates, including the Bank of England. Fed Chair Jerome Powell was clear about its intentions in stating that it “must keep at it until the job is done”.

Short-term rates also rose in this environment. Reflecting the likelihood of further hikes in the near term, cash rates advanced through the month. The ECB faces a challenging situation of very high gas prices due to Russia supply cuts, which are feeding inflation and threatening growth.

EUR Liquidity LVNAV Fund

European Central Bank: The ECB’s governing council did not meet in August, although a rate hike was flagged for September.

Market Rates: Most of the EURIBOR curve is now positive. The one-month rate rose from -0.07% to 0.23%. At the long end, 12-month EURIBOR increased from 0.92% to 1.78%. *

Macro: Eurozone inflation touched a new record high of 9.1% in August, driven by surging energy prices.

ECB Deposit Facility Rate: 0.00%
1-month Fund Yield (Gross): -0.11%
1-month Fund Yield (Net): -0.26%**

GBP Liquidity LVNAV Fund

Bank of England: The Monetary Policy Committee voted 8-1 to raise rates by 50 basis points – its sixth successive rate hike.

Market Rates: The 1-month ICE Term SONIA rate rose from 1.55% to 2.01% with the 3-month rate up from 1.82% to 2.43%.*

Macro: Headline annual inflation hit double figures, rising to 10.1% in August, with BOE saying it could hit 13% by year-end.

Bank Base Rate: 1.75%
1-month Fund Yield (Gross): 1.69%
1-month Fund Yield (Net): 1.49%**

USD Liquidity LVNAV Fund

Federal Reserve: Policy rates were unchanged in August in the absence of a Federal Open Market Committee meeting.

Market Rates: Markets continued to price in Fed rate hikes; 1-month LIBOR rose from 2.79% to 3.10%, with the 12-month rate up from 3.71% to 4.22%. *

Macro: US headline annual CPI inflation rose by 8.5% in July, down from the June peak of 9.1% as fuel cost increases eased.

Fed Funds Target Rate: 2.25% - 2.50%
1-month Fund Yield (Gross): 2.50%
1-month Fund Yield (Net): 2.30%**

USD Treasury Liquidity Fund

Federal Reserve: Fed officials signaled the bank will continue to raise rates despite some slowing in the pace of inflation.

Market Rates: The 1-month US Treasury Bill yield edged modestly higher from 2.15% to 2.17% in the month.

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, fell back to 4.6% in July from 4.8%.

Fed Funds Target Rate: 2.25% - 2.50%
1-month Fund Yield (Gross): 2.22%
1-month Fund Yield (Net): 2.02%**

More on Cash