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Liquidity Fund Monthly


As February progressed investor sentiment appeared to shift from believing that an end the rate hike cycle was nigh to recognition that the economic conditions may not yet be supportive of that view. Stronger-than-expected data on the jobs, inflation, and business activity fronts prompted investors to revisit previous assessments about recession prospects. Market speculation about hard or soft landings was expanded to include the potential for a ‘no landing’ scenario.

Central banks in the US and Europe increased interest rates in line with expectations and flagged that the fight against persistent inflation would continue. Bonds weakened across the spectrum, but particularly for shorter maturity assets — the inversion of the US Treasury yield curve (in the 2Y/10Y area) was the steepest since 1981 as the yield gap widened to 90 basis points. European bonds also retreated in the month. Short-dated market rates increased on policy rate hikes and the likelihood of higher rates for longer; upward moves in 12-month rates typically reversed the declines of the previous month.

State Street EUR Liquidity LVNAV Fund

European Central Bank: No surprises in the month as the Governing Council voted to raise policy rates by 50 basis points.

Market Rates: One-month EURIBOR rose to 2.48% from 2.18%, with the three-month rate up to 2.74% from 2.51%. *

Macro: Inflation edged lower from 8.6% to 8.5% in February, although core inflation (which excludes energy and food) rose to a new high of 5.6%.

ECB Deposit Facility Rate: 2.50%
1-month Fund Yield (Gross): 2.22%
1-month Fund Yield (Net): 2.07%**

State Street GBP Liquidity LVNAV Fund

Bank of England: The Monetary Policy Committee increased policy rates 50bps to 4.0%, while indicating that rates may be near their peak.

Market Rates: The 1-month ICE Term SONIA rate rose from 3.85% to 3.99%, with the 12-month rate up 36bps to 4.68%.*

Macro: Annual CPI inflation fell more than expected to 10.1%, with the core rate dipping to a seven-month low of 5.8%.

Bank Base Rate: 4.00%
1-month Fund Yield (Gross): 3.93%
1-month Fund Yield (Net): 3.73%**

State Street USD Liquidity LVNAV Fund

Federal Reserve: As expected, the Fed slowed the pace of rate hikes with its smallest increase (25bps) since March 2022.

Market Rates: USD market rates increased amid ongoing inflation concerns. 3-month LIBOR rose to 4.97% from 4.81%, with the 12-month rate up to 5.68% from 5.34%. *

Macro: US headline annual CPI inflation fell to 6.4% in January from 6.5%. The smaller-than-expected decline was replicated in the core rate, which also fell 0.1% to 5.6%.

Fed Funds Target Rate: 4.50% - 4.75%
1-month Fund Yield (Gross): 4.85%
1-month Fund Yield (Net): 4.65%**

State Street USD Treasury Liquidity Fund

Federal Reserve: The Fed warned the disinflation process has a long way to go, contrasting with more dovish comments earlier in the month.

Market Rates: The 1-month US Treasury Bill yield rose to 4.60% from 4.53% in February. *

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, unexpectedly increased to 4.7% in January from 4.4%.

Fed Funds Target Rate: 4.50% - 4.75%
1-month Fund Yield (Gross): 4.67%
1-month Fund Yield (Net): 4.47%**

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