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Liquidity Fund Monthly


There was a retreat in risk appetite during August as financial markets weighed the uncertain macro landscape against the prospects for easier interest rate policies. Resilient US jobs and retail sales data raised the potential of a soft economic landing, but it also invoked the prospect of rates staying high for even longer. While European labour markets remained tight as well, the broad thrust of economic data was less robust than in the US. With headline eurozone inflation unchanged at 5.3% (Source: Eurostat as of 31 August 2023), the European Central Bank is expected to increase rates further, stoking concerns the economic slowdown could become a recession. Also keeping markets on edge was weaker-than-expected data from China – the world’s second-biggest economy – where weak confidence levels and a struggling real estate sector offset moves by the People’s Bank of China to ease policy rates.

In rates markets, longer-dated bond yields were generally flat in Europe and higher in the US. Shorter-dated cash rates tended to track higher against the backdrop of ambiguity around near-term moves by central banks.

State Street EUR Liquidity LVNAV Fund

European Central Bank: : With no meeting of the ECB Governing Council in August, policy rates were unchanged. 

Market Rates : One-month EURIBOR rose to 3.64% from 3.58%, with the 12-month rate up to 4.10% from 4.06%. *

Macro: Headline annual inflation was static at 5.3% in August, with the core rate dropping to the same level from 5.5%.

ECB Deposit Facility Rate: 3.75%
1-month Fund Yield (Gross): 3.70%
1-month Fund Yield (Net): 3.55%**

State Street GBP Liquidity LVNAV Fund

Bank of England: In a split vote, the Monetary Policy Committee agreed to raise rates by a quarter percentage point.

Market Rates: The 1-month ICE Term SONIA rate ticked up to 5.26% from 5.24%, with the 12-month rate dipping to 5.79% from 5.83%. *

Macro: Annual CPI inflation fell from 7.9% to 6.8% in July, although the core rate was unchanged at 6.9%.

Bank Base Rate: 5.25%
1-month Fund Yield (Gross): 5.17%
1-month Fund Yield (Net): 4.97%**

State Street USD Liquidity LVNAV Fund

Federal Reserve: The Federal Open Market Committee did not meet in August, with policy rates thus remaining unchanged.

Market Rates: The 3-month US Treasury Bill yield edged up from 5.42% to 5.46%. The 12-month yield rose to 5.40% from 5.38%. *

Macro: US headline annual CPI inflation picked up to 3.2% in July from 3.0%. The core rate fell to 4.7%, the lowest level since October 2021.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.59%
1-month Fund Yield (Net): 5.39%**

State Street USD Treasury Liquidity Fund

Federal Reserve: In the absence of a FOMC meeting, focus moved to the Fed’s Jackson Hole gathering where Jerome Powell delivered a less hawkish speech that initially expected.

Market Rates: Yields on short-dated securities changed modestly over the month – the 1-month US Treasury Bill yield ticked higher to 5.39% from 5.38% in August. *

Macro: Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, rose from 4.1% to 4.2% in July.

Fed Funds Target Rate: 5.25% - 5.50%
1-month Fund Yield (Gross): 5.47%
1-month Fund Yield (Net): 5.27%**

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