US Treasury Department sells one-day bills for the first time since 2007

The US Treasury Department auctioned US$15 billion in one-day cash management bills (CMBs) on Friday, as its cash balance remained under pressure. It marked the first time since 2007 that the US government sold such short-term debt.

The bills, which carry a 5.145% investment rate, were issued yesterday and mature today, according to the Treasury. Bids totalling US$61.6 billion were tendered.

The auction came as the US Senate passed a debt limit deal late Thursday which President Biden signed at the weekend. It averted a default with just days to spare as the Treasury Secretary Janet Yellen said the government was set to run out of cash at the start of this week without a deal.

Leading up to the debt deal, the Treasury had scrambled to find cash to pay the government's bills on time. According to the latest update, its cash balance was US$48.5 billion last Wednesday, up from a six-year low of US$37.4 billion a day earlier but down from US  in mid-May.

One-day securities are highly irregular, with most cash management bills spanning a few days to a year. In 25 years, there have been only six one-day CMB auctions.

Once the debt ceiling is officially lifted, the Treasury will rush to replenish its cash coffers and has announced plans for a US$123 billion T-bill auction. It previously indicated that the auction was dependent on whether a debt limit deal was reached.

Analysts at Goldman Sachs estimated last month that the Treasury could issue US$700 billion in T-bills within weeks of a debt deal agreement.

Others have said debt issuance could total US$1 trillion for the year, potentially causing a strain on liquidity in financial markets.

 

Australia surprises with 0.25% rate hike

The Reserve Bank of Australia (RBA) has again upset market expectations, raising its benchmark rate by 25 basis points to 4.1%.

Economists polled by Reuters were widely expecting the central bank to hold rates steady this month and Australian stocks fell further on the announcement. The Australian dollar (AUD) was up by 0.73% to 0.6667 against the US dollar shortly after the decision,.

RBA Governor Philip Lowe said while inflation in the nation may have “passed its peak,” there are still indicators showing inflation persisting.

“Recent data indicate that the upside risks to the inflation outlook have increased and the Board has responded to this,” Lowe said. “This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.

“If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment,” Lowe said.

The governor’s statement added that there may be further rate hikes required to bring down the nation’s inflation rate, adding that it will “depend upon how the economy and inflation evolve.”

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe ... The Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market,” Lowe said.

Australia’s inflation rate peaked ay 8.4% last December, but the April rate unexpectedly rose to 6.8% from 6.3% a month earlier. The central bank’s target for inflation is a range between 2% to 3%.

While many analysts had not predicted this month’s rate rise Deutsche Bank Australia's chief economist Phil O'Donaghoe said last week that he expected the RBA to raise interest rates by 0.25 percentage points this month, and again in August and September.

This would take the cash rate to 4.6%, the highest level since November 2011. O'Donaghoe said the Fair Work Commission's recent decision to grant an 8.6% minimum wage increase on July 1 - the biggest since 1990 - had made him forecast an extra rate rise in September.
 

Hong Kong raises record amount in multi-currency green bonds

Hong Kong has raised US$6 billion in multicurrency green bonds, according to term sheets seen by Reuters, in a record transaction of its kind across Asia.

The city’s government carried out the transaction in dollars, euros and offshore Chinese yuan in the second such deal carried out this year for Hong Kong. At US$6 billion, the transaction is the largest ever environmental, social and governance (ESG) related bond in Asia, following a deal that raised US$5.75 billion in Hong Kong in January.

The deal raised $2.25 billion in dollar (USD) bonds with three-, five- and 10-year tranches, according to a term sheet seen by Reuters. The euro (EUR) transaction consisted of four- and nine-year bonds that raised €1.5 billion (US$1.6 billion), a separate term sheet showed.

An offshore yuan (CNY) tranche of two-, five- and 10-year bonds raised CNY15 billion (US$2.2 billion).

In January this year Hong Kong raised US$5.75 billion in a multicurrency deal, which the Hong Kong Monetary Authority (HKMA) said at the time was the biggest ever in Asia.

The city’s sale of nearly US$11.8 billion worth of green bonds in 2023 makes it the second-busiest sovereign issuer this year behind Italy and ahead of Germany, Refinitiv data showed. Globally there has been US$44.4 billion worth of green bonds sold in 2023, the data showed.

 

Japan’s tourism revival has mixed impact on economy

Japan’s reopening to tourists has helped the economy climb out of a recession with spending power that is also fueling upward pressure on hospitality-sector pay and prices.

Almost two million visitors arrived from overseas in April, compared with less than 140,000 a year earlier, according to Japan’s National Tourism Organisation. Although not yet back to pre-pandemic levels of almost three million per month, the return of spending by foreign tourists has already accounted for 1.1 percentage point of the 1.6% annualised growth in the first quarter of 202, according to Bloomberg Economics.

Tourism spending combined with a chronic labour shortage is supporting the kind of upward momentum in wages and price levels that Bank of Japan (BoJ) Governor Kazuo Ueda wants to see before he can consider changing policy.

Yohei Fujiwara, the head of a Japanese-style inn in Nagano on the historic Nakasendo trail between Tokyo and Kyoto, is among the hoteliers welcoming the return of foreign travelers who appear far less price-sensitive than their Japanese counterparts.

Data for March show that while average wages nationally rose just 1.3% from a year earlier, pay at restaurants and bars was 13% higher. A report by the Teikoku Data Bank found three in four of hotels surveyed said they had a shortage of full-time workers in April, the highest level among surveyed sectors. Around 85% of restaurants said they do not have enough part-time workers.

“Inbound demand is a factor accelerating the momentum of service prices and wage gains,” said Keiji Kanda, economist at Daiwa Institute of Research. “This is an element supporting the path targeted by the BoJ as labour shortages push up pay with a ripple through to prices.”

Tourism has been a central part of Japan’s economic growth plans for the past decade.

Japan’ s currency recently hit a six-month low against the US dollar and currently JPY139 is equivalent to USD1. For those using the greenback, everything in Japan offers about a 30% discount compared with the end of 2019. When the yen hit 150 against the US currency last year, local media reported that people abroad were changing money into the yen to prepare for visiting Japan after the pandemic.

The return of more Chinese visitors to Japan would add significant heft to the spending impact of tourists. They accounted for 37% of all inbound expenditure in pre-pandemic 2019, a share that has fallen to around 10% so far this year, according to Japan’s Tourism Agency. South Koreans currently top the list with about a fifth of tourist spending in Japan.

Prime Minister Fumio Kishida’s Cabinet is targeting inbound spending to hit JPY5 trillion (US$35.7 billion) a year as soon as possible, to beat its peak of JPY4.8 trillion four years ago.

 

British Chambers of Commerce plans rival to scandal-hit CBI

The Confederation of British Industry’s (CBI) director general Rain Newton-Smith is appealing for members to approve reforms ahead of a finely balanced vote on which the future of the scandalised business lobby group hinges.

The 59-year-old self-styled “voice of industry”, which has traditionally lobbied the government on behalf of big business, faces a potentially existential referendum at today’s extraordinary general meeting in London, where members will be asked to vote in favour of a package of changes to its structure, governance, and culture.

The package of reforms, compiled during a month of consultation, was prompted by media reports of misconduct, including two allegations of rape, and of a toxic culture, a claim a CBI-commissioned analysis found to be unfounded. However, the media coverage triggered the departure of Newton-Smith’s predecessor, Tony Danker, 

It also triggered an ongoing investigation by the City of London Police, led government and the opposition to suspend engagement with the CBI and prompted an exodus of leading companies who make up its membership.

 Newton-Smith is asking the remaining members to approve the changes, telling them: "I'm confident and determined this will be a turning point for us. The start of a new chapter, for a renewed CBI.

"This is a difficult but important journey. We've made great strides forward, but it will take real dedication. I am resolutely committed to leading that change and restoring the CBI to health.

However, the UK government has already signalled that it will work with a new business council set up to rival the CBI, which has been frozen out since the scandal broke. A Treasury source said that the Government was open to engaging with the new council established by the British Chamber of Commerce (BCC).

The BCC held a roundtable meeting with the council’s founding members – Heathrow, Drax, International Hotels Group (IHG) and BP – on Monday, as well as a number of prospective members.

The BCC also launched its new council to represent big businesses yesterday, in a move a source close to the CBI branded “opportunistic”.

 

Strong growth forecast for Asia’s real-time payments market

Asia-Pacific’s real-time payments (RTP) market will grow from US$49.2 billion in 2022 to US$96.2 billion by 2027, with a compound annual growth rate of 14.1% according to research from US payment systems specialist ACI Worldwide.

ACI's 2023 Prime Time for Real-Time report has shown that Asia Pacific continues its growth in the real-time payments market. The region has received live RTP integrations with the Association of Southeast Asian Nations (ASEAN), and central banks in the region have also supported the industry. Cross-border RTP is also a major area of growth, with the recent increase in international travel.

The report states that the volume of real-time payments (RTPs) in the region has seen constant growth. From 2022 to 2023 alone, 195 billion RTP transactions were made, indicating an annual growth of 63.2%. 

In addition to support from governments and central banks, which have invested in the infrastructure that made the adoption of RTP possible, features and services that offer convenience to users such as QR-code payments and mobile-native experiences are among factors that drive the adoption of RTP among consumers. A recent innovation in the area is the launch last month of cross-border QR code payments between Malaysia and Indonesia.

The widespread popularity of payment digitalisation in the area is made even clearer by the fact that 8 of the top 10 countries in mobile wallet adoption are from the APAC region.

The report highlights countries in the region that have made considerable progress when it comes to RTPs. Indonesia, one of the latest countries in the APAC to embrace RTP, is expected to have a significant growth rate in RTP adoption. Between 2022 and 2027, the country is expected to see an RTP growth at a CAGR of 81.9%. This would make its BI-FAST system one of the most successful RTP schemes.

Similarly, the RTP volume in Malaysia is also expected to increase at a CAGR of 19.7% during the same period. The main drivers of this shift are the expanding preference for mobile payments, population awareness, as well as the development of B2B use cases such as the QR-code payment linkage formed between countries like Thailand, Singapore, Indonesia, and Malaysia

By 2027, Thailand is projected to become the top country in APAC in terms of RTP adoption, as each citizen is expected to make an average of 43.6 RTPs each month by 2027. Another reason behind the success of RTPs is the fact that Thailand has also implemented ISO 20022 bulk payments.

New Zealand is another emerging country in the matter of RTP integration. Although the country has not yet established an internal RTP system, it has expressed an interest in following the trend of modernisation by utilising RTPs. New Zealand’s late start is not necessarily a setback, as it can make use of the successful RTP practices in the region when implementing its own strategy.

 

BNP Paribas and NatWest go live with Dynamic Credit manager

BNP Paribas and NatWest have partnered with fintech CobaltFX to simplify and streamline the allocation of credit for foreign exchange (FX) trades between banks.

A release said that the implementation of CobaltFX’s ‘Dynamic Credit’ solution marks a step forward in enhancing market access and control while optimising credit disbursement.

CobaltFX, part of London headquartered United FinTech, is a longstanding partner of BNP Paribas and NatWest. This latest collaboration aims to manage credit exposures, addressing manual processes as well as improving market access and control.

Joe Nash, digital chief operating officer (COO) for foreign exchange, rates, and commodities at BNP Paribas, noted the industry-wide trend of adopting innovative techniques to manage credit exposures and maintain market stability through digitalisation.

“By providing a standardised and digitised approach, and aggregating IT infrastructure across multiple venues,’Dynamic Credit gives banks unprecedented control to navigate fast-moving FX markets and proactively manage credit exposure,” said Nash. “This is a very important step in delivering a solution for credit providers, taking full advantage of new technical advancements.”

Since its acquisition by United Fintech in late 2022 and subsequent relaunch early this year, CobaltFX has gained traction. Marc Levin, CEO of CobaltFX, describes it as a prime example of United Fintech and partner companies collaborating to drive innovation in big banks’ digital transition. This aligns with the growing trend of banks and financial institutions seeking engagements with broader technology vendors to address compliance and security concerns effectively.

Christian Frahm, founder and CEO of United Fintech, notes that leading financial institutions are aiming to decrease the number of third-party vendors and work with broader technology vendors to challenge legacy providers. “Our prediction is that we will see many more banks and fintechs follow suit and join each other’s journeys on our digital platform,” he adds.

 

Mastercard and NAPS collaborate on digital payments in Morocco

Mastercard has teamed up with Moroccan fintech NAPS to drive innovation in Morocco’s digital payments market. The collaboration also builds upon a strong historical relationship between the pair and aims to develop innovative payment solutions for individuals and businesses.

A release stated that NAPS, with its mission to expand the horizons of digital payments in Morocco, brings over 30 years of expertise from M2M Group in software for electronic payments and biometric identity. As a partner of Mastercard, NAPS also acquires access to their extensive network, knowledge, and diverse portfolio of products and services, all powered by secure and innovative technologies

Aligned with NAPS’s long-term strategy, the collaboration with Mastercard will also enhance the company’s innovation capabilities by leveraging Mastercard’s advanced technology, ultimately speeding up the time to market for NAPS’s upcoming digital offerings.

Mohamed Benomar, country general manager, MENA West, Mastercard, expressed their commitment to supporting a global network of innovators and building a more accessible and sustainable digital economy. Benomar stated: “We are delighted to share our technological expertise with NAPS to pursue our common objective of advancing inclusive growth.”

Hassan Ghellab, CEO of NAPS, added that the partnership with Mastercard will foster a culture of innovation. Ghellab believes that by accelerating the development of digital payment solutions in Morocco, the collaboration will solidify the country’s status as a “premier fintech hub in the Arab world”.

The collaboration between NAPS and Mastercard aims to create new digital service ecosystems in Morocco, unlocking the full potential of digital payments and enhancing user experiences through innovative services. These digital ecosystems will facilitate the development of high-value applications and explore new service opportunities, contributing to sector-wide innovation and digital transformation.

Morocco has emerged as a prominent fintech hub in the Arab world, as highlighted in the Consultative Group to Assist the Poor (CGAP) report Fintechs Across the Arab World. The report identifies factors such as high mobile coverage, a sizable unbanked population, a talented workforce, infrastructure upgrades, government initiatives, and supportive regulations as key drivers of growth in Morocco’s fintech sector.

 

Advanced Markets joins forces with Brokeree Solutions

Advanced Markets, a provider of foreign exchange (FX) liquidity, technology, and credit solutions, and Brokeree Solutions, a developer of turnkey technology solutions for multi-asset brokers, have announced an integration which connects Advanced Markets’ revolutionary liquidity services with Brokeree’s Liquidity Bridge.

The integration facilitates brokers utilising MetaTrader 4, MetaTrader 5, and DXtrade trading platforms to access the advanced liquidity management technology of Liquidity Bridge, and the expansive liquidity pool offered by Advanced Markets at the same time.

MT4/MT5 Liquidity Bridge is Brokeree’s turnkey solution enabling brokers to manage large volumes of liquidity and efficiently map trading symbols inside the solution. Liquidity Bridge can connect several liquidity providers with the trading platform, expanding brokers’ abilities to finetune trade executions. Thus, brokers can set up any business model, including in-house risk processing, hybrid A/B book, direct market access (DMA), electronic communication network (ECN), or pure straight through processing (STP).

To discuss the integration, Tatiana Pilipenko, Regional Head of Business Development at Brokeree Solutions and Anya Aratovskaya, VP Institutional Sales at Advanced Markets, will host a short live QA session on June 8 at 1pm GMT. Follow the companies’ pages on LinkedIn to be notified about this event.

Commenting on the collaboration Andrey Kamyshanov, Co-Founder and Managing Partner at Brokeree Solutions, said, “We’re excited to integrate the deep liquidity pool from Advanced Markets, a leading provider of liquidity services, into our Brokeree Solutions Liquidity Bridge. With this integration, brokers can offer their clients access to a wider range of trading instruments, faster execution speeds, and tighter spreads.”

Anya Aratovskaya added, “We are delighted to partner with Brokeree Solutions and merge our Prime-of-Prime Liquidity with their innovative Liquidity Bridge. This collaboration will permit brokers to seamlessly enhance their clients’ trading experiences. By combining our strengths in liquidity provision and technology, we aim to empower brokers with greater flexibility, efficiency, and reliability, in trade execution and risk management.”