European Central Bank Chief Economist Philip Lane has emphasized the need for a balanced approach to interest rate cuts in 2025 to ensure inflation continues to cool without stalling economic growth. The ECB already lowered rates four times in 2024, and investors expect further cuts this year. "We need to ensure that interest rates follow a middle path," he said. "If interest rates fall too quickly, it will be difficult to bring services inflation under control. But we also don't want rates to remain too high for too long."
People's Bank of China Governor Pan Gongsheng has expressed confidence in China's economic recovery this year, highlighting measures such as potential interest rate cuts and increased fiscal spending. "China will respond to the world's expectations with responsibility and courage, continuing to play a key role as an engine of global economic growth," Pan said.
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Bank of Japan Deputy Governor Ryozo Himino has indicated that the central bank might consider raising interest rates at its upcoming policy meeting, citing sustained wage growth and clearer US economic policy under US President-elect Donald Trump. The BOJ has already ended negative rates and raised the short-term rate to 0.25% this year, and analysts expect another hike as inflationary pressures rise.
China's efforts to defend the yuan against a strong dollar have intensified a liquidity squeeze, pushing the seven-day interbank pledged repo rate to its highest level since October 2023. Seasonal cash demands ahead of the Lunar New Year and maturities from a PBOC lending facility are exacerbating the situation, with borrowing costs rising sharply.
The US IPO market, expected to return to pre-pandemic levels in 2025, faces challenges from rising US Treasury yields. Yields on 30-year Treasuries recently surpassed 5%, potentially affecting valuations of high-growth companies and leading some to delay IPOs.
The pound has slipped to a 14-month low against the dollar, driven by concerns that the US Federal Reserve will cut interest rates only once this year. The currency dropped as much as 0.8% to $1.211 before a slight recovery.
The UK is set to gauge investor interest in gilts with a £1 billion sale of 30-year inflation-linked bonds, the first since recent market turmoil. The sale comes amid concerns about government finances and inflation, which have driven yields to decades-high levels.
US Treasury yields continued to rise after Friday's job report, with the 10-year yield reaching 4.8% and the 30-year nearing 5%. The moves were caused by concerns around inflation and government debt, and expectations the US Federal Reserve will pause its interest rate cuts.
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The latest data from the Bank for International Settlements over-the-counter (OTC) derivatives statistics shows a modest increase in notional outstanding of OTC derivatives during the first half of 2024 compared to the same period in 2023. Click here to read the report.
The report analyzes interest rate derivatives (IRD) trading activity reported in Europe. The analysis is based on transactions publicly reported by 30 European approved publication arrangements (APAs) and trading venues (TVs). Click here to read the report.
