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FOMC Minutes Confirm Tapering Begins Mid-Nov or Dec At $15BN Monthly, Several Preferred “More Rapid” Bond-Buying Cuts

FOMC Minutes Confirm Tapering Begins Mid-Nov or Dec At $15BN Monthly, Several Preferred "More Rapid" Bond-Buying Cuts

Since the last FOMC meeting (September 22nd) – when Chair Powell began to detail the taper and rate-hike traajectory to…

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FOMC Minutes Confirm Tapering Begins Mid-Nov or Dec At $15BN Monthly, Several Preferred "More Rapid" Bond-Buying Cuts

Since the last FOMC meeting (September 22nd) - when Chair Powell began to detail the taper and rate-hike traajectory to come - bonds are down (yields higher) but stocks, gold, and the dollar are all up around 1%...

Source: Bloomberg

And even more notably, the trajectory (and initial timing) or rate-hikes has soared...

Source: Bloomberg

But the long-end of the yield curve is signaling that The Fed will once again commit a faux-pass...

Source: Bloomberg

So the big question the market is trying to glean from today's Minutes is - just how 'consensus' is the imminent taper talk... and potentially a sooner than expected rate-hike? Especially after today showed that consumer price readings have come in at 5% or higher on a year-over-year basis for five straight months, undermining the "transitory" theme put forward by central bankers.

As a reminder, The Fed confirmed plans to begin reducing their bond-buying stimulus program in November and to possibly end the asset purchases entirely by the middle of next year - this was confirmed in the Minutes...

Participants also expressed their views on how slowing in the pace of purchases might proceed.

In particular, participants commented on an illustrative path, developed by the staff and reflecting participants' discussions at the Committee's July meeting, that gave the speed and composition associated with a tapering of asset purchases. The illustrative tapering path was designed to be simple to communicate and entailed a gradual reduction in the pace of net asset purchases that, if begun later this year, would lead the Federal Reserve to end purchases around the middle of next year.

The path featured monthly reductions in the pace of asset purchases, by $10 billion in the case of Treasury securities and $5 billion in the case of agency mortgage-backed securities (MBS). Participants generally commented that the illustrative path provided a straightforward and appropriate template that policymakers might follow, and a couple of participants observed that giving advance notice to the general public of a plan along these lines may reduce the risk of an adverse market reaction to a moderation in asset purchases. Participants noted that, in keeping with the outcome-based standard for initiating a tapering of asset purchases, the Committee could adjust the pace of the moderation of its purchases if economic developments were to differ substantially from what they expected. Several participants indicated that they preferred to proceed with a more rapid moderation of purchases than described in the illustrative examples.

No decision to proceed with a moderation of asset purchases was made at the meeting, but participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.

Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.

Several participants indicated that they preferred to proceed with a more rapid moderation of purchases than described in the illustrative examples.

This is what that looks like...

“Many” thought the progress test would be met “soon”

A number of participants assessed that the standard of substantial further progress toward the goal of maximum employment had not yet been attained but that, if the economy proceeded roughly as they anticipated, it may soon be reached.”

On rate-hikes:

“Various participants stressed that economic conditions were likely to justify keeping the rate at or near its lower bound over the next couple of years.”

On Inflation:

Some participants expressed concerns that elevated rates of inflation could feed through into longer-term inflation expectations of households and businesses or saw recent inflation data as suggestive of broader inflation pressures. Several other participants pointed out that the largest contributors to the recent elevated measures of inflation were a handful of COVID-related, pandemic-sensitive categories in which specific, identifiable bottlenecks were at play. This observation suggested that the upward pressure on prices would abate as the COVID-related demand and supply imbalances subsided. These participants noted that prices in some of those categories showed signs of stabilizing or even turned down of late. Many participants pointed out that the owners' equivalent rent component of price indexes should be monitored carefully, as rising home prices could lead to upward pressure on rents. A few participants noted that there was not yet evidence that robust wage growth was exerting upward pressure on prices to a significant degree, but also that the possibility merited close monitoring.

On "Transitory" Inflation:

Participants noted that their contacts generally did not expect bottlenecks to be fully resolved until sometime next year or even later.

On Evergrande contagion:

Concerns over the period about the effects of COVID-19 developments on economic performance and, late in the period, about a heavily indebted Chinese property developer appeared to have only marginal net effects on financial asset prices.

...

On September 20, stock market prices fell notably and speculative-grade yield spreads widened amid rising concerns about the creditworthiness of a Chinese property developer, but these moves were mostly reversed during the following day, particularly in the stock market.

On the economy:

In discussing the uncertainty and risks associated with the economic outlook, participants noted that uncertainty remained high.

A number of participants judged that the uncertain course of the virus, supply chain disruptions, and labor shortages complicated the task of interpreting incoming economic data and assessing progress toward the Committee's goals. Participants generally saw the risks to the outlook for economic activity as broadly balanced. Uncertainty around the course of the virus, the resolution of supply constraints, and fiscal measures were cited as presenting both upside and downside risks. In addition, some participants mentioned the risks associated with high asset valuations in the United States and abroad, and a number of participants commented on the importance of resolving the issues involving the federal government budget and debt ceiling in a timely manner. Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed.

A few participants commented that there were also some downside risks for inflation, as the factors that had held inflation down over the previous long expansion were likely still in place.

There was complete unanimity in the decision to taper:

All participants agreed that it would be appropriate for the current meeting's postmeeting statement to relay the Committee's judgment that, if progress continued broadly as expected, a moderation in the pace of asset purchases may soon be warranted

Finally, there were 18 mentions of COVID in Sept Minutes, up from 3 in August.

*  *  *

Read the full FOMC Minutes below:

Tyler Durden Wed, 10/13/2021 - 14:08

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Spread & Containment

Aura Private Credit: Letter to investors 02 December 2022

This week, the Australian Bureau of Statistics released the monthly consumer price index, seeing a slight month-on-month fall, the Aura High Yield SME…

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This week, the Australian Bureau of Statistics released the monthly consumer price index, seeing a slight month-on-month fall, the Aura High Yield SME Fund was recognised in the HFM Asian Performance Awards 2022, as the top performing fund in the Fixed Income, High Yield & Distressed Category over the past 12 months in APAC, and our team attended the annual Australian Securitisation Conference.

Monthly Consumer Price Index Indicator 1 ​

This month we saw a slight reduction in the rate of inflation with the monthly consumer price index indicator rising by 6.9 per cent over the year to October 2022 following last month’s 7.3 per cent increase. ​

For the month of October, the main contributors to the rise were new dwellings, up 20.4 per cent, predominantly driven by high levels of construction activity and ongoing challenges with labour and material shortages. Petrol still contributed to the pressure, up 11.8 per cent, as the fuel excise ended at the close of September. Perishables, predominantly fruit and vegetables, also increased at 9.4 per cent, although this was a significant decrease from the 17.4 per cent rise in September. Next month’s data may see an increase in the rate of inflation for perishable goods, as a result of the recent flooding events. It is too early to determine whether or not we are now seeing a shift in the trend and if inflation has peaked. With the household balance sheets not yet showing signs of retraction and with the Christmas spending period ahead, we may be in for some more inflationary pressure. ​

The RBA will be meeting to discuss their monetary policy decision next week. The market has priced in a rate rise, although today’s data showing a slight ease in inflation could potentially result in a smaller increase than what has been expected. It is however important to note that the RBA will not be meeting in January, so their decision is effective until February. ​

HFM Asian Performance Awards

The Aura High Yield SME Fund, our wholesale client strategy, was recognised as the top performing fund in the Fixed Income, High Yield & Distressed category in the 12 months to 30 October 2022 in the Asia Pacific region according to HFM Data. As noted with our participation on other league tables, we are particularly proud of this recognition through a volatile bear market during a global pandemic. As a team we do not expect to feature on these tables in bull markets, as other participants will use leverage to boost returns in their strategies. Leverage is not your friend in a bear market. We prefer to take a more conservative approach to investment, focusing on protection of capital and alpha generation through asset selection and structuring. We would like to thank all of our investors for the support in making the strategy a success. I would personally like to thank the broader Aura Group team for supporting the strategy, and in particular our investment team who work hard assessing new investments and monitoring and maintaining the portfolio.    

Australian Securitisation Conference 2022

This week the team attended the annual Australian Securitisation Conference. The conference covers the broader securitisation market, the bulk of volume is in residential mortgage-backed securities (RMBS). The tone was generally cautious from presenters across regulators, the central bank, investors, lenders and banks. Banks in Australia have a number of headwinds coming over the next two years. The $24 billion Term Funding Facility (TFF) which was introduced to stimulate lending during the pandemic needs to be repaid by the banks in the next two years giving the banks the option to hit the capital markets to refinance the debt or reduce their loan books. There has also been a change to High Quality Liquid Assets (HQLA) classifications by the prudential regulator (APRA) that will come into effect over the next 12 months with respect to the capital treatment of RMBS. The banks will not be able to use self securitised assets or RMBS in their HQLA for capital purposes, therefore reducing bank demand for RMBS. Banks had been a big contributor to the RMBS bid. This could see a movement in spreads, a shrinking of the loan books of the banks, or a combination of both. We anticipate this will increase demand for funding from non-bank lenders. A net positive for our strategies, potentially providing more opportunity at wider spread levels.  ​

I was also pleased to be involved in moderating a discussion with a panel of non-bank lenders, focused on the SME lending space. We were lucky enough to hear some great market insights from some key lenders and service providers within the industry. There was a consensus view that there is a significant market opportunity to build out high quality exposures in the SME sector.​

1Australian Bureau of Statistics – Monthly Consumer Price Index Indicator

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International

Modified mRNA Demonstrates 10-Fold Protein Production

Scientists at Hong Kong University of Science and Technology came up with a technique to increase the efficiency and potentially the efficacy of mRNA therapeutics….

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Scientists at Hong Kong University of Science and Technology came up with a technique to increase the efficiency and potentially the efficacy of mRNA therapeutics. mRNA molecules have what is called a poly-A tail, which is basically a string of adenine nucleotides at one end. These researchers discovered that by replacing some of these nucleotides in the mRNA tail with cytidine, a cytosine base with a ribose sugar attached, that they could enhance the resulting protein production of the mRNA and increase its stability and life-span. The technique could lead to more effective mRNA therapies and vaccines, potentially enabling clinicians to achieve similar or better effects with smaller doses.

mRNA therapies have come a long way in just the last few years. The COVID-19 pandemic has propelled this approach from an emerging technology to a mainstay of our vaccine response. The concept is elegant – deliver mRNA strands to the patient, and allow their own cellular machinery to produce the relevant protein that the strands code for. So far, so good – the approach, once considered unrealistic because of the fragility of mRNA, has proven to work very well, at least for COVID-19 vaccines.  

However, there is always room for improvement. One of the issues with current mRNA therapies is that they can require multiple rounds of dosing to create enough of the therapeutic protein to achieve the desired effect. Think of the multiple injections required for the COVID-19 vaccines. Creating mRNA therapies that can induce our cells to produce more protein would certainly be beneficial.

To address this limitation, these researchers have found a way to modify the poly-A tail of synthetic mRNA strands. They found that by replacing some of the adenosine in the mRNA tail with cytidine, they could drastically increase the amount of protein the resulting strands ended up producing when applied to human cells and in mice. This translated to 3-10 times as much protein when compared with unmodified mRNA.

The researchers hope that the approach can enhance the effectiveness and required dosing schedules for mRNA therapies.

“Increasing the protein production of synthetic mRNA is generally beneficial to all mRNA drugs and vaccines,” said Becki Kuang, a researcher involved in the study. “In collaboration with Sun Yat-Sen University, our team is now exploring the use of optimized tails for mRNA cancer vaccines on animal. We are also looking forward to collaborating with pharmaceutical companies to transfer this invention onto mRNA therapeutics and vaccines’ development pipelines to benefit society.”

See a short animation about the technology below.

Study in journal Molecular Therapy – Nucleic Acids: Cytidine-containing tails robustly enhance and prolong protein production of synthetic mRNA in cell and in vivo

Via: Hong Kong University of Science and Technology

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Mercantile Appoints New Members to Bank Board of Directors

Mercantile Appoints New Members to Bank Board of Directors
PR Newswire
GRAND RAPIDS, Mich., Dec. 1, 2022

GRAND RAPIDS, Mich., Dec. 1, 2022 /PRNewswire/ — Mercantile Bank Corporation (NASDAQ: MBWM) (“Mercantile”), announced today the appointments o…

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Mercantile Appoints New Members to Bank Board of Directors

PR Newswire

GRAND RAPIDS, Mich., Dec. 1, 2022 /PRNewswire/ -- Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile"), announced today the appointments of Amy L. Sparks, CPA and Nelson F. Sanchez, CPA to the Bank's Board of Directors in the second half of 2022.

"We are thrilled to welcome two new Directors who bring a wealth of experience in business, finance and manufacturing as we expand the diversification of perspectives across our Board. Amy's executive leadership of solidifying financial performance, organizational development, diversifying into new markets and increased employee engagement, coupled with Nelson's deep experience in a variety of business sectors encompassing domestic, international, private, public, and family-owned organizations across start-ups, turnarounds, mergers, acquisitions, joint ventures, and strategic planning will help support our growth as a leading community bank," said Robert B. Kaminski Jr., President and Chief Executive Officer of Mercantile.

Ms. Sparks has nearly three decades of demonstrated expertise and success. She is the Owner, President, and Chief Executive Officer of Nuvar, Inc., a Michigan-based manufacturing company specializing in finished product contract manufacturing for the office furniture, health care, education, appliance and transportation industries. Ms. Sparks is also a Certified Public Accountant and currently serves on the Grand Valley State University Seidman School of Business Dean's Advisory Board and is the West Michigan Chair of the Great Lakes Women's Business Council.

Mr. Sanchez is a strong finance executive with broad strategic leadership experience in all aspects of finance, operations, marketing and general management. He is the Chief Operating Officer of RoMan Manufacturing, Inc., where he has also served as the Chief Financial Officer. Nelson is a Certified Public Accountant, is fluent in Spanish and has an extensive background in leadership and diversity training. He serves on various boards and committees in the West Michigan community, including the Grand Rapids Community Foundation, Grand Rapids Chamber of Commerce and Holland Home.

About Mercantile Bank Corporation

Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank. Mercantile provides banking services to businesses, individuals, and governmental units, and differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has assets of approximately $5.0 billion and operates 46 banking offices. Mercantile Bank Corporation's common stock is listed on the NASDAQ Global Select Market under the symbol "MBWM." For more information about Mercantile, visit www.mercbank.com, and follow us on Facebook, Instagram and Twitter @MercBank and on LinkedIn at www.linkedin.com/company/merc-bank

Forward-Looking Statements

This news release contains statements or information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods. Any such statements are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates; significant declines in the value of commercial real estate; market volatility; demand for products and services; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the method of determining Libor and the phase-out of Libor; changes in the national and local economies, including the ongoing disruption to financial markets and other economic activity caused by the COVID-19 pandemic and unstable political and economic environments; and other factors, including those expressed as risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein.

For Further Information:


Robert B. Kaminski, Jr.

Charles Christmas

President & CEO

Executive Vice President & CFO

616-726-1502

616-726-1202

rkaminski@mercbank.com 

cchristmas@mercbank.com

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/mercantile-appoints-new-members-to-bank-board-of-directors-301692145.html

SOURCE Mercantile Bank Corporation

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