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On September 17th, the Bank of England cancelled its plan to sell long-term government bonds as part of a major overhaul of its quantitative easing program. Under the plan, its £488 billion portfolio would be gradually liquidated by September 2034. According to the still-unfinalized proposal, the bank would hold £120 billion of UK government bonds maturing in 2049 or later, matching them with future paper money issuance. Another £222 billion of bonds maturing before 2035 would be gradually liquidated, and the remaining £146 billion maturing between 2035 and 2049 would be sold at a rate of £20 billion per year, possibly directly to the government through the Debt Management Office. In a letter to the Chancellor of the Exchequer, Bank of England Governor Bailey stated that the arrangement "maintains the independence of monetary policy" and will "maximize the effectiveness of funds by minimizing costs and risks during the programs implementation." All planned quantitative easing auctions will be suspended until April next year while consultations with the Debt Management Office (DMO) are underway regarding the terms of the sales. This postponement, by avoiding competition with government bond issuance, is expected to alleviate short-term pressure on government bond yields.ECB Governing Council member Rehn: We can reduce red tape in the European banking and financial sector, but a strong capital buffer remains crucial.On September 17th, local time, the Federal Reserve held its September 2026 FOMC meeting, raising the target range for the federal funds rate to 3.75%-4.00%. Donghai Securities analyst Liu Sijia stated that the Feds 25bp rate hike was in line with market expectations. Before the meeting, the market had already priced in a rate hike with a probability exceeding 90%. Besides fulfilling the hawkish stance since the Jackson Hole meeting, this also helps to rebuild the Feds image of independence and reduce the upward risk of the term premium in long-term US Treasury yields. Currently, CME data shows a probability of around 50% for an October rate hike and nearly 90% for another rate hike this year, close to the expectations shown in the dot plot. However, without the inflationary concerns arising from rising oil prices due to supply factors, the current K-shaped economic divergence in the US and the weak balance in the labor market with declining supply and demand do not support the Fed initiating a cyclical series of rate hikes. Warsh also stated that current financial conditions are not restrictive, and this rate hike is a partial withdrawal of easing. Whether a cyclical series of rate hikes will begin remains uncertain.The yield on 30-year UK government bonds fell 5.9 basis points on the day, currently trading at 5.8003%.ECB Governing Council member Rehn: The tightness of the Eurozone labor market after the Ukraine conflict and the post-pandemic crisis is not the same as in 2022.

The United States has no plan to release its strategic reserves, and oil prices have rebounded sharply by more than US$3

Oct 26, 2021 11:00

On Thursday (October 7), US oil rose 1.42 US dollars in late trading, or 1.83%, to close at 78.85 US dollars per barrel. Bilbao oil rose 1.35 US dollars, or 1.67%, to close at 82.43 US dollars per barrel. The U.S. Department of Energy stated that "currently" there is no plan to release strategic oil reserves to curb the rise in gasoline prices, and subsequent oil prices continue to rise. At the same time, progress has been made in the US debt ceiling negotiations, and market risk appetite has increased, which has boosted oil prices.

A report in the British "Financial Times" on Wednesday said that the US Secretary of Energy raised the possibility of releasing the Strategic Petroleum Reserve, and crude oil prices fell by 2.7%. In response to this, the US Department of Energy issued a statement on Thursday: “The Department of Energy continues to monitor global energy market supply and will work with our partner agencies to determine if and when action is required. To protect the American people, all tools in the toolbox are It is under consideration, but there is no plan to take action yet."

The United States also occasionally uses its strategic reserves, usually after hurricanes or other supply disruptions. However, since the end of the 40-year crude oil export ban in 2015, the country has become an important exporter and has never proposed to cut exports. There is speculation about whether the US government is considering using its Strategic Petroleum Reserve (SPR) or seeking to ban oil exports in order to reduce crude oil prices.

At the same time, US President Biden’s national security adviser on Thursday urged energy suppliers to increase supply to meet demand. He said the United States is worried about their failure to do this. Amrita Sen, chief oil analyst at Energy Aspects Ltd., said the key thing to remember is that the Biden administration is very eager to give consumers cheap gasoline. Therefore, if oil prices continue to rise and overheat, the United States will put pressure on OPEC.

Earlier this week, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) agreed to only gradually increase production, pushing crude oil prices to multi-year highs. Due to the tight global supply, the demand from major import markets such as Asian consumer countries has recovered faster than expected after the new crown epidemic, and oil prices have been rising steadily. In a report, ING Group analyst Warren Patterson said that the oil market is tightening in the short term, which means that oil prices will still be well supported before the end of the year.

The market focus now returns to the shortage of global natural gas supply, which is bound to increase the demand for crude oil for power generation this winter. On the 7th local time, the British Gasoline Retailers Association stated that the recovery of fuel supply in some parts of the UK has not been fast enough, especially in the southeastern part of the UK, including London, which has not seen a significant improvement. The chairman of the association, Brian Madsen, said that the current fuel supply situation in the southeast of the UK is the most difficult, and the fuel inventory level is still below the 20% warning line. It can be seen that the region is more affected by the shortage of truck drivers. Gas station inventories in London and the East of England are slightly higher, with a capacity between 20% and 40%.

(U.S. Oil Hour Chart)

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