Fed's Perli Encourages Firms' use of Standing Repo Facility

Central Bank

Stocks

Summary:

The Fed's SRF was launched in 2021 and provides eligible firms with fast cash in exchange for Treasury securities, in a bid to bolster market liquidity and avoid unexpected shortfalls.

A Federal Reserve Bank of New York official responsible for implementing monetary policy said on Thursday the central bank is encouraging usage of a key liquidity tool that thus far has been largely dormant.

When it comes to the Standing Repo Facility, or SRF, "I encourage our counterparties to use the SRF when it makes economic sense - the facility is there to support the effective implementation of monetary policy and smooth market functioning," said Roberto Perli, who manages the central bank’s System Open Market Account, in the text of a speech prepared for delivery at a conference held by his bank. "It's in everyone’s best interest if the SRF works as intended," Perli said.

The Fed's SRF was launched in 2021 and provides eligible firms with fast cash in exchange for Treasury securities, in a bid to bolster market liquidity and avoid unexpected shortfalls that can be hard for the central bank to counter expeditiously. Thus far, markets, still flush with liquidity, have largely left the SRF alone outside of the end of the third quarter last year, a short period of volatility.

Perli reiterated in his remarks that fairly soon the New York Fed will join its afternoon SRF operations with a morning availability.

"In the not-too distant future," the New York Fed "will start implementing daily morning SRF operations that will also be settled in the morning," Perli said. "This will be an important step in enhancing the efficacy of the facility, and, at the margin, it can contribute" to allowing the Fed's balance sheet to be smaller than it would otherwise be.

Perli is responsible for implementing monetary policy for the central bank, both in terms of the management of its short-term interest rate target and its massive holdings of cash and bonds. Perli noted in his remarks that the ongoing contraction of the Fed's balance sheet, which has seen the central bank shed just over $2 trillion in Treasury and mortgage bonds, likely has some ways to go, although there are signs of tightening money market liquidity.

As Fed holdings shrink and reserve levels move down, "upward pressure on money market rates is likely to increase," Perli said, adding "we are starting to see the early signs of this in the repo market, especially around key reporting dates."

This rise in repo market chop "is not a cause for concern," Perli said. But he also noted that it’s likely to increase the need for markets to use the SRF to manage their liquidity needs.

Source: Reuters

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Manuel

Bond

Economic

President Donald Trump cut a deal with blue-state Republicans on taxes and put down an 11th-hour rebellion by conservatives over spending to get his “one big, beautiful bill” passed by the House.

But if he’s going to shepherd the signature legislative package of his second term through the Senate, he may have to reckon with an even more demanding constituency: customers for the ballooning amount of US debt.

With the yield on 30-year Treasury bonds again passing the 5% mark on Wednesday, the nation’s creditors injected a dose of harsh economic reality into Trump’s fiscal policy — and not for the first time. Last week, a third bond-rating provider lowered the US sovereign grade, projecting the nation’s debt surging to 134% of the size of the economy in 10 years, from roughly 100% today.

That’s a long way from the vision Trump offered in his March address to Congress, when he promised a balanced budget “in the near future.” The House bill features a bevy of new tax breaks for key political constituencies — tipped and hourly workers, car buyers and seniors. And indications from GOP senators suggest they’ll seek to pare back spending cuts to shield others from financial pain.

Trump’s lieutenants, including Treasury Secretary Scott Bessent, argue that the package will boost business sentiment and unlock spending and investment. Trump’s allies on Capitol Hill also see it as the centerpiece of the party’s legislative agenda, and a counterweight to the uncertainty prompted by Trump’s haphazard tariff policies.

Bond market participants see something else.

“People are getting fed up. It’s clear that there are no adults in the room in Washington. Zero. No accountability,” said John Fath, managing partner at BTG Pactual Asset Management US LLC. “You have to ask yourself, what is it going to take? It’s going to be the price action.”

The action has been notable already. As Trump was putting pressure on House members to back the tax bill, the Treasury on Wednesday found tepid demand at an auction of 20-year bonds. Not just Treasuries, but stocks, too, tumbled as investor concern over the US fiscal profile deepened.

The moves were reminiscent of Trump’s wrangle with the bond markets last month, when he blinked. In the early morning hours of April 9, Treasury yields surged as Trump’s steep retaliatory tariffs — the highest in more than a century — went into effect. While a months-long slump in equities barely fazed him, the bond market got his attention.

“The bond market is very tricky,” he said at the time, announcing that he was suspending most of the tariffs just hours after they went into effect. “But yeah, I saw it last night where people were getting a little queasy.”

Interest Bill

If Treasuries continue to stay queasy, the higher yields not only threaten to dampen economic growth — as they translate into higher borrowing costs for everything from homes to cars — but to accelerate the government’s fiscal deterioration. As rates rise, so does the Treasury’s interest bill.

“Investors are now asking themselves a very difficult question, which is, would you loan the US government money at 5% for 30 years?” said George Catrambone, head of fixed income and trading at DWS Americas. “That’s the question that we have and are facing the long end of the Treasury market.”

Unlike in April, Trump has not had Bessent — who has been speaking to investors in Saudi Arabia and meeting with Group of Seven Finance Ministers in Canada — hovering over his shoulder as he negotiated the House’s tax bill in the Oval Office. It was Bessent, a hedge fund veteran, who helped persuade Trump to pause the tariffs when bond markets sent distress signals.

Bessent last month played down the selloff in Treasuries as a function of deleveraging by some market participants. In Banff, Canada, for meetings with Group of Seven partners, as of Thursday morning he had not weighed in on the most recent market volatility.

Friday’s removal of the US from the ranks of Aaa issuers by Moody’s Investors Service renewed market participants’ focus on the fiscal deficit — which has exceeded 6% of gross domestic product the past two years, unprecedented in the modern era for a time outside of recession or war. S&P Global Ratings took that step in 2011, and Fitch Ratings did so in 2023.

Moody’s said American economic strengths could “no longer fully counterbalance the decline in fiscal metrics.”

Even before the latest tax bill, which economists anticipate will deepen the deficit, the nonpartisan Congressional Budget Office projected that the US will see a record debt-to-GDP ratio by 2029.

“I do not know how much more of a wake-up call we need to get our house in order,” Ralph Norman, a South Carolina Republican, told Bloomberg Television Wednesday. “So all we are asking for is you need to pay for any expense you have.”

One of those expenses: The increase in the cap on state and local tax deductions. Set at $10,000 in Trump’s 2017 tax law, Republicans from high-tax states like New York and California negotiated an increase to $40,000 as the price of their votes for the package.

But it was a 12-basis-point increase in 30-year Treasury yields Wednesday that seems to have provided the impetus for further spending cuts to make the bill palatable to Republican hard-liners.

“The bond market seems to have spoken,” said Representative Warren Davidson of Ohio, one of two Republicans to vote ‘no’ on the bill.

Tush Push

As the bond markets started to show unease this week, Trump redoubled his efforts to get the measure — formally named the One Big Beautiful Bill Act — passed in the House. He visited Capitol Hill, called lawmakers and invited holdouts to the White House.

With the Memorial Day holiday weekend coming up, Republicans felt an urgency to get a legislative win in a presidency characterized by a blizzard of executive orders.

“The bill has to be done as early as possible both because the American people deserve the money in their pockets and the changes in their lives, but it also needs to happen soon, so it can have the biggest impact,” said former House Speaker Newt Gingrich, a close Trump ally. “If we are in the middle of a Trump economic boom in 2026, we will keep the House.”

If Republicans fail to pass the tax package, just as tariffs create a drag on the economy, then voters could revolt in the midterms. “In 2026, the only question that will matter is: Is it working?” Gingrich added.

But there’s no guarantee that the uneasy truce among the party’s various factions will remain intact when the bill gets to the other side of the Capitol.

Senate Majority Leader John Thune — who will lead the effort to shepherd the bill through his chamber starting in June — called the ratings agency downgrades “a warning shot that we need to get serious about spending restraint.” He said this week that any final bill would need to make a meaningful dent in spending, but also boost faster economic growth. Trumps Next Hurdle: The Bond Market Hates his "Beautiful" Tax Bill_1

Trumps Next Hurdle: The Bond Market Hates his "Beautiful" Tax Bill_1

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Cryptocurrency

Stocks

Kraken is preparing to roll out a new product that will allow users in select countries outside the US to trade tokenized versions of major American stocks and ETFs 24/7.

According to the May 22 announcement, the offering will include names such as Apple, Tesla, and Nvidia, with plans to expand the selection over time.

The announcement comes a few weeks after the exchange acquired NinjaTrader in February and subsequent expansion into stock trading last month.

xStocks

The product, dubbed xStocks, is built in partnership with Backed and will tokenize popular US-listed assets as SPL tokens on the Solana (SOL) network.

Unlike conventional equity markets, xStocks will be tradable 24/7 through Kraken’s platform and compatible Solana wallets.

The structure also allows the tokenized assets to be used onchain, such as for collateral in decentralized applications, use cases not possible through traditional brokerage systems.

Kraken’s Global Head of Consumer Mark Greenberg said that xStocks aims to offer faster, cheaper, and more inclusive access to US equities. He also criticized the current systems as slow, expensive, and geographically limited.

According to Greenberg: “[xStocks] is what the future of investing looks like.”

Democratizing access to US markets

Kraken’s move builds on its recent rollout of a conventional equities trading service for US-based clients, which includes over 11,000 publicly listed stocks and ETFs.

The company intends to expand the service to the UK, Europe, and Australia, while xStocks represents a parallel expansion using blockchain rails.

The launch comes amid heightened interest in tokenized real-world assets (RWAs), driven by demand for open financial infrastructure and the efficiencies introduced by digital rails.

Kraken has not announced a specific launch date for xStocks, but said it intends to grow the list of supported jurisdictions and tokenized assets over time.

Source: Cryptoslate

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Adam

Cryptocurrency

After months of waiting, Bitcoin has finally hit new record highs, reaching about $111,900.

BTC/USD first hit a high of $109,874 in the late afternoon, then dropped to $106,200 an hour later, before climbing again to reach today’s new peak.

Many analysts believe this sudden rise is due to growing concerns about the US Dollar and government debt. Last Friday, Moody’s downgraded the US credit rating, which triggered a wave of doubt in the market.

With President Donald Trump pushing for big spending and tax cuts, there is little hope that the situation will improve soon.

This uncertainty is showing up in rising US interest rates and a falling Dollar Index—a rare combination that signals declining trust in the US economy.

So, Bitcoin is rising not because investors feel hopeful, but because the current instability is making it look more like a safe-haven asset. More companies are now treating Bitcoin as a long-term store of value and adding it to their balance sheets.

4 Cryptocurrency Stocks to Watch

However, the cautious tone in the broader stock market is unlikely to stop several crypto-related stocks from reacting positively to Bitcoin’s new all-time high during Thursday’s session.

Strategy (NASDAQ:MSTR)(ex-MicroStrategy), Coinbase (NASDAQ:COIN), Riot Platforms (NASDAQ:RIOT), and Marathon Digital (NASDAQ:MARA) all posted gains in after-hours trading on Wednesday and will be worth watching closely on Thursday.

That said, these stocks are not necessarily the top picks in the tech sector right now. In fact, we have grouped them into an InvestingPro watchlist, which currently shows a mixed outlook.

Indeed, according to InvestingPro’s Fair Value—which combines several well-known financial models—most of these stocks appear overvalued, with the exception of Riot Platforms.

For instance, Coinbase is currently overvalued by nearly 25% based on its Fair Value estimate.

Meanwhile, Marathon Digital, Riot Platforms, and MicroStrategy all have below-average health scores.

On the brighter side, analysts’ price targets suggest strong upside potential for Riot Platforms (+69.7%) and MicroStrategy (+38.3%).

Overall, while these stocks offer a way to gain exposure to Bitcoin through the stock market, investors should keep in mind that ETFs now offer a more direct route—and may want to explore other opportunities in the tech sector as well.

This AI’s technology stock picks sparkle in May

In this context, it is worth noting that InvestingPro subscribers have already seen solid gains this month from several tech stocks highlighted in the May edition of the Tech Titans strategy, managed by Investing.com.

In fact, out of the 15 stocks tracked by this strategy since the start of the month, 13 have gained over the past three weeks, while the two that declined posted only minor losses.

In addition, no fewer than 6 stocks in the portfolio have delivered double-digit gains since the beginning of the month: +10.3%, +10.5%, +15.3%, +18.9%, +20.3% and +28.9%.

However, several of the stocks identified earlier this month in the Tech Titans strategy still show strong upside potential heading into the final days of the month.

Then, on June 1, the strategy will reassess an updated list of stocks for the new month—some will be removed from the portfolio, while new ones will be added.

It is also worth noting that May is not the first month the Tech Titans strategy has significantly outperformed the market, as its historical performance clearly shows:

4 Crypto Stocks to Ride Bitcoin’s Bullish Surge to New Highs_1

source : investing

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Owen Li

Economic

Dealmaking in the U.S. was off to a strong start this year before President Donald Trump announced tariff policies that led to extremely volatile market conditions that put a chill on activity. In a pre-tariffs world, dealmakers were encouraged by the Trump administration's pro-business flavor and deregulatory agenda, as well as previously easing concerns about inflation. Those trends were expected to fuel an even stronger M&A comeback in 2025, after last year's moderate recovery from a slow 2023.

This year's appetite for dealmaking came back quickly after Trump suspended his highest tariffs and market jitters took a backseat. If borrowing costs remain in check, many expect activity could be brisk.

"More clarity on trade policy and rebounding equities markets have set the stage for continued M&A, even in sectors hit especially hard by tariffs," Kevin Ketcham, a mergers and acquisitions analyst at Mergermarket, told CNBC.

The total value of U.S. deals jumped to more than $227 billion in March, which saw 586 deals, before suddenly slowing down in April to roughly 650 deals worth about $134 billion, according to data compiled by Mergermarket.

So far this month, activity is rebounding and the average deal has been larger. More than 300 deals collectively valued at more than $125 billion have been struck this month as of May 20, Mergermarket said.

That's encouraging. After Trump's "liberation day" tariff announcement, U.S. deal activity plunged by 66% to $9 billion during the first week of April from the prior week, while global M&A activity dropped by 14% week over week to $37.8 billion, according to the data.

Charles Corpening, chief investment officer of private equity firm West Lane Partners, anticipates M&A activity to pick up after the summer.

"The trade war has indeed caused a slowdown in the anticipated M&A boom earlier this year, particularly in the second quarter," Corpening said.

Higher bond yields are also hurting activity in the U.S. given that higher rates translate into greater financing costs, which reduces asset prices, he said.

Corpening expects greater interest towards special situations M&A, or deals that involve a motivated seller and tend to be flexible with their structure and terms, as well as smaller transactions, which are easier to finance and generally face less regulatory scrutiny.

"We're beginning to see signs of recovery and we're getting some clarity on the types of deals that are likely to get into the pipeline soonest," Corpening said. "We anticipate that these earlier transactions will lean toward special situations as the better-performing businesses will wait for more market stability in order to maximize sale price."

Several major deals have been announced in recent months, with large transactions occurring in tech, telecommunications and utilities so far this year.

Some of the biggest include:

Jan. 10: Constellation Energy signed an agreement to buy private natural gas and geothermal company Calpine for $16.4 billion.
March 6: Walgreens announced it will go private in a $10 billion deal with private equity firm Sycamore Partners. With debt and possible payouts, the deal could be worth up to $23.7 billion.
March 18: Google agreed to acquire cloud security startup Wiz for $32 billion.
May 16: Charter Communications and Cox Communications, two of the largest cable companies in the U.S., agreed to merge.
May 15: Dick's Sporting Goods announced plans to acquire Foot Locker for $2.4 billion.
May 21: AT&T said it would buy Lumen Technologies' mass markets fiber business for $5.75 billion.

According to Ketcham, the Dick's-Foot Locker deal "likely isn't an outlier" given that Victoria's Secret on Tuesday adopted "poison pill" plan. Such a limited-duration shareholder rights plan suggests the lingerie retailer is concerned about the threat of a potential takeover, he said.

Ketcham added that some consumer companies are adapting to the new macroeconomic environment instead of pausing dealmaking. He cited packaged food giant Kraft Heinz confirmation on Thursday that it has been evaluating potential transactions over the past several months as an example. Kraft Heinz said it would consider selling off some of its slower growing brands or buying a brands in some of its core categories such as sauces and snacks.

This kind of trend would lead to smaller deals, which has already been seen this year. For example, PepsiCo scooped up Poppi, a prebiotic soda brand, for $1.95 billion in March.

Source: CNBC

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Forex

The US dollar is under pressure as global investors grow increasingly wary of America's fiscal trajectory.

Once seen as a reliable safe haven, the greenback is now facing renewed skepticism, with strategists telling Yahoo Finance that capital is shifting toward undervalued currencies in Europe and Asia amid expectations of foreign stimulus and more attractive valuations abroad.

The US Dollar Index (DX-Y.NYB) — which tracks the dollar's value against a basket of major currencies including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc — has dropped more than 8% since the start of the year, underperforming every other G10 currency, according to Bloomberg data. It ranks as one of the worst-performing asset classes of the year, alongside Brent Crude (BZ=F).

Since April, the index has dipped below the crucial technical and psychological level of 100, hitting lows not seen since 2022.

"Investors now have a very strong reason to hedge their long US asset exposure, and the dollar is no longer behaving like a safe haven," Jayati Bharadwaj, FX and macro strategist at TD Securities, told Yahoo Finance on Wednesday. "I would say it's actually following much more of an emerging market playbook, which is the unfortunate truth that we need to come to terms with."

Bharadwaj cited mounting US debt and policy uncertainty as key catalysts behind the dollar's decline. Last week's credit rating downgrade by Moody's only deepened market concerns. Adding to the fiscal anxiety, the House of Representatives on Thursday approved President Trump's sweeping tax reform package, otherwise known as the president's "big, beautiful bill."

The proposal includes significant cuts to both individual and corporate tax rates and is projected to increase the national debt by $4 trillion over the next decade. The legislation now moves to the Senate for consideration.

"The volatility associated with the current administration's policies is a big confidence shock, which is actually forcing other countries to step up their local fiscal policies and work on fostering stronger trade relationships amongst themselves," Bharadwaj said, noting that it ultimately reduces foreign nations' dependence on the US.

As a result, Bharadwaj expects the dollar to keep weakening gradually, with another 5% drop likely by year-end.

The inflationary spiral

A weaker dollar adds to inflation by driving up import costs, an issue compounded by tariffs that remain near their highest levels since World War II.

"The dollar going down is going to add to inflation pressure and reduce purchasing power," Kevin Gordon, senior investment strategist at Charles Schwab, told Yahoo Finance.

Gordon highlighted that during the 2021 to 2023 inflation surge, the dollar's strength acted as a partial hedge against rising prices. But with the greenback now weakening and inflation still elevated, that protective buffer is fading. On top of that, tariffs have added further pressure by reducing capital inflows, or the money coming into the US from foreign investors seeking American assets.

The shift comes at a challenging time for US policymakers, with President Trump's "Liberation Day" tariff announcement fueling concerns of a broader "sell America" trade, in which US stocks fall, the dollar weakens, and Treasury yields rise.

While some of those worries eased after a partial tariff rollback, Deutsche Bank said foreign investors remain wary of America’s fiscal trajectory.

To be sure, despite recent weakness, strategists say the US dollar remains dominant in global finance, accounting for about 80% of trade finance and nearly half of global bond issuance.

Charles Schwab's Gordon described current softness as a "positioning adjustment" driven by sentiment and portfolio shifts rather than fundamental changes, especially after the dollar's strong bull run since 2011. "The scale is still very much in favor of the dollar, disproportionately so," he said.

TD's Bharadwaj echoed this view, calling the recent moves a "healthy recalibration."

"For the longest time, most markets became a pure US move and a pure dollar bet," she said. "Now you can actually start to focus on local, idiosyncratic stories."

While she doesn’t expect the US to lose its "crown" currency status, she noted that "other princes and princesses" may start to take the stage.

Source: finance.yahoo

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Adam

Economic

At the end of last week, Moody's announced that it is downgrading the US credit rating from Aaa (the highest rating) to Aa1. As we explained earlier this week, only a few countries still have a AAA rating.

This is obviously not good news for Donald Trump as he tries to get his tax cut plan through Congress.

As always, the blame is being shifted to the previous administration. Treasury Secretary Scott Bessent said that Moody's is a "lagging indicator" and that the downgrade is the result of Joe Biden's policies.

What is true is that the Democratic president passed several laws that significantly increased the US deficit, such as the Inflation Reduction Act in 2022, which offers companies tax credits for the development of renewable energies. In the last two years of his presidency, the public deficit rose to over 6%, even though the US did not experience a crisis over this period.

However, this deterioration in the US budgetary situation cannot be attributed solely to Joe Biden's policies. In its statement announcing the downgrade of the US credit rating, Moody's summed it up as follows: "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual budget deficits and rising interest costs."

This observation still holds true today, as Congress is currently examining Donald Trump's tax cut plan, the famous "big, beautiful bill." According to estimates by the Committee for a Responsible Federal Budget, this plan is expected to add between $3.3 trillion and $5.2 trillion to the deficit over 10 years.

The equity markets did not react much to Moody's announcement, with US indices even closing up on Monday. However, there is tension on Treasuries, particularly on the long end of the curve, which is most sensitive to deficit issues. The 30-year yield has thus once again exceeded 5%.

Moody's decision comes as no surprise. Investors have long been aware of the US budget situation. The "definitive loss" of the triple A rating – the downgrade by the three major agencies – merely confirms this, and it is a reality that Donald Trump, who often takes liberties with the facts, will not be able to ignore. From now on, his economic policy will be closely monitored by the bond markets.