World Watching, Meta Intelligence, Page 12

U.S. Treasury Announces Marketable Borrowing Estimate

[from the U.S. Department of the Treasury, released May 2]

WASHINGTON — The U.S. Department of the Treasury today announced its current estimates of privately-held net marketable borrowing^[1] for the April – June 2022 and July – September 2022 quarters.^[2]

During the April – June 2022 quarter, Treasury expects to pay down $26 billion in privately-held net marketable debt, assuming an end-of-June cash balance of $800 billion.^[3] The borrowing estimate is $92 billion lower than announced in January 2022, primarily due to an increase in receipts, partially offset by increases in outlays and the end-of-June cash balance.

During the July – September 2022 quarter, Treasury expects to borrow $182 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $650 billion.

During the January – March 2022 quarter, Treasury borrowed $668 billion in privately-held net marketable debt and ended the quarter with a cash balance of $652 billion. In January 2022, Treasury estimated privately-held net marketable borrowing of $729 billion and assumed an end-of-March cash balance of $650 billion. The $62 billion decrease in borrowing resulted primarily from an increase in receipts and, to a lesser extent, from a decrease in expenditures.

Additional financing details relating to Treasury’s Quarterly Refunding will be released at 8:30 a.m. on Wednesday, May 4, 2022.

Privately-held net marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve System Open Market Account (SOMA) but includes financing required due to SOMA redemptions. Secondary market purchases of Treasury securities by SOMA do not directly change net privately-held marketable borrowing but, all else equal, when the securities mature and assuming the Fed does not redeem any maturing securities, would increase the amount of cash raised for a given privately-held auction size by increasing the SOMA “add-on” amount.
These borrowing estimates are based upon current law and also do not include any assumptions for SOMA redemptions, pending a final decision and announcement by the Federal Open Market Committee (FOMC). Privately-held net marketable borrowing needs would increase from today’s estimates commensurate with any SOMA redemptions of Treasury securities.

Cash Balance Assumptions	January – March quarter			April – June quarter
Cash Balance Assumptions	Prior	Current	Change	Prior	Current	Change
Opening Balance	$406	$406	$0	$650	$652	$2
Closing Balance	$650	$652	$2	$700	$800	$100
Impact on Borrowing	$244	$245	$2	$50	$148	$98

Sources and Uses Table [Archived PDF].

World-Watching Energy: Gas Future Demand

Future of EU Gas Demand

[from E3G, by Euan Graham, Kamila Godzinska]

The EU is implementing an ambitious package of measures to reduce its reliance on Russian gas, targeting both supply and demand. REPowerEU will accelerate the EU’s move away from reliance on gas imports over the next decade.

When it comes to U.S. gas exports, while this will lead to an increased reliance on liquefied natural gas (LNG) in the short term, the outlined strategy doesn’t imply any long-term LNG market growth. The U.S. can supply Europe with sufficient LNG without building new infrastructure. New findings show that, with clean technologies and energy efficiency, EU gas demand will decline before newly proposed projects are actually completed — 15-20 years — and long payback periods mean LNG export projects may never recover the capital investment.

[LNG projects timeline] — Indicative construction and payback timelines for new LNG terminals, contrasted to additional LNG demand set out in REPowerEU. LNG demand between 2025 and 2030 reflects the potential of increased action on demand-side as set out by E3G.

Read the full briefing [archived PDF] on the future of EU gas demand.

Science-Watching: High-Energy Physics (CERN Courier – May/June 2022)

[from CERN Courier – May/June 2022, by Matthew Chalmers, editor]

As the LHC beams prepare to set new records in brightness and energy, the Courier takes an in-depth look at the Run 3 physics prospects in searches, precision measurements, flavor and heavy-ion physics. Together with a diverse fixed-target program, the LHC experiments are forging new research directions, while recent developments advance the feasibility study for a possible Future Circular Collider.

Also in the issue: a massive surprise from CDF, intriguing results at Moriond, luminosity versus energy, the CERN Neutrino Platform, International Linear Collider, and much more.

Read the May/June 2022 issue [archived PDF].

Japan-Watching: Governor Haruhiko Kuroda’s Special Lecture

[from Columbia Business School’s Center on Japanese Economy and Business]

Japan’s Inflation Dynamics and the Role of Monetary Policy (April 22, 2022)

by Haruhiko Kuroda (黒田東彦), Governor, Bank of Japan (日本銀行)

Climatology-Watching: Tyndall Centre for Climate Change Research

[from Tyndall Centre for Climate Change Research]

UK’s climate change readiness has made ‘significant progress’

by Renee Karunungan on May 4, 2022

There is significant progress in the UK for reporting and implementing climate change adaptation, according to a new study led by Tyndall UEA’s Katie Jenkins. Katie has created an Adaptation Inventory of adaptation actions happening based on official records of adaptation projects being implemented by both public and private sector, accompanied by a systematic review of the peer-reviewed literature of adaptation case studies.

Adapting to climate change means taking action to prepare for and adjust to current and predicted effects of climate change. Adaptation plays an important role in managing past, present and future climate risk and impacts. However, there is an “adaptation gap” where the distance between existing adaptation efforts versus adaptation needs is widening, according to the United Nations Environment Programme’s Adaptation Gap Report. Tracking national adaptation plans is deemed critical to support future decision-making and drive future actions.

Studies of adaptation consider the UK at the forefront of adaptation planning, setting an early example with the Climate Change Act 2008 which contains a five-year cycle of adaptation planning, published as the UK Climate Change Risk Assessment. Evidence from the UK Climate Change Committee shows that adaptation action has failed to keep pace with increasing climate risks.

According to the Committee’s assessment, adaptation planning for 2C and 4C global warming is not happening, and that the gap between future risks and planned adaptation has widened, delivering the minimum level of resilience.

Katie’s new Adaptation Inventory provides insight on what is currently being implemented, which helps policymakers and practitioners learn from existing knowledge and practical case studies.

“The Adaptation Inventory provides a consistent and easily searchable database which will continue to evolve. It can provide evidence on the specific types of adaptation implemented on the ground as well as provide more detailed insight into the specific examples of action being implemented. This has the potential to help and inform UK-based decision-making,” Katie said.

The Adaptation Inventory identifies and documents current and planned adaptation in the UK, and how it is being implemented through adaptation actions, the sectors where adaptation is occurring, and where the gaps remain. There were 360 adaptation actions identified in the Inventory, comprising 134 adaptation types. Out of these 360 adaptation actions, 80% have already been implemented.

The private sector accounts for 74% of the actions with water companies dominating. Regulatory frameworks, standards, and reporting requirements are key drivers required by water companies by the Regulator. For example, water companies are already required to plan their resilience to drought.

The most common types of adaptation actions are flood protection (12%), leakage reduction (4%), water metering (3%), property level flood protection (3%), operational improvements (3%), and back-up generators (3%). Most actions were categorized as structural and physical interventions. Other interventions were categorized as technological and ecosystem based.

An example of a structural adaptation action is raising boat landings to address higher tides because of rising sea levels. For an example of technology, London Transport has installed air cooling units and mechanical chillers at two key busy tube stations to address heat stress. An ecosystem-based example introduces barley straw to reservoirs to control blue green algae, more common with warmer summers.

The Adaptation Inventory also looks at the types of climate hazards being addressed. It found that 76% of the actions were in response to drought, 26% for extreme rainfall, 13% for flooding, and 11% for higher temperatures. One example of adaptation for drought is rainwater recovery using storage facilities available on the site, reducing the demand for fresh water during drought. For alleviating flooding, a water company is using afforestation. The London Underground has doubled the capacity of ventilation shafts on the Victoria line, which provide more air flow on hot days.

World-Watching: War and Military

Russians Make Minimal Progress in the Donbas, DOD Official Says

[from U.S. Department of Defense, by David Vergun, sent May 2 @ 3:58 PM]

Russian forces in the Donbas region of eastern Ukraine—where the bulk of the fighting is taking place—are suffering from poor command and control, low morale, and less than ideal logistics, a senior Defense Department official, said today.

“We continue to see minimal, at best, progress by the Russians in the Donbas,” the official said. “They are not making the progress that they had scheduled to make and that progress is uneven and incremental.”

The Russians have had some minor gains east of the Ukrainian cities of Izyum and Popasna, the official said, adding that that progress has been anemic.

“What we saw there in Popasna is not unlike what we’ve seen in other hamlets in the Donbas. Russian forces will move in, declare victory and then withdraw their troops only to let the Ukrainians take it back. So, there was a lot of back and forth over the last couple of days,” the official said.

Also, the Pentagon has observed that Russian forces seem to have a risk and casualty aversion in both the air war and the ground war, the official said.

Ukrainian forces continue to hold Kharkiv against nearby Russian forces. The city continues to endure Russian air strikes, the official said.

“But the Ukrainians have been doing an able job over the last 24 to 48 hours of pushing the Russians further away. And they have managed to push the Russians out about 40 kilometers to the east of Kharkiv,” the official said.

That’s a good example of the stiff and formidable resistance Ukrainian forces are displaying, the official said.

Mariupol continues to get hit with standoff Russian air attacks. “We continue to see them using dumb bombs in Mariupol,” the official said, referring to ordnance that’s not precision-guided.

Regarding security assistance to Ukraine, more than 70 of 90 M-777 howitzers the U.S. planned to send are now in Ukrainian hands, along with over 140,000 155 mm rounds that these cannons use, which is about half of the projectiles planned for delivery, the official said.

Training on those weapons continues outside of Ukraine, the official added.

From the start of the invasion 68 days ago, the Russians have launched 2,125 missiles into Ukraine, the official mentioned.

UN DESA Global Policy Dialogue Series: The Future of Sustainable Development Financing

Thursday, 14 April 2022, 8:30-10:00 AM EDT

What should be the role of development banks in closing financing gaps?
What tools or guidance documents for responsible borrowing and lending exist, and how can they be useful?
How can the global community better support the most vulnerable countries and ease their debt burdens?

Two years into the pandemic, COVID-19 has exposed and exacerbated global inequalities and set back hard-earned progress towards achieving the Sustainable Development Goals (SDGs). It is critical that the global community work together to avoid the catastrophic situation in which one group of countries recovers, and another sinks deeper into a cycle of poverty and unsustainable debt. To support efforts to overcome the great finance divide, the United Nations Department of Economic and Social Affairs (UN DESA) will host a discussion with experts exploring ideas to improve access to affordable financing as well as how to resolve situations of unsustainable sovereign debt. Speakers will examine the latest findings from UN DESA’s new report, the 2022 Financing for Sustainable Development Report.

Register here by 13 April 2022.

More information.

The event is free and open to all, and will be streamed live on UN DESA’s Facebook page. It will be held in English with captions available in Arabic, Chinese, English, French, Russian and Spanish, and translation into American Sign Language. The event is made possible by the United Nations Peace and Development Trust Fund. All are welcome!

Bank of England Statistical Releases—February 2022

(from the Bank of England)

Money and Credit

Overview

These monthly statistics on the amount of, and interest rates on, borrowing and deposits by households and businesses are used by the Bank’s policy committees to understand economic trends and developments in the UK banking system.

Key Points

Net borrowing of mortgage debt by individuals amounted to £4.7 billion in February. Mortgage approvals for house purchases fell slightly to 71,000 in February, from 73,800 in January, but remains above the 12-month pre-pandemic average up to February 2020 of 66,700.
Consumers borrowed an additional £1.9 billion in consumer credit, on net, of which £1.5 billion was new lending on credit cards.
Sterling money (known as M4ex) increased by £7.2 billion in February. Households’ holdings of money weakened with net flows of £4.0 billion, compared with £7.2 billion in January.
The effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 10 basis points to 0.77%.
Large businesses borrowing from banks rose to £4.0 billion in February, whilst small and medium sized businesses repaid £0.5 billion. Private non-financial companies (PNFCs) redeemed £4.1 billion in net finance from capital markets.

Read the full paper [Archived PDF].

Effective Interest Rates

Commentary on this data is now incorporated into the Money and Credit statistical release [Archived PDF, from above] to facilitate analysis.

Get the data tables [Archived Excel XLS].

BEA News: Gross Domestic Product (Third Estimate), Corporate Profits, and GDP by Industry, Fourth Quarter and Year 2021

(from the U.S. Bureau of Economic Analysis)

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:

Real gross domestic product (GDP) increased at an annual rate of 6.9 percent in the fourth quarter of 2021, following an increase of 2.3 percent in the third quarter. The increase was revised down 0.1 percentage point from the “second” estimate released in February. The acceleration in the fourth quarter was led by an acceleration in inventory investment, upturns in exports and residential fixed investment and an acceleration in consumer spending. In the fourth quarter, COVID-19 cases resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country. Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased as provisions of several federal programs expired or tapered off.

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $20.4 billion in the fourth quarter, compared with an increase of $96.9 billion in the third quarter.

Private goods-producing industries increased 5.4 percent, private services-producing industries increased 8.5 percent, and government increased 0.1 percent. Overall, 19 of 22 industry groups contributed to the fourth-quarter increase in real GDP.

Read the full report [Archived PDF].

Research Update: Oil Price Dynamics Report, March 28

Our oil price decomposition, reported weekly, examines what’s behind recent fluctuations in oil prices: demand factors, supply factors, or some combination of the two?

(from the Federal Reserve Bank of New York)

Highlights

Oil prices increased over the past week, mostly owing to lower supply.

Over the past week, a decrease in anticipated supply and, to a lesser extent, an increase in demand expectations resulted in higher oil prices. In 2021:Q4, oil prices decreased as increased anticipated supply outstripped the effect of an improving demand outlook.
In 2021:Q3, oil prices rose owing to increased demand and decreased supply. Rising demand expectations were the main cause of higher oil prices in 2021:Q1 and 2021:Q2. In 2020:Q1, oil prices plummeted owing to decreased demand and increased supply, whereas in 2020:Q2, oil prices rose owing to increased demand. Increased supply led to falling oil prices in 2020:Q3, and this reversed in 2020:Q4, as oil prices rose owing to increased demand and decreased supply.
Overall, between 2014 and 2017, both lower global demand expectations and higher anticipated supply held oil prices down. Since mid-2017, this trend reversed as stronger demand expectations and stabilizing anticipated supply drove oil prices higher. This lasted until 2018:Q4, when weaker demand lowered prices. Oil prices rose in 2019 due to increasing demand expectations.

Read the full report [Archived PDF].

View the data [Archived Excel XLS].