A leading measure of German investor confidence is expected to show a bit less optimism about the near future and but more about the present as more market participants predict looser monetary policy from major central banks in the months ahead.

An economists’ poll predicted that the forward-looking economic sentiment reading from this month’s survey conducted by Germany’s ZEW economic institute will slip to 8.8 points from 9.8 in November. The institute’s current conditions indicator is forecast to improve to -75.5 from -79.8, which was a tenth better than its lowest market in over three years.

Observers seem split about the direction of this month’s indicator, with a number pointing to last week’s survey results from Sentix, which said last investors had become a bit more concerned about the future and less so about the present. It noted that Europe’s largest economy still wasn’t on the up and up: “There is still no sign of a turnaround in Germany.” (LiveSquawk - Continue Reading) 

The Federal Reserve will need to start hitting the brakes on the unwind of its balance sheet as the outlook for the central bank’s reserves grows increasingly murky, according to Wrightson ICAP. For the past 18 months, the Fed has been letting Treasuries of up to $60 billion and agency debt holdings of up to $35 billion mature every month.

A more cautious approach could lead the central bank to slow the pace of quantitative tightening or QT after the Fed’s June gathering with the central bank then reducing the monthly cap for Treasuries allowed to run-off to $30 billion in the third quarter of 2024, the research firm’s economist Lou Crandall said.

The unwind of mortgage-backed securities he expects will continue at the current pace for the time being. Fed policymakers consider bank reserves — currently $3.5 trillion — to be abundant. Yet a confluence of factors helped pushed the Secured Overnight Financing Rate, or SOFR, to its highest-ever recorded level last week. (BBG - Continue Reading) 

Famed investor Michael Milken expects the Federal Reserve will move slowly on monetary policy — if history is any guide.

In fact, the Milken Institute founder expects the central bank will be sure to tamp out inflation before starting to cut rates so as to avoid a repeat of the 1970s, when inflation ran high in the double digits, Milken said on CNBC’s “Last Call” on Monday. He was speaking from the Hope Global Forum in Atlanta.

“History, as you know, repeats in different ways,” Milken said. “In the ’70s, the Fed moved too early. And so yes, we came out of that ’74, ’75, ‘76 period. But we had massive inflation at the end of the ’70s once again, with overnight rates up to 21%.” (CNBC - Continue Reading)