The Day at a Glance | June 3 2021

The Top

*The FED plans to start selling its portfolio of corporate bonds purchased through the emergency liquidity programs during the pandemic.

*Banxico increases growth (6%) and inflation (4.8%) estimates for 2021.

*The FED will start to discuss a plan to withdraw stimuli: Patrick Harker, Philadelphia FED.

*The average price of houses at a global level increased at an annual rate of 7.3% in March, the highest rise since 2006.

*Food prices at a global level reached their highest level in over a decade; the rise seen in May set at 4.8% according to a UN index.

*EU would not back US proposal to temporarily suspend intellectual property rights that would allow an increase in the worldwide supply of vaccines.

*Economic indicators: Private employment in the US exceeded estimates in May (ADP 978 thousand vs 650 thousand e.); the recovery in consumer confidence in Mexico continues (42.7 May; +0.3 pts.).

Economic environment

The Federal Reserve revealed in a statement made public yesterday that it will begin to carry out the sale of corporate bonds it acquired during the pandemic. The FED plans to start selling its portfolio of corporate bonds put together through an emergency-lending vehicle set up to contain the Covid-19 pandemic`s economic effects – the Secondary Market Corporate Credit Facility. The sale of said bonds will be carried out gradually and orderly; the goal is to minimize the impact on ETFs and corporate debt markets. The New York FED will stipulate the guidelines of the process before it begins. It`s calculated that the FED`s portfolio holds up to 13.7 billion dollars in corporate bonds and ETFs; and since the end of 2020, the program had halted purchases. The process will start with the sale of ETF`s and subsequently with the sale of corporate bonds; the latter will start to be sold in the summer. Selling the entirety of assets is expected to have occurred by the end of the year; any profit will be handed over to the Treasury Department. Spokespersons of the FED have pointed out that the measure has nothing to do with its monetary policy and is not a sign of a withdrawal of stimuli. The announcement was made amidst a sensitive time in which markets seek to anticipate the end of the FED`s ultra-accommodative stance.