It’s becoming the week of Minutes. Yesterday’s FOMC Minutes provided the blueprint for the Fed’s balance sheet roll-off. The Fed gives itself three months’ time starting from May to hit a pace of $95/bn month. This consists out of $60bn US Treasuries and $35bn mortgage-backed securities. Months were redemptions don’t reach this number will be complemented with shedding t-bills. Once the roll-off process is up and running, the Fed will contemplate active monthly selling out of its $2.7tn MBS-portfolio, implying that the $95bn figure serves as a floor. The rapid quantitative tightening will be complemented by bigger rate hikes as the Fed slams the breaks to address the inflation problem. Focus turned to ECB March Minutes today. At that meeting, the ECB changed its plans for net asset purchases. In December they suggested to buy a total amount of €120bn in Q2, €90bn in Q3 and €60bn in Q4 while keeping options open for 2023. In March they scaled back the (net) buying plans to €40bn in April, €30bn in May and €20bn in June while adding that they would end, ceteris paribus, in Q3. Minutes now highlighted internal division with some members preferring a firm end date during summer. That would be a stronger signal for a possible rate rise in the light of the deterioration in the inflation outlook. The latter scenario actually developed, making the hawkish call from the March meeting a likely scenario at the April one. Especially as Minutes stress that the economy enters the new crisis (Russian invasion) with better fundamentals than in March 2020. This again hints at additional and earlier room to maneuver on inflation. European bond markets took another scare in a significant bear flattening move. We warned before that a first ECB rate hike could come as early as July. German yields rise by 3.8 bps (30-yr) to 8 bps (3-yr) with the 2-yr yield returning in positive territory. The EU 2y swap set a new cycle high (and high since 2013) at 0.68%. The EU 10y swap rate is testing the 2015 top at 1.37%. The US Treasury yield curve continues its pre- and post-Minutes steepening trend as the Fed’s stealth QT pace leaves the longer end of the curve scrambling to find a new equilibrium. Daily changes vary between -2.5 bps (2-yr) and +4.2 bps (30-yr). The euro switched sides around the 1.09 big figure following ECB Minutes with the pair currently changing hands near 1.0930. EUR/GBP bounces back from an intraday low 0.8314 to currently 0.8360.News Headlines The Hungarian central bank kept the weekly deposit rate stable at 6.15%. Since 2022 it only hiked that rate after raising the base rate at its regular monthly meeting, meaning the status quo was expected. However, some in the market assumed the NBH would act still after the recent slide in the HUF from EUR/HUF 367 to almost 380 in just three days. This was to a large extent the result of the EU triggering the rule of law mechanism against Hungary, potentially blocking billions of funds over the lack of anti-corruption measures and eroding democratic standards. The forint weakened further in the early wake of the NBH’s decision to an intraday low of EUR/HUF 382 before paring losses to trade a tad stronger than yesterday at 378.7. Serbia’s central bank raised the policy rate from 1% to 1.5%. It’s the first hike in a decade and the central bank joins the worldwide trend of lifting borrowing costs to kill off high inflation. Price rose 8.8% in February, the fastest pace since 2013, double the 3% +/- 1.5 ppt target zone. “Inflationary pressures on the global and domestic markets are stronger and of more enduring character than previously expected,” the central bank explained, adding that additional tightening is on the way. With the hikes, it also seeks to protect the Serbian dinar from straying too far away from the narrow EUR/RSD trading range it favours. The currency in recent weeks suffered from geopolitical woes, causing EUR/RSD to drift north to 117.74 currently.