CSOP USD Money Market Fund –20240920

· The most significant development last week was the Fed’s first rate cut in over four years, where it cut rates by 50bps. It was followed by projections suggesting a slim majority favoring an additional 50 basis points of cuts in the remaining two policy meetings this year, despite market expectations of a more aggressive 70 basis points reduction. Fed Chair Powell warned against expecting continued large rate cuts. The median projections from officials' updated quarterly forecasts indicate a further half-point reduction by year-end, with median forecasts for the end of 2025 and 2026 at 3.375% and 2.875% respectively.

· Retail sales in August slightly increased 0.1% (consensus: -0.2%), and the key control series was up 0.3%, in line with consensus. Given that back-to-school shopping historically increases August retail sales, this year’s data indicate that consumers are becoming more budget conscious, and purchases are leaning towards discounted goods. Given weakening job and income fundamentals, there is minimal upside potential in retail sales in the next few months.

· Week ending September 14 saw greater-than-anticipated decrease in initial jobless claims, which fell by 12k to 219k, bringing the four-week average to its lowest since early June. Despite this report coinciding with the payroll survey week, JPM economists are hesitant to interpret it as a sign of payroll growth due to ongoing seasonal adjustments and a recent trend of slower job increases.

· While yields will fall along with Fed rate cut, we expect CSOPUMM to continue to deliver stable yield in the near term. As of 20240920, the fund has gross yield of 5.31% and net yield at 5.06%. ^

Source: CSOP, Bloomberg, JP Morgan as of 20240920. ^ Gross yield is based on annualized yield of underlying holdings. 7-day net yield is calculated based on calendar days and NAVs in 5-decimal.

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