Tag Archive: collateral

The Biggest Risk, No Surprise, Collateral

2022-06-28

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2022-06-28

It’s not just the 4-week T-bill rate which is defying the Fed’s illusion of control, though that’s where the incidents are most evident. The front bill is nowhere close to the official RRP “floor” which can only mean one thing: collateral shortage, a large and persistent liquidity premium.

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RRP (use) Hits $2T, SOFR Like T-bills Below RRP (rate), What Is (really) Going On?

2022-05-27

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2022-05-27

You might not know it, but front-end T-bill yields are not the only market spaces which are making a mockery of the Federal Reserve’s “floor.” There are others, including the same money number the same Fed demanded the world (or whatever banks in its jurisdiction it could threaten) ditch LIBOR over.

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UST 2s & Euro$ Futures *Whites* Both Ask, Landmine At Last?

2022-05-25

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2022-05-25

The 2-year Treasury right now is the key point, the spot on the yield curve which is influenced mostly by potential alternative rates including those offered by the Federal Reserve. Because of this, the market for the 2s is looking forward at what those alternate rates are likely to be, then pricing yields accordingly.

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T-bills Targeted Target

2022-05-20

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2022-05-20

Yesterday’s market “volatility” spilled (way) over into this morning’s trading. It ended up being a very striking example, perhaps the clearest and most alarming yet, of a scramble for collateral. The 4-week T-bill, well, the chart speaks for itself:During past scrambles, such as those last year, they didn’t look like this. They would hit, stick around for an hour, maybe a bit longer, and then clear up as collateral books get balanced in repo like...

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Eurobonds Behind Euro$ #5’s Collateral Case

2022-05-12

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2022-05-12

The bond market is allegedly populated by the “smart” set, whereas those trading equities derided as the “dumb” money (not without some truth). I often wonder if it’s either/or. The fixed income system just went through this scarcely three years ago, yet all signs and evidence point to another repeat.

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Collateral Shortage…From *A* Fed Perspective

2022-05-07

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2022-05-07

It’s never just one thing or another. Take, for example, collateral scarcity. By itself, it’s already a problem but it may not be enough to bring the whole system to reverse. A good illustration would be 2017. Throughout that whole year, T-bill rates (4-week, in particular) kept indicating this very shortfall, especially the repeated instances when equivalent bill yields would go below the RRP “floor” and often stay there for prolonged periods....

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What Really ‘Raises’ The Rising ‘Dollar’

2022-05-03

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2022-05-03

It’s one of those things which everyone just accepts because everyone says it must be true. If the US$ is rising, what else other than the Federal Reserve. In particular, the Fed has to be raising rates in relation to other central banks; interest rate differentials.

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The (less) Dollars Behind Xi’s Shanghai of Shanghai

2022-04-25

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2022-04-25

What everyone is saying, because it’s convenient, is that China’s zero-COVID policies are going to harm the economy. No. Economic harm of the past is the reason for the zero-COVID policies. As I showed yesterday, the cracking down didn’t just show up around 2020, begun right out in the open years beforehand, born from the scattering ashes of globally synchronized growth.

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Yield Curve Inversion Was/Is Absolutely All About Collateral

2022-04-18

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2022-04-18

If there was a compelling collateral case for bending the Treasury yield curve toward inversion beginning last October, what follows is the update for the twist itself. As collateral scarcity became shortage then a pretty substantial run, that was the very moment yield curve flattening became inverted.Just like October, you can actually see it all unfold.

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The Fed Inadvertently Adds To Our Ironclad Collateral Case Which Does Seem To Have Already Included A ‘Collateral Day’ (or days)

2022-03-21

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2022-03-21

The Federal Reserve didn’t just raise the range for its federal funds target by 25 bps, upper and lower bounds, it also added the same to its twin policy tools which the “central bank” says are crucial to maintaining order in money markets thereby keeping federal funds inside the band where it is supposed to be. The FOMC voted to increase IOER from 15 bps to 40 bps, and the RRP from 5 bps to 30 bps.

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There Is An Absolutely Solid Collateral Case For What’s Driving Curve Inversion(s) [Part 2]

2022-03-18

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2022-03-18

Securities lending as standard practice is incredibly complicated, and for many the process can be counterintuitive. With numerous different players contributing various pieces across a wide array of financial possibilities, not to mention the whole expanse of global geography, collateral for collateral swaps have gone largely unnoticed by even mainstream Economics and central banking.

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There Is An Absolutely Solid Collateral Case For What’s Driving Curve Inversion(s) [Part 1]

2022-03-17

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2022-03-17

With the 7s10s already inverted, and the 5s today mere bps away, making a macro case for the distortion isn’t too difficult. Despite China’s “upside” economic data today, even the Chinese are talking more about their downside worries (shooting/hoping for “stability”) than strength. In the US or Europe, no matter the CPIs in either place there are cyclical (not just inventory) warning signs all over the place.

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So Much Fragile *Cannot* Be Random Deflationary Coincidences

2022-03-10

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2022-03-10

At first glance, or first exposure to this, there doesn’t seem to be any reason why all these so many pieces could be related. Outwardly, from the mainstream perspective, anyway, you’d think them random, and even if somehow correlated they’re supposed to be in the opposite way from what’s happened.

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Sentiment v. Substance: Checking In On Collateral Via, Yes, The Fed

2022-01-13

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2022-01-13

The Federal Reserve, like other central banks around the world, it does lend out the securities it owns and holds. Sophisticated modern wholesale money markets are highly collateralized, so much so that collateral itself takes on the properties of currency.

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Bill Issuance Has Absolutely Surged, So Why *Haven’t* Yields, Reflation, And Other Good Things?

2021-11-02

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2021-11-02

Treasury Secretary Janet Yellen hasn’t just been busy hawking cash management bills, her department has also been filling back up with the usual stuff, too. Regular T-bills. Going back to October 14, at the same time the CMB’s have been revived, so, too, have the 4-week and 13-week (3-month). Not the 8-week, though.

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Short Run TIPS, LT Flat, Basically Awful Real(ity)

2021-10-28

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2021-10-28

Over the past week and a half, Treasury has rolled out the CMB’s (cash management bills; like Treasury bills, special issues not otherwise part of the regular debt rotation) one after another: $60 billion 40-day on the 19th; $60 billion 27-day on the 20th; and $40 billion 48-day just yesterday.

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The Curve Is Missing Something Big

2021-10-21

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2021-10-21

What would it look like if the Treasury market was forced into a cross between 2013 and 2018? I think it might be something like late 2021. Before getting to that, however, we have to get through the business of decoding the yield curve since Economics and the financial media have done such a thorough job of getting it entirely wrong (see: Greenspan below).

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CPI’s At Fives Yet Treasury Auctions

2021-08-12

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2021-08-12

A momentous day, for sure, but one lost in what would turn out to be a seemingly endless sea of them. October 8, 2008, right in the thick of the world’s first global financial crisis (how could it have been global, surely not subprime mortgages?) the Federal Reserve took center stage; or tried to.

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Golden Collateral Checking

2021-07-27

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2021-07-27

Dollar Correlations, 2018-2021
Searching for clues or even small collateral indications, you can’t leave out the gold market. We’ve been on the lookout for scarcity primarily via the T-bill market, and that’s a good place to start, yet looking back to last March the relationship between bills and bullion was uniquely strong. It’s therefore a persuasive pattern if or when it turns up again.

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Lower Yields And (fewer) Bills

2021-07-21

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2021-07-21

Back on February 23, Federal Reserve Chairman Jay Powell stopped by (in a virtual, Zoom sense) the Senate Banking Committee to testify as required by law. In the Q&A portion, he was asked the following by Montana’s Senator Steve Daines.

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