Tag Archive: repo

Head Faking In The Empty Zoo: Powell Expands The Balance Sheet (Again)

They remain just as confused as Richard Fisher once was. Back in ’13 while QE3 was still relatively young and QE4 (yes, there were four) practically brand new, the former President of the Dallas Fed worried all those bank reserves had amounted to nothing more than a monetary head fake. In 2011, Ben Bernanke had admitted basically the same thing.

Read More »

Waiting on the Calvary

Engaged in one of those protectionist trade spats people have been talking about, the flow of goods between South Korea and Japan has been choked off. The specific national reasons for the dispute are immaterial. As trade falls off everywhere, countries are increasingly looking to protect their own. Nothing new, this is a feature of when prolonged stagnation turns to outright contraction.

Read More »

Money Markets: Sizing Up the Cavalry

There’s been an unusual level of honesty coming out of Liberty Street of late. Not total honesty but certainly more than the usual nothing denials and dismissals. If you don’t immediately recognize the reference, that’s the street in NYC where FRBNY and its Open Market Desk resides. What is supposed to be the moneyed centered of the universe. After all, as Ben Bernanke famously threatened in November 2002, that’s the printing press.

Read More »

Treasury Bond Backwardation, Report 22 Sep

Something happened in the credit market this week. A Barron’s article about it began: “There have been disruptions in the plumbing of U.S. markets this week. While the process of fixing them was bumpy, it was more of a technical mishap than a cause for investor concern.” Keep Calm and Carry On. So, before they tell us what happened, they tell us it’s just plumbing, it’s been fixed, and that we should not be concerned.

Read More »

More Than A Decade Too Late: FRBNY Now Wants To Know, Where Were The Dealers?

I’ve said it all along; focusing in on bank reserves would leave you dazed and confused. It’s just not how the system works. After all, as I pointed out again not long ago, “our” glorious central bank had the audacity to claim that there were “abundant” reserves during the worst financial panic in four generations. “Somehow” despite that, it was a Global Financial Crisis that lived up to its name – global.

Read More »

What’s The Verdict On This Week?

Jay Powell’s disastrous week is coming to a close, not yet his long nightmare. He has been battling fed funds (meaning repo) for his entire tenure dating back to February 2018. This week wasn’t the conclusion to the contest, just the latest and biggest round of it.

Read More »

Stuck at A: Repo Chaos Isn’t Something New, It’s The Same Baseline

Finally, finally the global bond market stopped going in a straight line. I write often how nothing ever does, but for almost three-quarters of a year the guts of the financial system seemed highly motivated to prove me wrong. Yields plummeted and eurodollar futures prices soared. It is only over the past few weeks that rates have backed up in what has been the first real selloff since last year.

Read More »

How To Properly Address The Unusual Window Dressing

Unable to tackle effective monetary requirements, bank regulators around the world turned to “macroprudential” approaches in the wake of the Global Financial Crisis. It was mostly public relations, a way to assure the public that 2008 would never be repeated. A whole set of new rules was instituted which everyone was told would reign in the worst abuses.

Read More »

COT Blue: Distinct Lack of Green But A Lot That’s Gold

Gold, in my worldview, can be a “heads I win, tails you lose” proposition. If it goes up, that’s fear. Nothing good. If it goes down, that’s collateral. In many ways, worse. Either way, it is only bad, right? Not always. There are times when rising gold signals inflation, more properly reflation perceptions. Determining which is which is the real challenge.

Read More »

Phugoid Dollar Funding

On August 12, 1985, Japan Airways flight 123 left Tokyo’s Haneda Airport on its way to a scheduled arrival in Osaka. Twelve minutes into the flight, the aircraft, a Boeing 747, suffered catastrophic failure when an aft pressure bulkhead burst.

Read More »

Nothing To See Here, It’s Just Everything

The politics of oil are complicated, to say the least. There’s any number of important players, from OPEC to North American shale to sanctions. Relating to that last one, the US government has sought to impose serious restrictions upon the Iranian regime. Choking off a major piece of that country’s revenue, and source for dollars, has been a stated US goal.

Read More »

Insane Repo Reminds Us

It was only near the quarter end, that’s what made it so unnerving. We may have become used to these calendar bottlenecks over the years, but they still remind us what they are. Late October 2012 was a little different, though. On October 29, the GC repo rate for UST collateral (DTCC) surged to 52.6 bps. The money market floor, so to speak, was zero at the time and IOER (the joke) 25 bps. We also have to keep in mind the circumstances of that...

Read More »

Eurodollar Futures: Powell May Figure It Out Sooner, He Won’t Have Any Other Choice

For Janet Yellen, during her somewhat brief single term she never made the same kind of effort as Ben Bernanke had. Her immediate predecessor, Bernanke, wanted to make the Federal Reserve into what he saw as the 21st century central bank icon. Monetary policy wouldn’t operate on the basis of secrecy and ambiguity. Transparency became far more than a buzzword.

Read More »

Anticipating How Welcome This Second Deluge Will Be

Effective federal funds (EFF) was 1.92% again yesterday. That’s now eight in a row just 3 bps underneath the “technically adjusted” IOER. If indeed the FOMC has to make another one to this tortured tool we know already who will be blamed for it.

Read More »

The Top of GDP

In 1999, real GDP growth in the United States was 4.69% (Q4 over Q4). In 1998, it was 4.9989%. These were annual not quarterly rates, meaning that for two years straight GDP expanded by better than 4.5%. Individual quarters within those years obviously varied, but at the end of the day the economy was clearly booming.

Read More »

Chart of the Week: Collateral

It’s been a week of quite righteous focus on collateral. The 4-week bill equivalent yield closes it at just 114 bps, with only three days left before the RRP “floor” is moved up by the FOMC to 125 bps. That’s too much premium in price, though we know why given what FRBNY reported for repo fails last week.

Read More »

It Was Collateral, Not That We Needed Any More Proof

Eleven days ago, we asked a question about Treasury bills and haircuts. Specifically, we wanted to know if the spike in the 4-week bill’s equivalent yield was enough to trigger haircut adjustments, and therefore disrupt the collateral chain downstream. Within two days of that move in bills, the GC market for UST 10s had gone insane.To be honest, it was a rhetorical exercise.

Read More »

Moscow Rules (for ‘dollars’)

In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book added another, “Once is an accident. Twice is coincidence. Three times is an enemy...

Read More »

Basic China Money Math Still Doesn’t Add Up To A Solution

There are four basic categories to the PBOC’s balance sheet, two each on the asset and liability sides of the ledger. The latter is the money side, composed mainly of actual, physical currency and the ledger balances of bank reserves. Opposing them is forex assets in possession of the central bank and everything else denominated in RMB.

Read More »

Now China’s Curve

Suddenly central banks are mesmerized by yield curves. One of the jokes around this place is that economists just don’t get the bond market. If it was only a joke. Alan Greenspan’s “conundrum” more than a decade ago wasn’t the end of the matter but merely the beginning. After spending almost the entire time in between then and now on monetary “stimulus” of the traditional variety, only now are authorities paying close attention.

Read More »