67.3 There are 6 (to 20?!) Liens on each US Treasury
———Part 3 Summary———
US Treasury Securities are the financial system’s best collateral. But quantitative easing pulls Treasuries out of the system! In response market participants are ‘forced’ to repledge the SAME security more and more and more and more and more and more (and more and more and more and more and more and more and more and more and more and more and more and more and more and more)!
———Ep 67.3 Topics———
00:05 Are recent US Treasury Security auctions going so well because the central bank is buying?
02:05 Bond yields are lowered by quantitative easing… by around 50 basis points. Wait, wut?
04:55 Bond yields are lowered primarily and overwhelmingly by the market first.
06:11 QE is a two-part asset swap but mainstream focus is just on part-one: bank reserves
09:11 Part-two of QE is the removal of collateral (US Treasuries) from banks. Is this wise?
11:23 Banks utilize collateral in multifarious ways to extend funding to banks and non-banks
14:08 An example of collateral hypothecation using Morgan Stanley, Goldman Sachs, and Citigroup
21:40 Is the 50 basis point reduction in bond yields by QE a desperate collateral bid?
23:29 Jeff summarizes the main takeaways of the article.
———Ep 67.3 References———