The Federal Reserve conducts reverse repo operations (RRP) daily, and has for more than half a decade. These are very different from the “liquidity” operations the central bank has been deploying since last year’s rumble in the repo market; the latter merely mimic a repo transaction and are intended to push bank reserves the Fed creates on the spot out [...]
Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry. The latest sentiment figures from ZEW as well [...]
The front end of the yield curve is flattened out near enough to zero. While the bill yields I noted this morning did not finish the day session with a negative, they were close and several have traded that way in the after hours session (as of this writing, the benchmark 3-month bill is -1 bps). This thing doesn’t end [...]
Negative Treasury rates are here. The front end of the yield curve fell below zero for the first time, the equivalent yield for the 4-week T-bill at -0.025% as I write this. The benchmark 3-month yield is straddling zero (while 3-month LIBOR jumps, as noted yesterday). These are not surprising developments. They are to Jay Powell and the people who [...]
Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either. Stocks rebounded because of “major helicopter stimulus” or because that’s just what [...]
It barely rated notice, not even a mention. On Saturday, March 7, just before all Hell broke loose, Lebanon announced it wouldn’t be repaying a $1.2 billion Eurobond issue which was coming due right on March 9. Normally people only notice this tiny country for some terrorist action or recall much about it beyond the civil war which had devastated [...]
The Fed unveiled what was supposed to be shock and awe. Instead, it was the predictable series of upsizing the bazookas, monetary armaments in name only. I’ll write it again: there is no money in monetary policy. Central banks are not central. That was the primary lesson of September’s repo rumble, and not for the first time since August 9, [...]
Last week was one of the worst weeks in the history of the US stock market. Thursday’s plunge was the worst one-day loss other than the crash of 1987. Friday’s recovery was stunning as well but big rallies are typical of bear markets and that is, unfortunately, where we now find ourselves. Obviously, the selling was about the coronavirus and [...]
In a week replete with chaotic movements and arrangements, a puzzle has emerged. Conventional wisdom says that when stocks tank bonds rally. While the latter takes place regardless of the former, during those times when the NYSE finally pays attention to what might be herding financial agents into safety instruments the bond market typically rallies even harder. It sure did [...]
The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior. Let’s start with [...]
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