91: Repo Market Collateral Rumble Moving the Needle

———Ep 91.0 Summary———
Early-morning action in the repo market shows a musical chairs-like collateral scramble; it has the Fed’s attention. But the Fed is blasé about it (i.e. ‘too much cash’). Yet these collateral scrambles resemble what we saw in March 2020.

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Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
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Emil YouTube: https://bit.ly/310yisL
Art: https://davidparkins.com/

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———Ep 91.0 Topics———

01:41 Montana Senator Daines asked a Jeff-Snider-question to Jerome Powell in testimony.
04:50 Jerome Powell stated the Fed is focusing on the [dead] Federal Funds rate / range. WHY?!
06:17 In later testimony Powell changes his mind from “too much cash” to “not little collateral”
10:59 The NYFed notices that most repo transactions take place very early in the morning. Why?
13:27 Early morning collateral scrambles? The repo market? These took place in March 2020.
17:41 The NYFed offers several other reasons for the scramble: fees and liquidity.
18:55 The NYFed notes that more trades are taking place pre-market (to preempt the scramble?)
20:15 Monday, July 19 UST Bond yields dropped – but that was not a Jeff Snider “collateral day”
23:20 Tuesday, July 20 UST Bill yields traced out a fang-like drop in an early morning scramble
25:13 Show Conclusion: collateral scrambles are not rainbow/unicorn-reflationary phenomena

———Ep 91.0 References———

Lower Yields And (fewer) Bills: https://bit.ly/3BDZSxi
Why Don’t Bonds Reflect CPI Alarm About Inflation?: https://bit.ly/3kMx2oq
Sorry, One More On Bills: Today A Really Good Example of All The Things We’ve Been Focused On Lately: https://bit.ly/3i20FAo
Intraday Timing of General Collateral Repo Markets: https://nyfed.org/2VbxIZv
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7

———Who———

Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins. Podcast intro/outro is “Night Driver” by Ballpoint and Cushy from Epidemic Sound.