Federal funds is up again. As of yesterday, the 29th, the effective rate (EFF) is now 5 bps above IOER. That takes it to within 5 bps below the top of the Federal Reserve’s policy range. According to FRBNY, the 1st percentile in yesterday’s session was 2.40%, meaning that almost the entire federal funds market is paying more than IOER. [...]
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 [...]
They said May 29 was Italians. I say it was collateral. Offshore repo collateral, to be specific. Because we keep seeing May 29 show up everywhere, what happened that day matters. Getting the story straight allows us to properly analyze the craziness in between then and now. From that, we hope to get a better sense of what comes next. [...]
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. The airplane had been improperly repaired from a tailstrike (the tail of the aircraft actually hitting the runway pavement) seven [...]
QT. Bank reserves. Balance sheet normalization. They really are going through all the motions in 2019. It’s as if officials can sense something just isn’t quite right. This would amount to a serious setback, of course, having assured the public repeatedly how the financial system has been remade into “resilient.” Janet Yellen, call your current office, Jay Powell’s Federal Reserve [...]
The TIC data for December 2018 starts out well enough, exactly the way it should. The headline says foreigners sold a record amount of US$ assets in that month. Anyone paying attention during it would be the opposite of shocked. Everyone sold anything they could in December. It follows from the idea of dollar shortage. However, then you start asking [...]
I’ve observed a lot that’s purely absurd the last eleven years, trying hard to write up as much of it as I can. It's worth the effort in terms of education but also to reveal what's really going on. The catalog is too long to republish here in its entirety. One of the most ridiculous anecdotes, however, was pieced together [...]
Gold is on fire, but why is it on fire? When the precious metals’ price falls, Stage 2, we have a pretty good idea what that means (collateral). But when it goes the other way, reflation or fear of deflation? Stage 1 or Stage 3? If it is Stage 1 reflation based on something like the Fed’s turnaround, then we [...]
In theory, it is always so simple. For China, it was intended that RRR cuts are stimulus. By allowing banks to use more of the reserves they’ve built up over the years it is meant to add to overall interbank liquidity. From there, banks flush with RMB supported by robust RMB money markets will lend and undertake more direct economic [...]
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, [...]
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