While the credit markets were looking elsewhere these past few weeks, funding markets are again off their axis as repo fails spiked significantly one more time. The current level of fails is not quite that of June, but it is enough to engender some more pause about financial plumbing. For the most part, explanations have been offered on the supply [...]
It may have been something like two years, maybe closer to eighteen months, but it seems just like yesterday that Europe had left its deficient construct in the past. It was a daily ritual back then, exercising due diligence often through nothing more than checking just how negative bond rates would spring. There were German bunds and even indications of [...]
What follows here, in the interest of full disclosure, is nothing more than speculative conjecture on my part. This is due mostly to the opacity that dominates gold “markets” and trading oddities that follow from it. My thoughts here are based on gut instinct about recent observations, but that is about as much to solidify any analysis as can be [...]
I have to say that I am more than a little amused by the “news” that the US Treasury Dept. is asking for comment from the primary dealers about the recent repo fails. As Bloomberg put it succinctly, “The Treasury also asked the dealers to explain the causes for an increase recently in “fails-to-deliver” in the market for U.S. government [...]
What happens at the quarterly window dressing periods for the domestic banking system (which includes foreign subsidiaries chartered for US business) is essentially a gaming of the leverage ratios. As with everything inside the Basel paradigm, banks make themselves look less risky for their reporting periods. In terms of funding markets, that means massaging short-term liabilities, particularly repo. To do [...]
The positive price action in gold of the last few weeks stands out in sharp contrast to other sectors of the funding market, particularly repo. Under last year’s defiling paradigm, such a collateral shortage as pronounced as what we see now would have been disastrous for gold prices (more collateral demand typically leads to an increase in gold “leasing”, which [...]
Just a few weeks ago I went through the repo and credit markets with the idea that tapering QE was an act of necessity rather than convenience. Again, the orthodox practitioners at the FOMC will proclaim the economy healed when it clearly is not (an economy does not simply contract 3% and then go on its merry way) to set [...]
The explanation given for the increase in participation at the reverse repo “window” in mid-April was taxes. In other words, the payment of quarterly and annual estimates and billings reduced the need for the federal government to borrow. Since the variability in borrowing amounts is taken up in t-bills, the relative scarcity of on-the-run t-bills has left the market somewhat [...]
It was just over a year ago that the ECB began courting rumors about an ABS addition to its monetary toolkit. With the obvious lack of credit flowing in the real economy flying directly in the face of all monetary convention and expectations, you can understand the desire to dust off the idea. Just over a week before the ECB’s [...]
The global dollar situation continues to get muddied by divergent and apparently unrelated factors of significant scale. The Chinese are still not buying UST with nearly the same vigor that was very evident prior to the dollar travails last year (which I still believe is dollar liquidity rather than PBOC intent), while Japan and Belgium have suddenly found themselves infatuated [...]
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