If the Financial Times report is to be believed, and there is no indication contrary, then FRBNY took warnings earlier this year to heart and began investigating. FT links a February speech by Fed Governor Jeremy Stein about “overheating credit markets” to what looks like an ongoing probe of bank exposure to mortgage REITs. “The worry is that MReits could [...]
With the federal government shut down, the seasonal adjustment calculations are on holiday with the rest of the statistical agencies. Perhaps that is a positive aspect to the unfolding drama. However, in their absence we are left overanalyzing other major economic parameters. Given the monetary relevance in the weeks after the taper “surprise” and the incoming (potentially) change in Fed [...]
The September FOMC meeting minutes continually refer to “tightening” as the primary concern, matching what I assumed when the decision was first announced in September. “For example, questions were raised about the effects on the housing sector and on the broader economy of tightening in financial conditions in recent months, as well as about the considerable risks surrounding fiscal policy. [...]
Yesterday the Fed conducted the first test of its newly-minted Fixed-Rate Reverse Repo program. The auction drew $11.809 billion in bids (all accepted, thus the “fixed rate” rather than “fixed allotment”) at 0.01%. Since this is a reverse repo, the Fed is “borrowing” cash from the system, collateralized by the UST’s in its SOMA holdings. Most commentary continues to focus [...]
Last thing I remember, I was Running for the door I had to find the passage back To the place I was before "Relax, " said the night man, "We are programmed to receive. You can check-out any time you like, But you can never leave! " Hotel California, The Eagles The Fed surprised the markets last week when it [...]
This week is a perfect illustration of the absurdity of “investing” in this activist age. It wasn’t all that long ago the Chairman of the Federal Reserve was just some obscure bureaucrat that barely rated mention in any mainstream publication or conversation. His job (they have only been “he” to this point) was to make sure currency was stocked at [...]
I think that the initial impulse driving FOMC concerns over “too much” monetary stimulus tied closely to three factors: repo markets, junk bonds and housing. Home prices in previous bubble markets have been on fire again, and in no way do those prices reflect actual supply and demand factors (they very much ignore basics like demographic trends). Prices reflected and [...]
As early as September 11, the changing trend had already been spotted. In Indian finance, the epicenter of taper turmoil since May, the inflows of “money” were distinctly different than the combat for funding experienced over the previous months. “Forex dealers said the turnaround in the rupee was mostly led by dollar inflows from foreign institutional investors (FIIs) in the [...]
It seems the Establishment Survey is not all that convincing in FOMC circles. Actually, many of the committee members noticed that financial conditions had “tightened” in recent months and were worried a taper may accommodate further doses of that. As we know from the monetary textbook, tight financial conditions “could slow the economy if sustained.” Above all else, stocks are [...]
The sudden upturn in GOFO led me to believe that there were changes in the gold dynamics from the relatively favorable period through mid-August. Given the repo action around the UST auctions this week and last, there can be little doubt the collateral shortage has been renewed. Starting August 27, several tenors of UST bonds went special in repo markets, [...]
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