The June 2003 FOMC meeting is one of those events that has only taken on increased relevance and significance with time. That gathering marked a major shift in monetary policy as it was, particularly with relation to the fomented housing bubble, as the FOMC was debating the zero lower bound. The discussion centered around the proposed monetary alignment that would [...]
Every other central bank in the world has at some point shifted their monetary policy framework to the world of secured short-term funding rather than unsecured. That shows the primacy of repo as opposed to what has been used almost exclusively in the US (and related eurodollars). The Federal Reserve has discussed letting go of the federal funds target before, [...]
Credit and funding markets have been pretty much defined by “dollar” behavior for most of March in the same manner that defined December and early October. At the outset, it looked as if credit markets had turned the “other” way with interest rates rising and some of the downstream “markets” no longer under such steady pressure. The culmination of that [...]
It was a bit of a shock in June 2014 when the repo market experienced sudden and sharp disorder. The surge in fails seemingly did not fit the conditions as convention held them in the middle of last year when everything was supposedly running so smoothly. In the eight months since then, repo fails have not much calmed, which has [...]
Oh Europe. I have a growing sense that US credit markets are repeating the leadup to last October 15, though there isn’t any obvious expression of any such illiquidity (at the moment). For one thing, the eurodollar curve has taken the FOMC’s bluffs in complete stride, in fact doing the exact opposite as you would expect of a very close [...]
There was a lot to talk about at the last FOMC meeting, where most are focused on “patience” and all that about rate hikes. Less discussed and analyzed, as these areas are often difficult to parse for outsiders, was the fact that the savior of rate “normalization” has been totally and completely put out to pasture. The reverse repo program [...]
There is so much depth that is missing from the ongoing discussion about the state of “markets” as the Federal Reserve purportedly moves toward “normalizing” its regime. That isn’t all that surprising given that most people still have never heard of these various moving parts, and certainly cannot easily grasp the concepts without some degree of studied initiation. While you [...]
When speaking about the costs of having undertaken numerous QE’s in the US, there is not only the economic inefficiency and asset price psychology to account in the tapering and ultimately exit (hopefully a permanent one this time, though I increasingly doubt it). There is little doubt that repo market problems, that have become far too persistent to be comfortable, [...]
There is a slow but steadily building sense that there is more than a little problem with systemic liquidity as it stands right now. While not quite mainstream, there has been some minor attention devoted to repo problems and now credit trading. An article in Bloomberg today does a pretty good job of sketching out the real world as it [...]
Since we are now in the middle of the final month of a quarter, checking repo stats shows what we have come to expect of a fragile liquidity system. Once again, repo fails spiked sharply in the latest weekly statistics from FRBNY as primary dealers and the Fed’s own repo “fix” fail to affect the “resiliency” that FOMC members appear [...]
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