The biggest thing about September’s repo rumble wasn’t the double-digit GC rate(s), it was the timing. Beginning on the Monday the day before the FOMC’s regular policy meeting, Jay Powell couldn’t accomplish what he had set out to. The Fed’s Chairman wanted what was the second rate cut in the series to be a more placid one. A confirmation, of [...]
Much has been made about the repo market since mid-September. Much continues to be made about it. The question is why. It is now near the middle of December and repo looks dicey despite repo operations and a not-QE small-scale asset purchase intended to increase the level of bank reserves. Always the focus on “funds” which may be available. It [...]
There it was sticking out like a sore thumb right in the middle of what should have been the glory year. Everything seemed to be going just right for once, success so close you could almost feel it. Well, “they” could. The year was 2014 and the unemployment rate in the US was tumbling, the result of the “best jobs [...]
I don’t think that was quite the message the FOMC wanted to send. It’s pretty clear what the Committee wanted to say, or wanted everyone to hear. The members are done with rate cuts because everything looks great. Sure, it all looked great to them last year but, as has become the conventional interpretation of late, hey, at least it [...]
There’s trouble brewing in a particular sector of the corporate bond market. It’s not really new trouble, merely the continuation of doubts and angst that have existed for more than a year already. What’s different now is that it is finally causing more open disruptions, and thus sparking our interest as to what it might mean well beyond this specific [...]
It’s not the level of bank reserves. It never was. QT was always a distraction. As I’ve said from the very beginning, the same thing the Fed’s researchers (rather than top policymakers) will say you if you ask them, the level of bank reserves only tells us what the Fed is doing. It does not, and will not, describe anything [...]
JP Morgan’s CEO Jamie Dimon has been running around Washington claiming that mid-September’s repo rumble was the result of the post-crisis regulatory environment. He now says that his bank had the spare cash and was willing to cash in on double digit repo rates but it was government rules which prevented that from happening. It’s unclear (but we can, and [...]
When we talk about money dealers (not just primary dealers) and liquidity, we aren’t just zeroing in on the repo market. Money market conditions such as what we can observe in the part of the global repo market that ends up hitting the tape can be helpful in assessing overall liquidity. It isn’t, however, the complete picture. If money dealers [...]
The second most frustrating aspect of trying to analyze global shadow money is how the term “shadow” really applies in this case. It’s not really because banks are being sneaky, desperately maintaining their cover for any number of illicit activities they are regularly accused of undertaking. The money stays in the shadows for the simple reason central bankers don’t know [...]
Despite the name, the Fed doesn’t actually intervene in the US$ repo market. I know they called them overnight repo operations, but that’s only because they mimic repo transactions not because the central bank is conducting them in that specific place. What really happened was FRBNY allotting bank reserves (in exchange for UST, MBS, and agency collateral) only to the [...]
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