In the summer of 2014, repo fails suddenly surged out of nowhere. Between the events of the violent taper selloff in June 2013 and the first half of 2014, fails had been particularly calm if somewhat gently rising as the trend had it dating back to the QE’s. It had become common to find total fails (meaning both “to receive” [...]
There is an ongoing mess in repo markets and not a lot of straightforward commentary about it. As usual, whenever any repo tenor trades highly special we hear only about the persistence and plethora of shorts betting on rate normalization. Since rates, overall, have done only the opposite going back to June 2014 and the start of this repo mess [...]
It has become cliché that commentary continues toward the increasingly absurd at the expense of the obvious and all because Janet Yellen says there can’t possibly be anything wrong. The degree to which the broader markets agree in that sense has certainly lessened of late, but that only suggests the increasingly bizarre platitudes offered to do anything other than confirm [...]
If the world is poised upon the precipice of “deflation” and the ugly economic consequences of reduced “money supply”, at the middle of all that are the primary dealers – still. While it is technically correct to claim that the Fed expanded its balance sheet to $4.5 trillion, with $2.4 trillion left after autonomous factors for bank “reserves”, that actually [...]
You simply cannot act as a money dealer when the money you are dealing is highly suspect. I am not writing about money in the true sense, such as any tangible form that falls under property laws of custody and bailment, but rather the wholesale “money” that is derived under the much looser and unconstrained terms of financial laws and [...]
The simple fact of the matter is that gold is no longer money and hasn’t been treated that way in decades. It is a frustrating and often woeful outcome, but deference isn’t a reason to color judgement. As an investment, which is more like what gold has become, it isn’t all that straight, either. Gold behaves in many circumstances erratically; [...]
Today’s radical reversal in stocks notwithstanding, the continuing hits of liquidations are not achieving their settled ends. In purely financial terms, the entire process of liquidation is to renew a settled state. Local imbalances force restriction of financial resources (what used to be money but now is something recognizable as such but truly not money) which triggers a cascade of [...]
Behind our new paywall, I have been documenting the behavior of “dollar” money markets as they relate to China and elsewhere (global, general liquidity) but recent data in repo demand a more open airing. There are numerous indications that US$ markets are a total mess, none more so than repo. That starts with GC repo rates that remain above the [...]
In September 1979, the Federal Reserve Bank of St. Louis published a paper that attempted to clarify the monetary and economic characteristics of repurchase agreements. The name itself offers little but further confusion as prior to the 1990’s repos could be classified as either collateralized loans or actual sales and purchases depending on individual circumstances. In some cases, the two [...]
Repo rates were once again today above the upper “ceiling” of the FOMC’s intended corridor, marking three consecutive trading days exploring territory not meant to be reserved for secured overnight lending. The MBS GC rate hit 60 bps, surging with agency GC likewise nearing 60 bps. The UST rate fell slightly but remained just above the 50 bps upper limit. [...]
Stay In Touch