Way to go, fellas. The FOMC minutes for the crucial March 2020 meeting further make a mockery of everything the central bank should stand for. Nowadays, the Federal Reserve is thought about in terms of its inflation and employment mandates. Nothing whatsoever to do with the monetary system, at least not directly. That’s the way they want it; officials can’t [...]
The Federal Reserve announced the Secondary Market Corporate Credit Facility (SMCCF) on March 23. The intent of this program was to calm the corporate bond market (secondary) then experiencing a massive blowout. Credit spreads of all kinds of corporate securities were exploding, the market in danger of completely shutting down.According to its latest balance sheet statement as of this afternoon, [...]
It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it [...]
Government securities have become so scarce that it is driving down repo rates. A collateral shortage that has become so acute, money dealers won’t part with their stock of government securities no matter what the price. Stop me if you’ve heard this before. Except, we’re talking about Japan and JGB’s here rather than UST’s. The trick is that both types [...]
For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason [...]
I knew long before they came out that it was going to be a shitshow, pardon my French. You don’t screw up that badly and let the worst global monetary crisis in four generations happen on your watch with it having been any other way. So, when the FOMC transcripts for 2008 finally came out early in 2014, I knew [...]
The Federal Reserve conducts reverse repo operations (RRP) daily, and has for more than half a decade. These are very different from the “liquidity” operations the central bank has been deploying since last year’s rumble in the repo market; the latter merely mimic a repo transaction and are intended to push bank reserves the Fed creates on the spot out [...]
The front end of the yield curve is flattened out near enough to zero. While the bill yields I noted this morning did not finish the day session with a negative, they were close and several have traded that way in the after hours session (as of this writing, the benchmark 3-month bill is -1 bps). This thing doesn’t end [...]
Negative Treasury rates are here. The front end of the yield curve fell below zero for the first time, the equivalent yield for the 4-week T-bill at -0.025% as I write this. The benchmark 3-month yield is straddling zero (while 3-month LIBOR jumps, as noted yesterday). These are not surprising developments. They are to Jay Powell and the people who [...]
The Fed unveiled what was supposed to be shock and awe. Instead, it was the predictable series of upsizing the bazookas, monetary armaments in name only. I’ll write it again: there is no money in monetary policy. Central banks are not central. That was the primary lesson of September’s repo rumble, and not for the first time since August 9, [...]
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