201711.17
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A TIC Look At Qualitative Contraction

The latest update of the Treasury Department’s Treasury International Capital (TIC) estimates clarified a few things. To begin with, for the month of September the Chinese sold UST’s again for the first time in seven months. Between the end of January and the end of August, the Chinese had added $149.4 billion in UST holdings….

201710.23 2

TIC For August (China’s Belgian Hong Kong Dollars)

The Chinese have been on a UST buying spree of late, having announced to the world several months into it that they were intent on keeping it going. The idea in publicly endorsing and really highlighting their official activity was as a currency policy – to stabilize CNY against its highly disruptive tendency toward devaluation…

201710.23
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TIC For August (Background)

The Treasury International Capital (TIC) report produced somewhat of an anomaly in its update for August 2017. There was a lot going on during that month, mostly as UST yields fell (even though interest rates have nowhere to go but up, supposedly) while CNY continued its blistering ascent. As to the latter, it was quite…

201710.18
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Dollar Denial

At this point in the longer term process of unwinding the Fed’s prior emergency activities, the yield curve was supposed to flatten. That was the plan all along. If monetary policy was successful, or had even run into just dumb luck somewhere in the last ten years, here where policymakers declare the economy to be…

201710.02 4

Three Straight Weeks Can’t Be Ignored

The Federal Reserve Bank of NY reported on Friday that repo fails for the week of September 20 were $359 billion (combined “to receive” plus “to deliver”). That’s the second highest weekly total of this year, following $435 billion fails recorded just two weeks earlier. The week in between those two was also high, tallying…

201709.18
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It Was Collateral, Not That We Needed Any More Proof

Eleven days ago, we asked a question about Treasury bills and haircuts. Specifically, we wanted to know if the spike in the 4-week bill’s equivalent yield was enough to trigger haircut adjustments, and therefore disrupt the collateral chain downstream. Within two days of that move in bills, the GC market for UST 10s had gone…

201709.07
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Wherefore Art Thou Collateral?

The US Treasury as a result of the government’s bloated response to the Great “Recession” has been forced in notes and bonds to reopen their auctions each and every month. Before then, reopenings were less frequent. They weren’t infrequent, but the Treasury wasn’t just auctioning 10s every month. In 2007, for example, the Department conducted…

201708.29
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Moscow Rules (for ‘dollars’)

In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book…

201708.17
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The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day. A lot…

201708.15
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Can’t Forget About Dealers

When the Federal Reserve was founded in 1913, there was no role for it in the marketing and selling of government debt. This wasn’t an oversight on the part of Congress. For more than two years before the Fed, the Treasury Department hadn’t issued any marketable instruments at all. In those days it just didn’t…