The most common explanation for UST repo fails is that short sellers become an imbalance in the market for Treasuries. Convinced (isn’t everyone?) interest rates have nowhere to go but up and these instruments are doomed, therefore ripe to profit from the destruction, short selling sharks supposedly swoop in. Since they’ve borrowed UST’s they don’t own, the herd is susceptible [...]
Have European banks begun to lend in a way that will lead to actual inflation? For Europe’s central bankers, this is a huge question. For so many years despite almost constant QE, banks have consistently refused to do so. Even with supercharged asset purchases begun in 2020, there still hasn’t been any correlation between ECB activities and bank lending.This is [...]
Today, Treasury auctioned its usual weekly allowance of 4- and 8-week Treasury bills. For the former, this was the first conducted given a maturity which goes past the March 2022 FOMC meeting; the initial all-but-guaranteed rate hike. Last week’s 4-week bill expires right on the first day of that meeting, so no rate hike had been considered auctioning off that [...]
The Treasury Department released its broad TIC data today for the month of December 2022. Omicron fears, bond yields dropping despite the Fed’s rate hikes and an accelerating US CPI. Sure enough, more than a few segments of TIC consistent with those general outlines.Let’s begin with one of those which doesn’t have an immediate explanation; or, put another way, can’t [...]
With the first Federal Reserve rate hike widely anticipated (all but confirmed) for the March 15-16 FOMC meeting, this means that every one of the bill tenors with the exception of the 4-week are now inside that window. The 8-week maturity moved into it last week, on January 20, so its equivalent yield is now pricing higher alternative money rates [...]
Why are US banks borrowing hundreds of billions of US “dollars” (quotation marks fully deserved given the nature of these borrowings which are neither physical currency nor easily identifiable even on the global ledger, too many classified here as “other”) from themselves? Technically, for regulatory and accounting purposes “American” banks (a classification which includes domestic subsidiaries of foreign banks) are [...]
The Federal Reserve, like other central banks around the world, it does lend out the securities it owns and holds. Sophisticated modern wholesale money markets are highly collateralized, so much so that collateral itself takes on the properties of currency. Elasticity of collateral is as much – if not more – important as elasticity of other forms of wholesale money [...]
I’m not saying it is the whole story, but it’s not just random coincidence, either. It can’t be. At each inflection point when the global eurodollar system rolls over from reflation to the next major funding squeeze, you will find the debt ceiling nonsense rolled on into that process. Every time. On September 8, 2017, the debt ceiling was temporarily [...]
This wasn’t meant to be a running tally. In fact, that was my major point in yesterday’s curve inversion missive; the thing inverted, it stayed inverted for a second day but maybe won’t change much for some time moving forward. Boring and consistent, what matters most in this first stage is only that the inversion sticks rather than expecting big [...]
This sour/soar stuff goes back many years. The last time we went through the same hysteria (if for different reasons), everyone said the global economy was going to accelerate, take off, and sail onward forever after. The world was, they all claimed, set to soar.Globally synchronized growth. The bond market didn’t just disagree, it did so vehemently, a pessimism when [...]
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