The Federal Reserve did something today, or actually announced today that it will do something as of tomorrow. And since we’re all conditioned to believe this is the biggest thing ever, I’ll have to add my own $0.02 (in eurodollars, of course, can’t be bank reserves) frustratingly contributing to the very ritual I’m committed to seeing end.We shouldn’t care much [...]
With the 7s10s already inverted, and the 5s today mere bps away, making a macro case for the distortion isn’t too difficult. Despite China’s “upside” economic data today, even the Chinese are talking more about their downside worries (shooting/hoping for “stability”) than strength. In the US or Europe, no matter the CPIs in either place there are cyclical (not just [...]
The most common explanation for UST repo fails is that short sellers become an imbalance in the market for Treasuries. Convinced (isn’t everyone?) interest rates have nowhere to go but up and these instruments are doomed, therefore ripe to profit from the destruction, short selling sharks supposedly swoop in. Since they’ve borrowed UST’s they don’t own, the herd is susceptible [...]
The FOMC is going to hike rates maybe even aggressively. There’s not much dispute on this assumption. Why the Committee might be doing so, that’s a whole detailed debate. The Treasury yield curve is building toward inversion while the crucial (and leading) Euro$ futures curve is already substantially upside down.Both are increasingly confident market bets against the FOMC’s position(s).Jay Powell [...]
I wrote a few months ago that Germany’s factories have been the perfect example of the eurodollar squeeze. The disinflationary tendency that even central bankers can’t ignore once it shows up in the global economy as obvious headwinds. What made and still makes German industry noteworthy is the way it has unfolded and continues to unfold. The downtrend just won’t [...]
On January 14, FRBNY announced that it would continue offering its short-term liquidity operations for another month, until at least February 13. In setting the scene in order to slowly wean primary dealers from its non-repo repo program, the New York branch also declared that at its term repo window the cap would be reduced from $35 billion to $30 [...]
Back at the end of April, the FOMC and its dozens of staff members gathered around to talk policy as those people always do every six weeks or so. The agenda was quite full, with Jay Powell having had to switch from rate hikes to a Fed “pause” the few months before and none of them really sure why. Economic [...]
There it was sticking out like a sore thumb right in the middle of what should have been the glory year. Everything seemed to be going just right for once, success so close you could almost feel it. Well, “they” could. The year was 2014 and the unemployment rate in the US was tumbling, the result of the “best jobs [...]
Despite the name, the Fed doesn’t actually intervene in the US$ 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 [...]
I’ve said it all along; focusing in on bank reserves would leave you dazed and confused. It’s just not how the system works. After all, as I pointed out again not long ago, “our” glorious central bank had the audacity to claim that there were “abundant” reserves during the worst financial panic in four generations. "Somehow" despite that, it was [...]
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