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An Overlooked And Important Point: The Fed’s Overnight Repo Operation Had Less To Do With Repo Than You Are Led To Believe

By |2019-09-17T16:49:06-04:00September 17th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

There is one additional important point to note in all this repo uproar. Why did the Fed conduct the overnight repo operation this morning? The answer isn’t what you might think. It sounds like officials particularly at the Open Market Desk sounded the alarm about repo and the FOMC forcefully responded. And if you think that, policymakers would be beyond [...]

Stuck at A: Repo Chaos Isn’t Something New, It’s The Same Baseline

By |2019-09-16T18:15:23-04:00September 16th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Finally, finally the global bond market stopped going in a straight line. I write often how nothing ever does, but for almost three-quarters of a year the guts of the financial system seemed highly motivated to prove me wrong. Yields plummeted and eurodollar futures prices soared. It is only over the past few weeks that rates have backed up in [...]

Powell Surrenders: I Told You Last Year It Was A Lie; Or, Here’s Almost The Whole Of It

By |2019-06-19T16:54:28-04:00June 19th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Jay Powell has had his mind changed for him. Why? Not even a year ago he was downplaying things like federal funds. The rise in that one anachronistic rate was inconsistent with a healthy financial system poised for the good times that come with serious economic acceleration. Quite the opposite, actually. To dismiss the obvious contrary signal, in very place [...]

Federal Funds Rate Is Communicating (Again)

By |2019-04-22T12:27:20-04:00April 22nd, 2019|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It is the shadows what really matter. A big enough problem in them would affect pretty much everything, including far off, out-of-the-way places like federal funds. Thus, if we observe weird things going on there we can infer more serious issues back where it does mean something. In 2013 and 2014, the Federal Reserve was hugely optimistic. FOMC officials didn’t [...]

The Remarkable And Lengthy Consistency of Repo

By |2018-06-25T18:11:32-04:00June 25th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Before August 2007, US$ money markets operated efficiently and predictably. They behaved according to a rigid hierarchy, which is a good thing no matter how it may sound. This inflexibility in the context of funding markets was exactly what we would want. Arbitrage opportunity was responsible for enforcing the rules. One simple example was the difference between repo and federal [...]

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