November 2008 was an extremely busy month for authorities in the US. The financial markets had just undergone panic the month before, but rather than dissipate there were lingering indications that all was not yet over. On November 23, 2008, the Treasury Department, the FDIC, and the Federal Reserve issued a joint statement on Citigroup. The first two had agreed [...]
On February 23, the equivalent yield for the 4-week US Treasury bill was just 39 bps. That was almost 11 bps (counting full pips) below the so-called money rate floor, to which T-bills are a near enough equivalent to count in that view. It was also 36 bps below IOER, which at one time was thought to be a huge [...]
The most basic link in finance is that between risk and reward. Just like alchemists who once sought a path to gold from lead, a great deal of modern finance was built around finding a shortcut between them. Discovering the great asymmetry where risks would be low but rewards sky high was the Holy Grail of later 20th century mathematics. [...]
The release of the 2011 FOMC transcripts has provided some useful clarity on the thinking of Federal Reserve officials. Unlike in 2008, policymakers were a little better acquainted with wholesale money and its possible points of failure. They never did solve or even identify all of them, of course, but the repo market in particular seems to have finally been [...]
That the repo market, as noted yesterday, has been beset by a persistent collateral shortage is relatively uncontroversial. Where once large blocks of MBS tranches were central to interbank flow and funding, their absence is still a fact of operation though that repudiation was a very long time ago. Even with that backdrop, however, it doesn’t explain a whole lot [...]
Last July, the US Treasury Department finally issued its official report detailing its account of what happened on October 15, 2014. The statement was co-authored by staff at the Board of Governors of the Federal Reserve System, FRBNY, the SEC, and CFTC, as if the government were going overboard trying to prove its word the end of the matter. As [...]
As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 [...]
It is quarter end, so illiquidity irregularity is to be expected except that it isn’t irregular really. Eurodollar futures have been heavily bid for three days in a row now, leaving four consecutive up days for the first time since the liquidations. And because I am a sucker for fractal behavior, repo markets proved that quarter end is still what [...]
Behind our new paywall, I have been documenting the behavior of “dollar” money markets as they relate to China and elsewhere (global, general liquidity) but recent data in repo demand a more open airing. There are numerous indications that US$ markets are a total mess, none more so than repo. That starts with GC repo rates that remain above the [...]
The federal funds rate applies to a range of actual trades in unsecured overnight lending. What you see as the calculated “effective” rate is an average of those trades. Under the ZIRP/QE paradigm, there has been very little dispersion since there isn’t much volume in that corner of the money market. By theoretical definition, repo rates should come in under [...]
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