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Three Straight Weeks Can’t Be Ignored

By |2017-10-02T16:59:42-04:00October 2nd, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 $325 billion. That makes for [...]

I Repeat

By |2017-09-25T18:58:44-04:00September 25th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The nominal CMT yield on the benchmark 10-year US Treasury note hit its low on July 8 last year. It’s debatable, of course, as to what turned it around; I think “reflation” from there began in Japan and all those whispers of the “helicopter.” It didn’t really matter that the BoJ didn’t really consider the proposition, what did instead was [...]

It Was Collateral, Not That We Needed Any More Proof

By |2017-09-18T16:20:49-04:00September 18th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 insane. To be honest, it [...]

Canada’s RHINO(s)

By |2017-09-06T18:18:59-04:00September 6th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The Bank of Canada “raised rates” again today, this time surprising markets and economists who were expecting more distance between the first and second policy adjustments. The central bank paid typical lip service to being data dependent. It has a vested interest if you, as any Canadian reader, believe that to be a fact. But what we really find in [...]

Once Again, Not Korea but March

By |2017-09-05T18:37:52-04:00September 5th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It's hard not to put all emphasis on missile tests and other serious forms of sabre rattling. Even doing so, as the bond market may be doing right now, however, misses the underlying. Everything at the moment traces back to mid-March, which in hindsight was a very eventful month in full far away from the Korean peninsula. Take, for example, [...]

That’s Odd, I’ve Seen That Curve History Somewhere Before

By |2017-08-23T17:40:11-04:00August 23rd, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Orthodox monetary theory tells us that central banks matter, a lot. Monetary policy is supposed to be the difference in everything from economy to currency. If one central is doing one thing and another central bank something different, it is presumed the only necessary information to infer what markets and therefore economies might do in response. The Federal Reserve is [...]

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

By |2017-08-17T19:01:29-04:00August 17th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 has happened between now and [...]

Data Dependent: Interest Rates Have Nowhere To Go

By |2017-08-14T18:20:05-04:00August 14th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

In October 2015, Federal Reserve Vice Chairman Bill Dudley admitted that the US economy might be slowing. In the typically understated fashion befitting the usual clownshow, he merely was acknowledging what was by then pretty obvious to anyone outside the economics profession. Dudley was at that moment, however, undaunted. His eye was cast toward the unemployment rate and that was [...]

Follow-Up on Bills; Supply Side

By |2017-06-26T16:51:54-04:00June 26th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Returning to the theme of the parallel evolutionary developments in the early 20th century as compared to the last decades of it, in 1908 famed Gilded Age industrialist Andrew Carnegie wrote what seems today a misplaced article for New York Outlook magazine. The steel magnate lamented the state of American banking, which he called within his piece “at least one [...]

Chart of Last Week: In Need of Official Address

By |2017-06-26T11:56:08-04:00June 26th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

According to the US Treasury, the calculated equivalent treasury bill yield for the 4-week maturity was 76 bps at Friday’s close. At such a short time frame there isn’t actually a single instrument that creates the rate, more of an amalgamation (spline) of various 4-week securities staggered on their own. The bill maturing this week, for example, closed last week [...]

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