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There Is An Absolutely Solid Collateral Case For What’s Driving Curve Inversion(s) [Part 1]

By |2022-03-15T20:29:23-04:00March 15th, 2022|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 [...]

Sentiment v. Substance: Checking In On Collateral Via, Yes, The Fed

By |2022-01-11T20:39:44-05:00January 11th, 2022|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 [...]

Chapter 2 In The RRP Fairy Tale

By |2016-01-13T15:17:36-05:00January 13th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 Bad News Of Repo Fails Subsiding

By |2014-07-16T16:12:27-04:00July 16th, 2014|Bonds, Currencies, Federal Reserve/Monetary Policy, Markets|

With the latest data from FRBNY in hand, the surge in repo fails authorities and certain credit market observers that were stressed over the affair, it is actually confirmation of regularity, and thus a high degree of systemic deficiency. Further, as a real world test, it ends any credibility the reverse repo program had as an institutional tool for maintaining [...]

Gold and Reverse Repos

By |2014-02-26T12:31:27-05:00February 26th, 2014|Commodities, Federal Reserve/Monetary Policy, Markets|

Despite now two doses of QE taper and much more confirmation that the FOMC will be committed to that course, gold prices have not collapsed. Conventional wisdom has been uniform in believing QE as inflationary, and thus a positive for gold prices (despite the trajectory since 2011). Removal of QE should have been, if this thinking is correct, a negative [...]

QE Moved Out of On-the-run

By |2013-07-17T16:11:11-04:00July 17th, 2013|Markets|

There still hasn’t been any official acknowledgement that QE damages effective liquidity by removing usable collateral from the system. By purchasing US Treasury debt securities, including those just auctioned, the Federal Reserve is reducing what is left for the market to repo and, more importantly for fragmented markets, rehypothecate. The closest we have to facing up to the problem is [...]

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