201708.17
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The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

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…

201708.11
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JPY Joins EDM; End of Week Chart Dump

Brexit, Trump’s election, even the Bank of Japan rumored to be thinking helicopter. Last year was the year of thinking differently and therein was hope. No matter how many times some markets and especially media blindly accepted the “stimulus” or “recovery” judgments of economists over the years, by 2016 and the near-recession globally that accompanied…

201707.18
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When You Stop Reading After The Second Sentence

On June 27, ECB President Mario Draghi opened that central bank’s international conference in Sintra, Portugal. Most media never made it past the first two sentences of his prepared remarks. For them, the verdict was already delivered in those few lines. They declared that Draghi declared monetary policy was working and the world was on…

201707.11
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Didn’t Notice the Proposed Changes To the SLR? Don’t Worry, Most Markets Didn’t Either

The US Treasury released its first report (under Trump) on re-examining financial regulations and their impact on economic growth. The publication was little noticed because most people don’t much care about Supplemental Leverage Ratios (SLR), though they should. For decades, regulators allowed banks to operate under Basel rules as if capital ratios were sufficient criteria…

201706.26
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Follow-Up on Bills; Supply Side

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…

201706.26
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Chart of Last Week: In Need of Official Address

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,…

201701.20
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Memories of 2a7 Fade, But Commercial Paper Remains Relevant Anyway

If you are an enterprising financial firm with spare cash toward the end of the business day, you have several options for it. Primary among them is the Fed’s Reverse Repo (RRP) desk which will pay you 50 bps interest with your cash secured by both the reputation of the Federal Reserve as well as…

201609.14
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When The ‘Risk-Free’ Rate Is Risk…

Treasury bill rates have been trading notably higher of late, with the 3-month bill equivalent yield as much as 37 bps this week. Though it was the highest rate since November 2008, a true reading of bill history shows that it is not a matter of Fedearl Reserve policy “normalization.” Trading in bills, especially the…

201512.21
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Still Fragmentation

Picking up on the money market(s) discussion from this morning, bill rates once again were suggestively shallow. The 4-week T-bill was just 14 bps in “yield”, well below the Fed’s new “floor” of 25 bps; the 3-month bill was just 24 bps and behaving nothing like what would be expected. Federal funds remain well-behaved but…