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Seriously, Wherefore Art Thou Collateral?

By |2017-12-07T17:35:32+00:00December 7th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

I’m going to go out on a limb and claim there is something seriously wrong in repo. All jokes aside, I know it sounds like a broken record but the dimension that matters is not intermittent collateral problems so much as the greater intensity to them and in a condensing timeframe. Escalation is a description [...]

Three Straight Weeks Can’t Be Ignored

By |2017-10-02T16:59:42+00:00October 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 [...]

It Was Collateral, Not That We Needed Any More Proof

By |2017-09-18T16:20:49+00:00September 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 [...]

Repo On The African Plain

By |2016-11-22T17:48:37+00:00November 22nd, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 [...]

Money Market Illiquidity Further Removes A Central Myth

By |2016-06-27T18:02:52+00:00June 27th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It might be expected that monetary policy would fail to achieve its goal in attempting to manage the economy when it cannot even meet its own basic technical requirements. The main lever of Fed policy continues to be the federal funds rate even though it is entirely irrelevant, and has been for a long time. [...]

Still More Money Market Fragmentation

By |2015-12-28T16:53:17+00:00December 28th, 2015|Economy, Federal Reserve/Monetary Policy, Markets|

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 [...]

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