For what it ever may have been worth, you have to at least acknowledge the Federal Reserve really did put its (own limited use form of) money where its abundant mouth had been. The entire story of the crisis era and then post-crisis experience of “abundant reserves” indicated a monetary situation (liquidity, colloquially) where supposedly money was beyond sufficient. Too [...]
When all this federal funds business started, the effective federal funds (EFF) rate was pretty well established at 16 bps above the RRP “floor.” It had been that way, consistently, all throughout Reflation #3, all throughout 2017. So consistent, that dependable spread was a very solid indication of reflation. As of yesterday, EFF was…16 bps above RRP. It’s not at [...]
More than any conundrum in the bond market, the Federal Reserve has one on its hand much closer to home. Its home, anyway. The effective federal funds rate (EFF) has been stapled to IOER for each of the last fifty trading days. No variation whatsoever. EFF had converged with IOER back in October. A lot of ugly things began to [...]
There had been whispers that the FOMC would have to undertake a second “technical adjustment” this year. Is it coincidence that the eurodollar futures curve inverted on the same day, June 13, Jay Powell announced the first one? Perhaps, but given what we are talking about here there is a fair chance they are related, especially in the close aftermath [...]
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 [...]
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 [...]
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 [...]
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. [...]
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