Posts Tagged ‘repo’
September 22, 2019
There is no question that the world’s central banks are all living under the shadow of doubt as investors and financial markets are questioning the efficacy of the zero lower bound. The sense of always doing more in an effort to attain a self-conjured 2% level of inflation has led to the continued downward slide in interest rates.
On this note, last week we saw the Powell Fed lower the target range for the fed funds rate by 25 basis points — and its interest on excess reserves rate by 30 basis points — as congestion in the financial plumbing sent overnight rates soaring. (For those who are interested in the nuances, I am linking to one of many splendid pieces from Bloomberg reporters Liz McCormick and Alexandra Harris detailing out the repo market mess.)
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Tags:ECB, Federal Reserve, FOMC meeting, forward guidance, funding markets, Gold, Jerome Powell, Mario Draghi, repo, tariffs
Posted in Debt Market, Fed, United States | 4 Comments »
October 7, 2013
As I drove along the Blue Ridge Parkway many of the Federally manned information spots and federally run conveniences were closed. But it did not detract from the grandeur of the Carolina mountains and majestic valleys. The Parkway itself was an allegory for the markets as it winds it way a forest of trees with danger all along the way. It is best to stop at the lookouts along the way as an astute trader/investor would take the time to analyze charts to see where the road leads. The present standoff in Washington has brought profits to the SHORTS, but as Friday’s rally revealed. This market is fraught with danger for bulls and bears alike. More important than the shutdown of some federal government operations is the looming issue of the DEBT CEILING. Many analysts have rightfully pointed out that the government defaulted in 1979 and although Treasury bill yields rose 60 basis points, the overall effect was minimal. Beware of faulty historical correlations.
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Tags:Abe, BOE, BOJ, central counter parties, debt ceiling, Don Kohn, government shutdown, Pound, repo, Yen
Posted in BOE, BoJ, Currency, Japan, Switzerland, United States | 6 Comments »
September 11, 2013
Is the repo market more important than the Fed’s tapering? According to Manmohan Singh and his paper, “Collateral and Monetary Policy,” an IMF Working Paper, it seems that the Fed’s efforts to pare down its vast balance sheet will be much more significant for the markets. This work by Singh is critical to dealing with the issue of money and its velocity, or the lack of velocity of money that has kept the inflation rate down (despite all the predictions of rampant price increase due to the huge liquidity creation by the FED). The FED‘s vast $3.5 trillion balance sheet has kept high-grade collateral from providing the lubrication to the credit/repo markets.
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Tags:collateral, Fed, Fed Funds Rate, IOER, QE, repo
Posted in Fed, Quantitative Easing | 7 Comments »
June 4, 2013
Ex-FED Chairman Paul Volcker delivered a speech on May 29, which served as a “shofar” blast, warning the FED and its governors to be cautious in possibly undermining the credibility that all central bankers strive to maintain. Mr. Volcker does not doubt the intelligence of Chairman Bernanke but what he worries about “… is a matter of good judgment, leadership and institutional backbone” (READ THAT AGAIN). “A willingness to act with conviction in the face of predictable political opposition and substantive debate is, as always a requisite part of a central bank’s DNA.” Now, knee-jerk FED supporters (insert name here) will maintain that is what Bernanke did in presenting QE1, QE2 and QE3–but he certainly had the support of a democrat-controlled HOUSE and SENATE in 2010. Also, the White House was a fervent supporter of massive monetary stimulus as he helped keep the economy from sliding into a chaotic state of asset liquidation. The FED may have suffered the barbs of some “tea party” legislators but for the most part the major powers in Washington and Wall Street provided the needed support for the FED.
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Tags:Ben Bernanke, Bill Gross, Fed, Jeremy Stein, Paul Volcker, PIMCO, QE1, QE2, QE3, repo
Posted in Fed | 6 Comments »
June 3, 2013
The markets were tossed back and forth again today as the sudden ubiquitous Fed President John Williams was letting the world know his views about curtailing the Fed’s bond purchases. Why is the Fed’s newest voice busy spouting about the bringing forward tapering of bond purchases? It seems that Williams has decided that the U.S. economy is entering a virtuous cycle of rising home values, creating increased demand for autos and other large priced consumer durables. And then let’s add in the steady rise in equity values, as well as the repaired balance sheet of consumers, which will lead to job creation and possibly inflation. The question arises: Why does John Williams’ opinion carry so much weight? Because of his previous role as a DOVE on the FED board?
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Tags:dove, Fed, Janet Yellen, John Williams, money markets, RBA, repo, short-term financing
Posted in Fed, RBA | 5 Comments »
May 23, 2013
First, Happy Memorial Day to all the readers of Notes From Underground. If you are a veteran of the U.S. Military, thank you for your service. If you aren’t a veteran, take the time to thank those who have served to fight for the freedom to write blogs and entertain the free interchange of ideas.
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Tags:Abenomics, China PMI, collateral, Fed, IOER, Nikkei, QE, repo
Posted in Fed | 3 Comments »
March 10, 2013
The continued parade of stock market analysts who proclaim the equity market is rallying merely on Fed monetary policy instead of market fundamentals have spent far too much time doing case studies and not reading economic history. Interest rates as the variable signaling the cost of money are a very critical element and a key fundamental of the economy and especially the equity markets. U.S. multinational corporations are sitting on record piles of cash and also reporting strong profits. Much of the growth in profits can be attributed to two factors: Very low borrowing costs and continued pressure on wages. The FED has created the low interest rates and has hoped that the profitability resulting from low borrowing costs would bleed into higher wages and thus the need for increased hiring. The problem is many fold on the lack of success in aiding jobs creation. Globalization has kept pressure off wages and the deleveraging of the private balance sheets has meant that downward pressure remains on demand.
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Tags:Angela Merkel, dollar index, Dow, ECB, employment-to-population ratio, equity marktes, Euro, Fed, Francois Hollande, Free Democrats Party, French oats, Germany, labor force participation, Mario Draghi, Mexican Central Bank, nonfarm payrolls, OMT, Peso, repo, SPS, yield curve
Posted in Canada, ECB, Fed, Mexican CB, Mexico, unemployment, United States | 6 Comments »
January 8, 2013
In the most significant news over the weekend, the Basel Committee announced that it was backing off from the implementation of the 2015 enhanced capital requirements for banks. Under the original Basel III requirements, global banks were going to have to have enough LIQUID ASSETS to be able to sustain a possible financial crisis of 30 days. The ability to sell assets to meet a possible run meant that banks would be forced to hold a larger amount of high quality, easily sellable assets. European banks have been clamoring for relief from the new capital rules for fear that the new standards would create less bank lending as banks rushed to shore up their balance sheets. U.S. banks were supporting the lobbying efforts by the European banks and thus the Basel Committee showed forbearance and lessened the possible impact by extending full compliance with the new regs out until 2019.
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Tags:5-Year Treasury Note, Basel III, Bernard Connolly, collateral, Debt, Fed, GDP, Italian 10-year, LCR, liquid assets, repo, Roger Altman, Rotten Heart of Europe
Posted in Banks, Europe, United States | 6 Comments »
September 23, 2012
A an op-ed piece in last weeks WSJ created a great deal of buzz in the financial media. Appearing a few days after the aggressive move by the FED, the opinion piece written by five eminent economists–George Schultz, Michael Boskin, John Cogan, Allan Meltzer and John B. Taylor–criticizes the Bernanke Fed’s QE policy from many different aspects. It is not the criticism that is significant but rather the stature of the economists that are calling the question of the FED’s continued one-dimensional response to the tepid growth following the deep recession of 2007-2008. The media would have the public believe that the only economists qualified to theorize on the problems at hand are those chosen by the FED and its research staff. The financial media bowed to the altar of Alan Greenspan– the Maestro, Oracle and whatever else–and thus the cult of personality was thrust upon the markets.
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Tags:Allian Meltzer, Bernanke, ESM, Fed, FOMC, George Schultz, Gold, IOER, John Cogan, John Taylor, John Williams, MBS, Michael Boskin, operation twist, QE, QE3, repo, Richard Fisher, shadow banking market, Spain
Posted in Central Banks, Debt Market, Spain | 5 Comments »
September 9, 2012
Friday’s unemployment report solidified the TRIFECTA of LIQUIDITY for the week. ECB President Draghi seeded the “liquidity clouds” at Thursday’s press conference by announcing the installation of the OTM (outright monetary transaction), which will allow the ECB/ESM to purchase unlimited amounts of sovereign debt of up to three-year duration–of course with conditions for those asking for help. Draghi is hoping to buy the whole EU project enough time so that a FISCAL UNION CAN BE FORMED WITH THE ABILITY FOR THE EU TO ISSUE A TRUE EUROBOND.
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Tags:Basel 3, Bernanke, BOC, Bullard, China, Christine Lagarde, collateral, copper, Draghi, ECB, ESM, EU, Eurobond, Fed, FOMC, Gold, Hu Jintao, IMF, IOER, liquidity, Mark Carney, nonfarm payrolls, operation twist, OTM, QE, repo, silver, unemployment rate, Wen Jiabao, yield curve
Posted in Canada, Central Banks, China, Commodities, Europe, unemployment | 5 Comments »