"In short: we are slowly but surely approaching that moment when the US financial system will yet again be the catalyst for the next crisis. Until then, keep a very close eye on total borrowings under the Fed's discount window: once it spikes from its 8 year slumber, all bets are off..." So basically they are saying that equity markets are going to crash soon. It sucks being a bull currently.
I really love watching JPM's Joyce Chang on TV. First hearing her sexy voice then seeing her ugly face always refreshes my day
There was plenty of liquidity on Christmas Eve when the Treasury Secretary called and asked. What changed?
https://www.bloomberg.com/news/arti...-control-key-rate-may-already-be-at-its-limit And where we are today... https://www.alhambrapartners.com/20...ng-out-the-shadow-money-costs-that-do-matter/ https://seekingalpha.com/article/4255850-federal-funds-rate-communicating Now let’s look at it with yesterday’s figures. FRBNY says that the 25th percentile was 2.43%, meaning that 75% of all federal funds transactions took place at least 3 bps above IOER (currently 2.40%). The 1st percentile was 2.37%, so we can assume that the vast majority of all lending came with a rate above IOER. It worked out to a weighted average of 2.44%, the published EFF rate. The 99th percentile was 2.60%, or 20 bps above IOER. It’s an easy profit. There really is no risk involved here. Though unsecured, the lack of unfamiliar players makes it pretty open. Why keep reserves parked at IOER when you can pocket 5, 10, 20 additional bps? It doesn’t seem to make sense. Players should be falling all over themselves to jump in, which would, again, push the weighted average lower. Instead, the average keeps on rising over time, and officials are predictably befuddled. In other words, what this market is saying is that the cost of creating or mobilizing additional liquidity must be greater than that spread! As discussed a little while back, this isn’t quite the theory behind the mainstream view of the printing press. Bernanke says for the US government to print money there is no additional cost. But in this system, it isn’t the US government which creates and mobilizes liquidity (effective money supply). What we are witnessing is how there are, actually, costs to money. We know this simply because we are left asking, once more, where are the dealers? They are the entities who evaluate and choose to, or choose not to, absorb those costs. Jeff Snider is a freak and one of top liquidity macro's out there... Good read for sure, basically the Fed is getting exposed for not being in control after all, surprise! They basically have to stop unwinding balance sheet way before September schedule, or cut rates by 25 bps which they won't do until credit collapse, so balance sheet option is likely the one. I would say June they will end balance sheet unwinding, it's pretty clear
I don't think that is correct, since the Fed would just water it all down and create money if need be like they have done since 2008. Yes--we have a problem with National Debt, but liquidity will always be there as long as there is a Fed.
This is the kind of stuff I was referencing in a conversation with @sle in another thread a few weeks ago. The banks are tight on liquidity due to the post crisis rules. I forget off hand what they were calling it but last week there was an article on cnbc reporting that some people at the Fed are talking about a repo facility that will allow banks to buy more Treasuries by letting them buy Treasuries then exchange them for cash to both buy more bonds and still have liquidity. They're tight on cash, healthy but low on liquidity.
I have no interest in going any further with this discussion because it is zerohedge for god's sake. But in their intro, 2nd paragraph, the only thing I read, they must have gotten everything backwards. The rate paid on excess reserves is the floor; not ceiling. You can only loan your excess reserves. You won't loan them for less than the what the Fed will pay on them. Also, I might note somewhat of a watershed moment here, in that this is the first time I can recall that I have ever agreed with anything Buy1Sell2 (or whatever) has posted. He's right about this one thing, and this one thing only!, Banks will not run out of "liquidity". That's virtually impossible, and its one reason our C.B. is the model for the rest of the world. When you write a check, as long as you have deposited funds to cover it, it is going to clear regardless of whether your particular bank is solvent! And for solvent banks, liquidity will always be there.
Primary dealers control distribution and create money if they wish... It is the massive rise of Non Bank Financial Lenders ( Shadow Banks ) that will create a vicious blow up, we're in that time of the cycle where nobody knows who is exposed to what, fear has gripped world banking... From India banking crises happening, to Turkey reneging on Sovereign Debt soon, China vicious Shadow Banking crisis coming, US Shadow banking crisis. Federal Reserve lost control since beginning 2018, Powell cut IOER by 5 bps 3 times since 2018 to match EFF and lately it has gone out of control, banks are demanding more for the current risk environment... Last time this happened was 08, Commercial Real Estate lending has been a debacle, and even RMBS standards are poor as fuck, subprimes been happening since 2014, in 2018 was full blown and in 2019 has not stopped... 0 % down payments are back, funds provided by Shadow Banks who loan from a Primary Dealer. Big Banks are saying, we think default wave is coming and we are hoarding little extra cash available. Giant massive pile of created money without collateral, add defaults and investos wanting their money back, well that causes liquidity crisis, which you will see very shortly. Even after Fed 5 bps cut in IOER few days ago, the next day according to NY Fed, EFF-IOER was a 1bps higher mismatch, at 6 bps. IOER was reduced by 5 bps by Fed, but EFF reduced by 4 ? Next few weeks will be very very interesting Watch the China open, they were closed Thursday-Friday... Thursday Earnings report came in, with a lot of revised earnings in multi billions negative for some, other's flat out refused to release earnings. Unless China Central Bank buys everything Monday, there is a sell-off happening over there, a lot of companies defaulting and need cash asap, investors will pull out before companies crash, they are also out of US Dollars. As of Friday, they jacked citizens of US Dollars, dollar shortage everywhere. What do you think it means for Debt Issued in US Dollars ?