How about this opinion? TL;DR: Bankrun because of negative interest rates. meritorius_demotion Joe, thanks for the shoutout and the back and forth via DM As I said to you, I'm wondering if the large banks have gone to their respective federal chairs and at this point have laid bare to them because of this single month of China decreasing manufacturing, we don't even have a month supply shock runway to keep the ship from sinking due to the current velocity of money to maintain our current global economy. While a month long shortage of goods should rightfully decrease GDP albeit there will be some bounceback due to pent up demand, I'm of the firm belief all the zombie corps out there will go tits up. Likewise banks clamoring for interest rate decreases guts their traditionally core business of treasury yield arbitrage based off of deposits as it obviously makes sense to everyone that unless you live in a world of serious deflation, lending money out in the negative percentages as the Germans do makes no sense. Of course there are statutory minimum amounts of bonds their banks must hold so they are coerced into the game and let's face it if you have to hold 50 billion in treasuries its better to do so at -.3% rather than -.5% as an example so there will always be a market due to it. Given the mystery repo bank being largely speculated as Deutsche or some other German bank and you can see in the graph how repos have spiked after a good decrease in the need of them since they started in September, a .5% decrease and another one already being priced in is an obvious capitulation sign where they have told their chairs that the only way they stay afloat and stop a panic are these drastic measures as pre-emptively curbing illiquidity is just wasting bullets unless the people who need to use it themselves are already outright telling them they can't wait for the expected money velocity decrease due to less goods to hit their balance sheets as that will be the day they are insolvent. It is interesting though that as interest rates decrease the need for banks as a store of wealth becomes increasingly useless outside of security purposes so people are even more greatly encouraged to go direct to bonds/stocks and even classics like real estate for investment but it further hampers the banks ability to lend against deposits maintained by their institution without requesting the fed to lower it's threshold for maintained deposits. if inflation then hits through say trillions of dollars of QE and interest rates stay low there is then exactly no reason to keep your money in banks outside security which will result in bona fide bank runs.
"NY Fed: Beginning with today’s operation and through March 12, 2020, the Desk will increase the amount offered in daily overnight repo operations from at least $100 billion to at least $150 billion." Note: I didn't make the image above, that was done by our fav WallStreetBets poster WSBGod, who just cleaned up with a bunch of puts.
If 90% of your exports are oil (KSA) and oil is priced in dollars, you're not really pegging to the dollar in a way that say Argentina did. Even if it wasn't officially pegged, it wouldn't move much and there's no defense of the peg that they have to do to maintain that. Plus massive reserves if they ever did have to defend it. I wouldn't read too much into a tiny, war torn country that's been on the brink of default for months and has no oil revenue yet (but have been spending like they do).
Like with everything in finance (from repo to HFT), there is no conspiracy or magic, but rather a very complex, detailed process. To have a complete picture of what's going on in that business, you'd have to work on a repo desk. To have a good clue, you can be a UST bond trader trading various RV strategies (like on-the-run/off-the-run or bond futures basis, for example). To have some idea, you need to do a few repo transactions and understand their impact on the balance sheet of the bank, the significance of GC vs special, how different parties interact etc. In short, like with everything, big picture is easy to grasp, but the devil is in the details.
@Sig ... Hezbollah is involved in the government and refused to allow IMF assistance. I think Lebanon is in play in some way. The black market quotes the Lebanese Pound at 2500 to the USD. The official peg rate is about 1500. And like when the Swissy depegged it illuminated the Hungarian mortgages denominated in Swissy... Similar stuff in Lebanon with USD tuition and mortgages. Work for pay in Lebanese Pound and pay debt in USD. Now instead of giving me a headache, I shrug... I guess.
No doubt Lebanon is completely messed up and I wouldn't be surprised to see all kinds of issues come to light there. I'm just saying it's not a leading indicator for KSA or any other the other oil states.
The US government caused the Repo liquidity crunch via Quantitative Easing and they can damned well fix it. The Repo situation has virtually nothing in common with MBS. What this is really about is that the commercial banks need more short to mid term US sovereign debt in the banking system. These T-Bills and Notes are the most common collateral posted for Repo agreements. You're welcome.