Tuesday , December 10 2019
Home / Tag Archives: bank reserves

Tag Archives: bank reserves

China’s Financial Stability: A Squeeze and a Strangle

I do get a big kick out of the way Communists over in China announce how they are dealing with their enormous problems especially as they may be getting worse. Each month, for example, the country’s National Bureau of Statistics (NBS) will publish figures on retail sales or industrial production at record lows but in the opening paragraphs the text will be full of praise for how the economy is being handled. If you thought the Western media was liberal with the word “strong” (经济强劲, I...

Read More »

There’s No S-L-R in R-E-P-O

JP Morgan’s CEO Jamie Dimon has been running around Washington claiming that mid-September’s repo rumble was the result of the post-crisis regulatory environment. He now says that his bank had the spare cash and was willing to cash in on double digit repo rates but it was government rules which prevented that from happening. It’s unclear (but we can, and I will, guess) why he didn’t make the same claim and warn everyone on Friday, September 13, before the seasonal low point in liquidity that...

Read More »

The Fed and PBOC: Joined At The Zoo

The Federal Reserve wasn’t the only major central bank conducting open market operations (OMO’s) this week. On the other side of the Pacific, the People’s Bank of China (PBOC) had been, too. Big ones. And in both places, nobody really seems to know what to make of them even though they are actually connected to the same offshore dollar problem. Increasingly illiquid markets and more active central banks. The latter doesn’t fix the former, it’s an advertisement. How's it going in repo?...

Read More »

Tidbits Of Further Warnings: Houston, We (Still) Have A (Repo) Problem

Despite the name, the Fed doesn’t actually intervene in the US$ repo market. I know they called them overnight repo operations, but that’s only because they mimic repo transactions not because the central bank is conducting them in that specific place. What really happened was FRBNY allotting bank reserves (in exchange for UST, MBS, and agency collateral) only to the 24 primary dealers. These were repos only between those entities and the Federal Reserve. It had nothing directly to do with...

Read More »

Never Attribute To Malice What Is Easily Explained By Those Attributing Anything To Term Premiums

There will be more opportunities ahead to talk about the not-QE, non-LSAP which as of today still doesn’t have a catchy title. In other words, don’t call it a QE because a QE is an LSAP not an SSAP. The former is a large scale asset purchase plan intended on stimulating the financial system therefore economy. That’s what it intends to do, leaving the issue of what it actually does an open question. The SSAP is what’s coming next. A small scale asset purchase plan whose intent is only to raise...

Read More »

Head Faking In The Empty Zoo: Powell Expands The Balance Sheet (Again)

They remain just as confused as Richard Fisher once was. Back in ’13 while QE3 was still relatively young and QE4 (yes, there were four) practically brand new, the former President of the Dallas Fed worried all those bank reserves had amounted to nothing more than a monetary head fake. In 2011, Ben Bernanke had admitted basically the same thing. But who was falling for it? The stock market, sure. Investors on Wall Street are still betting as if it will work any day now. The financial media,...

Read More »

The Wholesale Zoo: Where Did All The Animals Go?

One of the most maddening aspects of the recent repo market, federal funds mashup is the lack of context behind it. The event is being characterized and described as if in isolation. Regulations are squeezing dealers at the same time there is a lack of bank reserves. Thanks to QT, there’s just not enough liquidity to go around. Therefore, the Fed adds a repo facility of some type and, voila, back to our regularly scheduled programming. It all sounds very comforting. The focus on bank reserves...

Read More »

More Than A Decade Too Late: FRBNY Now Wants To Know, Where Were The Dealers?

I’ve said it all along; focusing in on bank reserves would leave you dazed and confused. It’s just not how the system works. After all, as I pointed out again not long ago, “our” glorious central bank had the audacity to claim that there were “abundant” reserves during the worst financial panic in four generations. “Somehow” despite that, it was a Global Financial Crisis that lived up to its name – global. Straight away you have to ask, what good are reserves if they are abundant...

Read More »

Stuck at A: Repo Chaos Isn’t Something New, It’s The Same Baseline

Finally, finally the global bond market stopped going in a straight line. I write often how nothing ever does, but for almost three-quarters of a year the guts of the financial system seemed highly motivated to prove me wrong. Yields plummeted and eurodollar futures prices soared. It is only over the past few weeks that rates have backed up in what has been the first real selloff since last year. Is this a meaningful change? It may seem that way in certain places. The ECB has launched a more...

Read More »

China’s Next Warning

Chinese monetary authorities announced today what will be for some of its banks a seventh round of “stimulus.” For the largest institutions, it will “only” be their sixth and the first one since January 2019. The PBOC has decided it is time for more RRR cuts. Effective September 16, the ratio all banks are required to hold of reserves will be reduced by 50 bps; applying to certain city banks, the decrease will be 100 bps. It sounds like a flood of stimulus, enabling China’s...

Read More »