Wednesday , May 27 2020
Home / Tag Archives: Repo

Tag Archives: Repo

Let Japan Show You Again Just How Laughable The Idea That Central Banks Can Support Markets

On March 2, the Bank of Japan leapt into the stock market, Haruhiko Kuroda burnishing his Superman cape as he flew in to rescue the Nikkei. Purchasing a record amount of ETF’s that day, shares in Tokyo surged. It was a clear message, or so everyone thought. Don’t fight the Fed nor the Bank of Japan, not when they can buy theoretically unlimited amounts. Right?The following day, however, Bloomberg wrote up the bad news: The Bank of Japan’s surprise purchase of a record volume of...

Read More »

The Global Engine Is Still Leaking

An internal combustion engine that is leaking oil presents a difficult dilemma. In most cases, the leak itself is obscured if not completely hidden. You can only tell that there’s a problem because of secondary signs and observations.If you find dark stains underneath your car, for example, or if your engine smells of thick, bitter unpleasantness, you’d be wise to consider the possibility. There’s also the potential for the engine to overheat and maybe even visible smoke from oil burning as...

Read More »

These Idiots…

Way to go, fellas. The FOMC minutes for the crucial March 2020 meeting further make a mockery of everything the central bank should stand for. Nowadays, the Federal Reserve is thought about in terms of its inflation and employment mandates. Nothing whatsoever to do with the monetary system, at least not directly. That’s the way they want it; officials can’t define let alone control money, so what else are they going to do? Make you think they can maximize employment with minimal inflation...

Read More »

The Empty Bank

The Federal Reserve announced the Secondary Market Corporate Credit Facility (SMCCF) on March 23. The intent of this program was to calm the corporate bond market (secondary) then experiencing a massive blowout. Credit spreads of all kinds of corporate securities were exploding, the market in danger of completely shutting down.According to its latest balance sheet statement as of this afternoon, the Fed hasn’t purchased any assets. Nothing. Not a single penny shows up on the comprehensive...

Read More »

Banks Or (euro)Dollars? That Is The (only) Question

It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it was to be ignored as the Fed at that point was still forecasting inflation and rate hikes. Total financial resilience otherwise. Yesterday was, of course, another...

Read More »

Hemorrhaging Resumes

Overview: There is no reprieve for investors. Equities are falling sharply. Nearly all the Asia Pacific markets slumped but Australia. Chinese markets fared better than most, but the Nikkei was off 4.5%, and India was down almost as much in late dealings. Europe's Dow Jones Stoxx 600 is off more than 3% near midday, led by a sell-off in banks that are suspending dividends and share buybacks. It is giving back the last two days of gains. US share is sharply lower. Yesterday, the S&P...

Read More »

The COVID19 Tripwire

“You better tuck that in. You’re gonna’ get that caught on a tripwire.” – Lieutenant Dan, Forrest Gump There is a popular game called Jenga in which a tower of rectangular blocks is arranged to form a sturdy tower. The objective of the game is to take turns removing blocks without causing the tower to fall. At first, the task is as easy as the structure is stable. However, as more blocks are removed, the structure weakens. At some point, a key block is pulled, and the tower collapses. Yes,...

Read More »

Collateral Shortage Goes Global, Hinting At The Way The (euro)Dollar Reaches Its Eventual End

Government securities have become so scarce that it is driving down repo rates. A collateral shortage that has become so acute, money dealers won’t part with their stock of government securities no matter what the price. Stop me if you’ve heard this before. Except, we’re talking about Japan and JGB’s here rather than UST’s. The trick is that both types of government bonds are being hoarded for US$ purposes. The shortage of JGB’s is due to Japanese dealers desperate to source US$ funding. With...

Read More »

Why QE Is Not Working

“The process by which money is created is so simple that the mind is repelled.” – JK Galbraith By formally announcing quantitative easing (QE) infinity on March 23, 2020, the Federal Reserve (Fed) is using its entire arsenal of monetary stimulus. Unlimited purchases of Treasury securities and mortgage-backed securities for an indefinite period is far more dramatic than anything they did in 2008. The Fed also revived other financial crisis programs like the Term Asset-Backed Securities Loan...

Read More »

Right on Cue, Low Money Rates Are Not What You Might Think

For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason why is simple: they are all the same thing just with different letters and bigger numbers. Central bankers can explore infinity...

Read More »