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Old 10-29-2019, 01:14 PM   #241
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Originally Posted by rblong2us View Post:
So change the compliance rules or find ways to get the money to go where its needed.

If the problem is a lack of money and the Feds only tool is to print more of the stuff, then this has to be a fixable problem .......
hmmm

Quote :
As usual passing the buck and putting the blame for JPM stepping away from the repo market - and catalyzing the Sept 16 repo rate explosion - on regulators, Dimon said his firm had the cash and willingness to calm repo markets when they went haywire in September, but regulations held it back.

Meanwhile, as part of stepping away from the repo market, JPMorgan succeeded in forcing the Fed to restart not only repo operations, but also QE. As a result, the Fed began daily liquidity injections, and even as repo rates have since returned to more normal levels, the Fed has also resumed purchases of Treasuries to bolster bank reserves.
from - https://www.zerohedge.com/geopolitic...ay-loosen-gsib


Quote :
It's also why Jamie Dimon is hoping to fully deregulate the financial system, so that he has no longer has any constraints on what his balance sheet should look like. And if regulators needs a little more "convincing", JPM is happy to crash the repo market as many times as is necessary.
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Old 11-15-2019, 09:17 AM   #242
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November 14, 2019

The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo) operations for the monthly period from November 15, 2019 through December 12, 2019. In accordance with the most recent FOMC directive, the Desk will continue to offer at least $35 billion in two-week term repo operations twice per week and at least $120 billion in daily overnight repo operations.

The Desk will also offer three additional term repo operations during this calendar period with longer maturities that extend past the end of 2019. These additional operations are intended to help offset the reserve effects of sharp increases in non-reserve liabilities later this year and ensure that the supply of reserves remains ample during the period through year end. They are also intended to mitigate the risk of money market pressures that could adversely affect policy implementation. The Desk will adjust the timing and amounts of repo operations as necessary to maintain an ample supply of reserve balances over time and based on money market conditions, consistent with the directive from the FOMC.
...
https://www.newyorkfed.org/markets/o..._policy_191114

That ain't workin' that's the way you do it
Money for nothin' and your chicks for free
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Old 12-02-2019, 10:09 AM   #243
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...
Dealers submitted $42.550BN in bids for the 42-day op ($29.750BN in Treasurys, $1BN in Agency, $11.8BN in MBS paper), resulting in an oversubscription of the $25BN in available repo.

This was modestly below the $49.050 billion submitted in the first 42-day repo operation conducted on November 25.

It remains a key question for funding markets why, even with QE4 in place and now daily overnight and short-term repo operations in place, banks continue to rush to lock in year-end liquidity ...
...
https://www.zerohedge.com/markets/fe...liquidity-rush
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Old 12-05-2019, 10:15 AM   #244
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The repo turmoil that put traders on edge in September has prompted a full scale review by regulators, who identified disruptions to short-term funding markets as a potential risk to the U.S. financial system.

The Financial Stability Oversight Council is calling for federal agencies to collect data and scrutinize cleared repurchase transactions to determine what prompted rates to spike three months ago, according to Treasury Department officials. The group, led by Treasury Secretary Steven Mnuchin, highlighted the examination in its annual report released Wednesday.
...
https://www.bloomberg.com/news/artic...d=fixed-income

haha/ Nelson Muntz

Dotting the "i"s and crossing the "t"s to build the foundation for the legislative deregulation that Dimon wants.

The following headline caught my attention. The article didn't really say anything new until a comment near the end really blew my mind (emphasis mine):

Quote :
The repo market is ‘broken’ and Fed injections are not a lasting solution, market pros warn

... Paresh Upadhyaya, director of U.S. currency strategy at Amundi Pioneer.

But Upadhyaya also sees potential knock-on effects from the Fed’s stabilization efforts, including short term yields being pressured lower and investors taking advantage of the liquidity to rotate to riskier assets, as the central bank’s share of the T-bill market expands to an estimated 20% of the market by mid-2020 from 1% currently.

“We’re very much on track for that,” he said.
https://www.marketwatch.com/story/gu...8-78FDC05761AF
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Old 12-10-2019, 09:08 AM   #245
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ZH highlights a report from the BIS stating that the repo market troubles were at risk of toppling several large hedge fund dominoes, not just one:

https://www.zerohedge.com/markets/fe...eally-happened
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Old 12-11-2019, 09:11 AM   #246
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So this analyst at Credit Suisse has worked for both the US Treasury and NY Fed. He was apparently an important cog in the response team the 2008 financial crisis. He just published an analysis of the repo market issue and basically confirmed most of the issues that have been posted in this thread already, but he also says:

Quote :
...
If we’re right about funding stresses, the Fed will be doing “QE4” by year-end: the safe asset – U.S. Treasuries - is funded by RV hedge funds on the margin and if the FX swap market pulls balance sheet and funding away from them, the safe asset will go on sale. Treasury yields can spike into year-end, and the Fed will have to shift from buying bills to buying what’s on sale – coupons.
...
The Fed became lender of last resort to dealers as J.P. Morgan ran out of reserves to lend, and the primary financier of the government as $250 of the $275 billion of the reserves that’s been put into the system since September ended up in Treasury’s general account (see Figure 1). Thus, all that the Fed’s liquidity operations have done to date is to ensure that the Treasury’s cash needs don’t drain further liquidity from banks’ HQLA portfolios, but it did not inject excess reserves into the banking system ahead of the year-end turn.
...
https://research-doc.credit-suisse.c...8208&toolbar=1

h/t: https://www.zerohedge.com/markets/it...ket-crash-days
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Old 12-11-2019, 11:56 AM   #247
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So I've been thinking about this issue quite a bit this morning. As I understand it, the big stress point on the repo market is that banks (and more specifically JPM) can't use Treasuries to satisfy regulatory requirements for reserves. It's what's preventing JPM from participating in the repo market like they used to do. Dimon and Mnuchin talked back in late October and I suspect they will get Congress to loosen the liquidity regulations. The groundwork for that is being done right now with the Financial Stability Oversight Council's investigation in the September repo spike. But that's (Congressional action on changing liquidity regulations) not likely to happen in the next couple of weeks, so yeah, we might see some real dislocations in the markets short term. The Fed will step in if necessary. It's not going to totally break down. It's just going to shore up political support for deregulating the banks. It's not going to solve any fundamental problems. Just more can kicking until the next time IMO. But short term, there's going to be some pain in the markets (and buying opportunities for those ready and able to take advantage of it).
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Old 12-12-2019, 09:40 AM   #248
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Quote :
...
But what are the signs that Pozsar is looking at, to determine that a liquidity crunch is imminent? There are two key leading indicators that serve as an advance warning that all hell may be about to break loose.

The first thing to watch to determine if the repocalypse 2.0 is about to hit, is the repo rate itself.
...
The second, and perhaps more critical indicator of a coming market crisis, are FX swaps.
...
Naturally, the most accurate indicator that the FX swap market is starting to freeze, are cross-currency basis swaps themselves. And, as the chart below shows, both EUR and JPY 3-month swaps have started to push sharply wider in recent weeks. As Bloomberg points out, the premium to swap Japanese yen into US dollars for three months - a bet on rising dollar scarcity - widened more than 4 bps to the highest level in seven weeks, while the a similar spread to convert euros into dollars expanded by as much as 6 bps.
...
Looking at the charts above, there is good news in that none of the current reads are remotely as apocalyptic as Pozsar is making them. However, there are three critical dates in the coming week that could results in a violent move wider in both swaps and repo rates, which would then instantly cascade to the rest of the market. They are the following:
  • December 12 - the Fed will announce the details of the next round of Fed RP Operations. As Curvature's Scott Skyrm noted yesterday, "I look for the Fed to announce a $50 billion (at least) term operation for Monday, December 23 and a $50 billion (at least) term operation for Monday, December 30. If the Fed announces operations of $25 billion or less on those days then Turn rates will immediately spike higher."
  • December 15 - China tariff decision. While not directly linked to the repo market, an adverse outcome here would result in a sharp drop in risk assets, tightening in financial conditions and a spike in the dollar, which would have an indirectly adverse impact on bank liquidity, potentially exacerbating the underlying funding shortage.
  • December 16 - Treasury tax remittance. A major liquidity drain, if the level of reserves is indeed catastrophically low this event could trigger a blow out in repo rates as banks transfer reserves to the Treasury. As a reminder, many attributed the first repocalypse to a tax payment made on Sept 16.

Together, these three events could potentially have a direct impact on financial conditions, on reserve levels, and by extension, could catalyze the repocalypse that Pozsar is confident is now coming.
https://www.zerohedge.com/markets/zo...o-things-watch
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Old 12-12-2019, 04:05 PM   #249
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think theyve got this covered -

https://www.zerohedge.com/markets/av...-end-liquidity

Just dont call it MMT
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Old 12-12-2019, 10:23 PM   #250
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Wow. I expected the Fed to take drastic action, but I figured it would be reactive and not proactive. They must know just how "healthy" the banking sector really is.
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Old 12-16-2019, 12:42 PM   #251
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Fed started their proactive liquidity push this morning. Banks wanted more than the Fed was offering. Is this a one off or indicative that the Fed's measures might not be enough?

https://www.zerohedge.com/markets/fe...-december-high
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Old 12-21-2019, 10:11 AM   #252
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For posterity, because it is likely to happen:

https://www.bloomberg.com/opinion/ar...pinion-markets

Natives getting restless...

https://www.bloomberg.com/news/artic...rnd=markets-vp
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Old 12-22-2019, 09:37 AM   #253
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Monetizing the debt...

Quote :
...
In this step by step analysis, we will put together the week by week numbers from the Fed and the Treasury, uncover what is being hidden behind a veil of complexity, and show the simple truth - about 90% of recent federal government deficit spending has effectively been funded at below market rates by simply creating the new money.
...
More: http://danielamerman.com/va/ccc/F1DefFund1219.html

h/t: https://www.silverdoctors.com/headli...ards-thoughts/
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Old 12-23-2019, 10:27 AM   #254
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Quote :
It looks like the year-end repocalypse that was predicted by Credit Suisse strategist Zoltan Pozsar is not going to happen this year after all.

Today's Term Repo which matures on January 7 saw $28.8BN in security submissions ($13.85BN in TSYs, $14.95BN in MBS), below the $35BN in total availability.

As such, this was the second term repo since the start of the Fed's emergency repo program that covered the year-end "turn" with a maturity of Jan 2, and was not fully overalotted. ...
...
In his latest comment on the repo market, Curvature's Scott Skyrm noted that "once the term RP operations switch to being undersubscribed, it either means most of the Street's year-end funding need is fulfilled, or banks are close to their balance sheet limits." ...
...
Meanwhile, despite the lack of oversubscribed repo for two operations in a row, repo doomsayer Pozsar refuses to throw in the towel and in an interview posted by Bloomberg on Friday, the Credit Suisse analyst said "it's not over" yet, saying that "if the yearend is less of a problem because of the repo bazooka we got from the Fed, and if the message of my report played a part in getting that bazooka, then that’s a nice way to be proven wrong." However, he then added ominously that "now we’re getting into a point in the year when balance-sheet problems are going to flare up, and I think the system will get gummed up again."
...
https://www.zerohedge.com/markets/re...-down-doomsday
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Old 01-03-2020, 07:34 AM   #255
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... the Fed is now actively monetizing debt the Treasury sold just days earlier using Dealers as a conduit... a "conduit" which is generously rewarded by the Fed's market desk with its marked up purchase price.

In other words, the Fed is already conducting Helicopter Money (and MMT) in all but name. As shown above, the Fed monetized T-Bills that were issued just three days earlier - and just because it is circumventing the one hurdle that prevents it from directly purchasing securities sold outright by the Treasury, the Fed is providing the Dealers that made this legal debt circle-jerk possible with millions in profits, even as the outcome is identical if merely offset by a few days.
...
https://www.zerohedge.com/markets/he...t-days-earlier

Guarantee that you won't see any POTUS candidates talking about this on the campaign trail. I think we are in the last stages of the American Empire, but very few of my neighbors realize it. It's going to be increasingly dangerous for the world too as war and conflict are always great distractions from currency crises.
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Old 01-07-2020, 10:14 AM   #256
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Quote :
... the Fed announced that Dealers are once again scrambling for liquidity, submitting $41.12BN in securities ($30.7BN in TSYs, $10.42BN in MBS) into today's 2-week repo operation, which was oversubscribed hitting the maximum operation limit of $35BN.
...
https://www.zerohedge.com/markets/re...o-mid-december

Liquidity in the banking system does not appear to have normalized (yet?).
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Old 01-08-2020, 07:31 AM   #257
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You might wonder just how much printing / support is really going on ......

You know they kinda talked about a couple of $T and it eventually became apparent it was more like $27T during the last meltdown.

Theres probably no point in speculating too much around the figures they do actually admit to, cause its all 'sterilised or very short term' apparently
yeah theres a bit of leakage showing up as stock price support but its probably incidental )-:
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Old 01-09-2020, 08:33 AM   #258
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Ah pictures....



Quote :
... as Curvature Securities' Scott Skyrm writes in his daily Repo Market Commentary note ...

... the market had gotten addicted to the easy Fed liquidity unleashed in September (via temporary repo ops), and then again in October (via permanent T-Bill purchases).

As Skyrm writes, "it's easy to see how the Repo market can get addicted to easy cash from the Fed when the stop-out rates for the RP operations are 1.55% - behind the offered side of the market."

But, as the repo strategist adds, as the Fed keeps injecting cash, the market gets used to it.

Which is great in the short-term as it sends risk assets soaring, but become a major issue over the long-term: "The long-term problem is that the some investor cash (real money cash) that was once going into the Repo market is now going elsewhere", Skyrm explains.

Indeed, the problem is that repo rates are trading in the lower end of the fed funds target range. When GC rates were higher in the range, Repo general collateral, as an investment, was more competitive than other overnight rates. But now that cash has gone to other markets.

In short, just as the market got addicted to QE and the result was a 20% drop in the S&P in late 2018 when markets freaked out about Quantitative Tightening, the Fed's shrinking balance sheet, and declining liquidity, Skyrm cautions that "it will take pain to wean the Repo market off of cheap Fed cash" since "it's a circle" which can be described as follows:
Quote :
For the Fed to end daily RP ops, they need outside cash to come back into the Repo market. For the Repo market to attract cash, Repo rates need to move higher. For rates to move higher, the Fed needs to stop RP ops.
The problem is that stopping RP ops could spark another repo market crisis, especially with $259BN in liquidity pumped currently - more than at year end - via Repo. It also means that the Fed is now unilaterally blowing a market bubble with its repo and "NOT QE" injections, and yet the longer it does so the more impossible it becomes for the Fed to extricate itself from the liquidity pathway without causing a crash.
...
https://www.zerohedge.com/markets/to...rket-easy-cash
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Old 01-16-2020, 10:07 AM   #259
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From Tuesday:
Quote :
... the Fed announced that its latest 2-week term repo operation was also the most oversubscribed since December 16, as $34.3BN in securities ($27.65BN in TSYs, $15.5BN in MBS) were submitted for today's $35 billion operation, as dealers continue to scramble to the Fed for liquidity which they are no longer using for "regulatory" year-end purposes (since it is no longer year-end obviously), but are instead using it to pump markets directly.
...
https://www.zerohedge.com/markets/fe...ibed-one-month
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Old 01-17-2020, 07:47 AM   #260
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so much commentary, all reckoning it will end badly but no obvious mechanism ..........

Years ago Bill Bonner, in one of his 'Daily Reckonings' said 'they are fighting deflation but they really want inflation ......... eventually they will get it right '

Bill is still writing -

https://www.bonnerandpartners.com/bi...-economy-down/
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