Loading ...We’ll see how the Fed paper’s over this problem if this guru is right.
“It’s About To Get Very Bad” – Repo Market Legend Predicts Market Crash In Days
“Which brings us to the first of the key observations made by Pozsar: since the Fed’s repos and T-Bill monetizations have done virtually nothing to boost prevailing reserve levels on a sustained basis, “year-end balance sheet constrains will preclude primary dealers from bidding for reserves from the Fed through the repo facility or through repos from money funds. The slope of money market curves suggest that excess reserves won’t build up at banks, and so U.S. banks will not be able to fill the market making vacuum left by foreign banks.”
In other words, the already thin liquidity at year end (which as a reminder, last December 31 sent repo rates soaring even though excess reserves were about $100 billion more than they are now) could get far worse as a result of the Fed’s inability to properly address the reserves (cash) shortage plaguing banks.”