Loading ...[This is a whisper that only the adroit are capable of hearing/understanding, just wait till the shouting starts.
Wait till the MSM has its hair on fire].
Something Snaps: Repo Freezes Again As Overnight Fed Operation Oversubscribed, Repo Rate Jumps
First it was supposed to be just a mid-month tax payment issue coupled with an accelerated cash rebuild by the US Treasury. Then, it was supposed to be just quarter-end pressure. Then, once the Fed rolled out QE4 while keeping both its overnight and term repo operations, the mid-September repo rate fireworks which sent the overnight G/C repo rate as high as 10% was supposed to go away for good as Powell admitted the level of reserves was too low and the Fed launched a $60BN/month Bill POMO to boost the Fed’s balance sheet.
Bottom line: the ongoing repo market pressure – which indicated that one or more banks were severely liquidity constrained – was supposed to be a non-event.
Alas, as of this morning when the Fed’s latest repo operation was once again oversubscribed, it appears that the repo turmoil is not only not going away, but is in fact (to paraphrase Joe Biden) getting worse, because even with both term and overnight repos in play and with the market now expecting the Fed to start injecting copious liquidity tomorrow with the first Bill POMO, banks are still cash starved.
******************************************************************************************************
READER COMMENTS:
*******************************************************************************
The banks must be using excess reserves to wallpaper over something causing both a larger tranche of borrowers and shorter tranche of lenders.
Where could the banks be bleeding cash to ?
Only thing I can see that isn’t showing up clearly on the books is derivatives. They’ll show sooner or later but the bleed can be hidden for a season.
**************************************************************************
I got it now:
The negative rates in EU and JP are a consequence of everyone trying to get out of US treasuries: yielding < 2%, fed deficit > 3%, current account -2%! They are not insane, but entirely rational. The neg rate distortion only is taking place bec there is so much less depth of EU bonds vs UST, nowhere to go
.***************************************************************************
Well the Fed created this mess. And why are they only buying short term treasury bills and notes instead of longer dated ones. Shouldn’t also the Fed be buying banks stocks? It’s basically a daisy chain at the leper colony and they’re running out of lepers. Most of this so called wealth is an illusion. IOU’s backed by nothing used as collateral to rehypothecate more money. And on and on it goes. In the end have physical gold,silver and cash although the cash is an IOU it will keep you ahead of the bunch
************************************************************************************************