Can someone explain wtf repo rate thing is about and whether it even matters for us?

[2FT]

He is probably correct. This is what I said in my earlier post.

I was an interbank money market dealer in the 90's and 00's. This repo thing was part of my job from 1995, in various countries, over the years.

- Most liquidity squeezes like this resulted in nothing. They came from poorly anticipated short term D<>S for o/n funds that sorts itself out quickly enough.

But... liquidity squeezes don't usually make the press either. However... the press today looks for news that they didn't even know existed 10+ years ago.

Seriously, go to NY, hire a hooker, find the bar all the dealers drink at these days, get her working the crowd and asking the right questions. They'll talk. If she works hard enough.

What would you say would be the main red flag to watch out for that indicates that this is not just a technical and very temporary imbalance but something much more sinister? And preferably a datapoint that can be checked by us, plebs

The landscape has changed in the many years since I left. But it should revert to normal quickly. It isn't hard for the CB to level the equilibrium and the flows to normalize... unless there is a deeper fear driving it. In which case it will not normalize quickly. Monitor the interbank overnight cash rate.

If there was a liquidity squeeze, then the ZQ / SR spread shouldn't have widened. But then, I just made that up. Compare them.

 

[tiddlywinks]

@2FT

Thank you very much for your posts. Very informative!

As I coffee this morning, I've wandered into a question I have no idea about. Perhaps you can shed light...

The 17T of negative interest rate stuff. How does that effect REPO? While it (negative-bearing paper) isn't issued in US, **I think** there is an implicit connection with correspondent banks seeking short term (USD)cash. As you mentioned earlier, EONIA is the European counterpart. Overnight haircuts on the negative paper could be extremely dangerous to the entire system! But I seem to be missing a connector. Something like LIBOR?? Or maybe I've just had too much caffeine.

Thanks for your posts.

 

[Specterx]

What would you say would be the main red flag to watch out for that indicates that this is not just a technical and very temporary imbalance but something much more sinister? And preferably a datapoint that can be checked by us, plebs

The thing is, major crises don't just happen out of the blue. The mortgage meltdown and the likelihood that major banks would collapse and/or require bailouts, was obvious to savvy insiders by 2006 at the latest and to the savvy public after June 2007. Likewise the Asian crisis started as a typical run on a currency peg, same deal as Soros' GBP short.

To get a handle on what if any crisis is likely to flare up, and possible trading opportunities, you need to identify what fundamental or macro events are actually causing the stress. If you can't find anything then there's not likely to be a crisis.

 

[lentus]

He is probably correct. This is what I said in my earlier post.



But... liquidity squeezes don't usually make the press either. However... the press today looks for news that they didn't even know existed 10+ years ago.

Seriously, go to NY, hire a hooker, find the bar all the dealers drink at these days, get her working the crowd and asking the right questions. They'll talk. If she works hard enough.



The landscape has changed in the many years since I left. But it should revert to normal quickly. It isn't hard for the CB to level the equilibrium and the flows to normalize... unless there is a deeper fear driving it. In which case it will not normalize quickly. Monitor the interbank overnight cash rate.

If there was a liquidity squeeze, then the ZQ / SR spread shouldn't have widened. But then, I just made that up. Compare them.

I love how you think. What do you trade now?

 

[lentus]

@2FT

Thank you very much for your posts. Very informative!

As I coffee this morning, I've wandered into a question I have no idea about. Perhaps you can shed light...

The 17T of negative interest rate stuff. How does that effect REPO? While it (negative-bearing paper) isn't issued in US, **I think** there is an implicit connection with correspondent banks seeking short term (USD)cash. As you mentioned earlier, EONIA is the European counterpart. Overnight haircuts on the negative paper could be extremely dangerous to the entire system! But I seem to be missing a connector. Something like LIBOR?? Or maybe I've just had too much caffeine.

Thanks for your posts.

I love you too because you've made coffee a verb. And ask cool questions.

 

[lentus]

The thing is, major crises don't just happen out of the blue. The mortgage meltdown and the likelihood that major banks would collapse and/or require bailouts, was obvious to savvy insiders by 2006 at the latest and to the savvy public after June 2007. Likewise the Asian crisis started as a typical run on a currency peg, same deal as Soros' GBP short.

To get a handle on what if any crisis is likely to flare up, and possible trading opportunities, you need to identify what fundamental or macro events are actually causing the stress. If you can't find anything then there's not likely to be a crisis.

Well.. I'm not sure what insiders you're referring to. I think way more than 97% were caught with their pants down with regards to either timing, scope or what will crash or all of the above. Remember, the subprime was rated AAA.

 

[lentus]

He is probably correct. This is what I said in my earlier post.



But... liquidity squeezes don't usually make the press either. However... the press today looks for news that they didn't even know existed 10+ years ago.

Seriously, go to NY, hire a hooker, find the bar all the dealers drink at these days, get her working the crowd and asking the right questions. They'll talk. If she works hard enough.



The landscape has changed in the many years since I left. But it should revert to normal quickly. It isn't hard for the CB to level the equilibrium and the flows to normalize... unless there is a deeper fear driving it. In which case it will not normalize quickly. Monitor the interbank overnight cash rate.

If there was a liquidity squeeze, then the ZQ / SR spread shouldn't have widened. But then, I just made that up. Compare them.

Do you think monitoring this could indicate trouble? Like if it keeps trading outside of the Fed's target range?

https://www.barchart.com/futures/quotes/SLU19/overview

 

[lentus]

Alrite, Fed had to step in for the fourth day. Is this normal? At how many days of consecutive Fed intervention should we panic? Should we wait for an official "PANIC NOW!" announcement?

Hoping @2FT will chime in.