Is the Repo Market issue not getting enough attention?

[Specterx]

So there really is a problem then?

You don't tell a guy on the brink of a heart attack that everything is fine with his heart as long as he doesn't exert himself, or frankly even move, and just lays in bed all day.

I think at this stage, nobody is going to believe that the authorities have it under control once a problem is actually identified.

The thing to realize is that bank solvency only matters if somebody shows up wanting his cash, and the cash isn't there - or if regulators force you to mark stuff to a cratering market. When it comes to TBTF institutions, the Fed will provide unlimited liquidity to mask any problems and things will get worked out behind the scenes.

If there was a problem so massive that it couldn't be concealed, the market would certainly have wind of it and we'd be talking about whatever the root cause is.

 

[Seaweed]

The thing to realize is that bank solvency only matters if somebody shows up wanting his cash, and the cash isn't there - or if regulators force you to mark stuff to a cratering market. When it comes to TBTF institutions, the Fed will provide unlimited liquidity to mask any problems and things will get worked out behind the scenes.

If there was a problem so massive that it couldn't be concealed, the market would certainly have wind of it and we'd be talking about whatever the root cause is.

So its fair to say that the spike meant there was a problem, and all the money the FED is injecting is them concealing it. So now we just have to make sure nobody gets wind of it???

 

[bone]

Dude - as I said before but you choose to gloss over; Repo Rate spikes are NOT an anomaly. They’re not common but they’re not rare either. In fact - it’s been that way since the 1980’s and the advent of the Treasury Bond futures.

In fact, bigger basis traders would hedge against them. Basis financing (Repo) risk is the largest component to the Fed Funds futures contract volume (now SOFR).

So its fair to say that the spike meant there was a problem, and all the money the FED is injecting is them concealing it. So now we just have to make sure nobody gets wind of it???

 

[Seaweed]

Dude - as I said before but you choose to gloss over; Repo Rate spikes are NOT an anomaly. They’re not common but they’re not rare either.

And I asked what did the FED do about it at the time? If your answer is nothing, then my question is why are they doing something about it now?

If traders would hedge against it before, as you say, why does the FED need into inject billions of dollars this time around?

 

[bone]

It is the Fed’s core mission to monitor and maintain inter bank liquidity. ALWAYS HAS BEEN. Look at the number of times the Fed has pumped liquidity into the system since 1971. This is NOT new.

https://www.federalreserve.gov/aboutthefed.htm

“The fundamental mission of the Federal Reserve System is to foster the stability, integrity and efficiency of the nation's monetary, financial and payment systems in order to promote optimal macroeconomic performance.”

And I asked what did the FED do about it at the time? If your answer is nothing, then my question is why are they doing something about it now?

If traders would hedge against it before, as you say, why does the FED need into inject billions of dollars this time around?

 

[ElCubano]

The thing to realize is that bank solvency only matters if somebody shows up wanting his cash, and the cash isn't there - or if regulators force you to mark stuff to a cratering market. When it comes to TBTF institutions, the Fed will provide unlimited liquidity to mask any problems and things will get worked out behind the scenes.

If there was a problem so massive that it couldn't be concealed, the market would certainly have wind of it and we'd be talking about whatever the root cause is.

Massive problems have been conceleaed in the past, even fooling the market herself. That’s how you go down 30-50% in such a short time unexpectedly.

 

[bone]

To wit: if Repo market liquidity was thought to be a systemic problem that threatened the integrity of US markets and interbank payment systems, the stock market would not be setting record after record. I can’t think of a more transparent market on planet Earth than the US Repo market.

This is NOT the 2007-08 MBS/CDO debacle in any way, shape, or form.

Again, this “liquidity vacuum” is entirely of the Fed’s own creation - and its their problem to fix. It’s NOT the fault of US Commercial and Investment Banks.

Massive problems have been conceleaed in the past, even fooling the market herself. That’s how you go down 30-50% in such a short time unexpectedly.

 

[ElCubano]

Usually assets/mkts that have massive issues that are kept from the public are in fact printing new highs day after day. But if you say it’s transparent I have to believe you, cuz I don’t know shizzzo.

Happy Thanksgiving!

 

[LoosenUp]

The Repo market illiquidity issues are entirely of the Fed’s own construction.

Over years of QE they took massive amounts of liquidity OUT of the market - and now they’re finally playing catch-up, and only when there was a problem. Plus they’ve been rolling coupons to take advantage of the current rate environment.

Federal Government bureaucrats at their finest.

QE was providing liquidity to the market right?

 

[bone]

The US Government was BUYING Treasuries on the secondary market as part of QE. And MBS. To the tune of $40B per month. The idea being to grow the money supply. But that doesn’t increase the supply of short term government paper to loan on the interbank market - the opposite in fact.

QE was providing liquidity to the market right?