US Fed to Print $425B for New Year’s — 3 Times Bitcoin’s Market Cap

[tiddlywinks]

Seems most here don't "remember" or don't even know what "repo" is.

It is OVERNIGHT borrowing!!

EOY will be accommodation for banks, hedge funds, and similar, to ensure no rise in short-term interest rates. In layman's terms, EOY window dressing for the borrowers, to be unwound within hours or days at max.

Not to diminish the entire elevated repo thing, there IS a confidence problem where banks do not want to lend to other banks, even just for overnight... There IS "something" going on in the kitchen. One *guess* has to do with affects of BRExit.

 

[bone]

To be more detailed - the Banks borrowing on Repo Agreement have to post very specific ultra high quality in kind collateral to the Fed for the privilege - mostly US Treasuries and certain debt-to-equity ratio MBS’s.

As I’ve said elsewhere - this liquidity “crisis” is largely of the Fed’s own making. They’ve been buying Treasuries on the open market like drunken sailors.

Seems most here don't "remember" or don't even know what "repo" is.

It is OVERNIGHT borrowing!!

EOY will be accommodation for banks, hedge funds, and similar, to ensure no rise in short-term interest rates. In layman's terms, EOY window dressing for the borrowers, to be unwound within hours or days at max.

Not to diminish the entire elevated repo thing, there IS a confidence problem where banks do not want to lend to other banks, even just for overnight... There IS "something" going on in the kitchen. One *guess* has to do with affects of BRExit.

 

[nooby_mcnoob]

Seems most here don't "remember" or don't even know what "repo" is.

It is OVERNIGHT borrowing!!

EOY will be accommodation for banks, hedge funds, and similar, to ensure no rise in short-term interest rates. In layman's terms, EOY window dressing for the borrowers, to be unwound within hours or days at max.

Not to diminish the entire elevated repo thing, there IS a confidence problem where banks do not want to lend to other banks, even just for overnight... There IS "something" going on in the kitchen. One *guess* has to do with affects of BRExit.

Did none of you guys read the same thing I did between the lines on Powell's press recent press conference. A big bank withdrew liquidity because of reserve requirements which they want lowered. This is the "banks don't want to lend to other banks" bit. Approximately 1/3 of overnight repo was removed by JPM.

I agree with bone, when I think he says that there is no problem here. This is "too big to fail" being a bully.

 

[nooby_mcnoob]

Here: Durden blogged this some time back https://www.zerohedge.com/markets/here-megabank-behind-septembers-repo-shock

The recent press conference all but confirmed exactly this. So this is drama between Fed and JPM, nothing else.

 

[SteveM]

Sounds like madness to me (and everyone else who has taken any econ courses).

Gold-backed currency may seem like madness to you, but this seems like madness to me:

 

[tiddlywinks]

Did none of you guys read the same thing I did between the lines on Powell's press recent press conference. A big bank withdrew liquidity because of reserve requirements which they want lowered. This is the "banks don't want to lend to other banks" bit. Approximately 1/3 of overnight repo was removed by JPM.

I agree with bone, when I think he says that there is no problem here. This is "too big to fail" being a bully.

You can mark the calendar and place me in the opposite camp.
There indeed is a problem...

Fed vs JPM is a deflection.... neither the Fed or JPM can speak honestly without causing significant stress to the entire system.

In time, we will see . I hope I'm wrong.

 

[bone]

I used to trade the Treasury Basis - so I had to use the Repo market through my FCM.

A Repo Agreement is an in-kind exchange with the Fed - it is NOT an IOU.

If I want $2B face value 48 hour Repo agreement at 1.91% I have to post $2B face value of a US Sovereign Instrument - typically a T-Bill or T-Note, as collateral. There is NO LEVERAGE in the Fed / Inter-Bank Repo Market.

As a Bank, I do not want to liquidate performing commercial and retail loans just for the sake of meeting very short term operational liquidity needs - hence the Repo Market.

As a basis trader, I will buy a T-Note on the secondary market and finance the purchase on the Repo market using the T-Note as 1:1 collateral. I will sell the notional value of the cash Note on the analog futures market. That particular spread is called being LONG the basis.

 

[bone]

That’s small time - look at Japan, Steve-O

Gold-backed currency may seem like madness to you, but this seems like madness to me:View attachment 215294

 

[tiddlywinks]

I used to trade the Treasury Basis - so I had to use the Repo market through my FCM.

A Repo Agreement is an in-kind exchange with the Fed - it is NOT an IOU.

If I want $2B face value 48 hour Repo agreement at 1.91% I have to post $2B face value of a US Sovereign Instrument - typically a T-Bill or T-Note, as collateral. There is NO LEVERAGE in Repo.

As a Bank, I do not want to liquidate performing commercial and retail loans just for the sake of meeting very short term operational liquidity needs - hence the Repo Market.

As a basis trader, I will buy a T-Note on the secondary market and finance the purchase on the Repo market using the T-Note as collateral. I will sell the notional value on the futures market. That particular spread is called being LONG the basis.

To me, that pretty explains why JPMs recent public comments and criticisms of Basel III (right or wrong) are merely red-herrings.

 

[dozu888]

Just imagine for a second that the US dollar was actually backed by something tangible, instead of just being a bunch of made up electronic numbers on a computer screen somewhere.

Under such a scenario (where the currency was backed by something tangible), where would the Fed possibly get $500B dollars from in an emergency?

Selling off national parks to the Saudis?

you have been brain washed by bitcoin and gold bullion salesmen.

the dollar is backed by the full strength of the US economy and military... now would you trust that? or some piece of metal, or some string of numbers out of thin air?

sure when you print you dilute money, so what, as long as you are invested in assets that naturally hedge the printing... yup, people don't have assets get screwed, but we already know that.

central banks are the greatest thing since sliced bread... otherwise how'd we have survived '08? you can't move quickly with gold bars or bitcoin to put enough lubricant in the economy to prevent from seizing.

it sounds cool to yell 'abolish the Fed'... but be careful... at least with the Fed you have food on the supermarket shelves.