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US - Do US banks have a liquidity problem? QE4 implemented using repo market as excuse - since September 2019

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  • US - Do US banks have a liquidity problem? QE4 implemented using repo market as excuse - since September 2019

    Wed, 10/16/2019 - 09:03


    snip

    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.

    https://www.zerohedge.com/markets/so...epo-rate-jumps
    "May the long time sun
    Shine upon you,
    All love surround you,
    And the pure light within you
    Guide your way on."

    "Where your talents and the needs of the world cross, lies your calling."
    Aristotle

    “In a gentle way, you can shake the world.”
    Mohandas Gandhi

    Be the light that is within.

  • #2
    Fed's Second "Not QE" T-Bill POMO Is 4.8 Oversubscribed

    snip

    As such the question we have been asking for the past month remains: why are banks still so desperate for liquidity even though the Fed has now made clear the Fed's balance sheet will expand to accommodate all reserve needs, and why do they so stubbornly refuse to approach the interbank market for their funding needs?

    In short, what do they know about the banking system that we don't?


    https://www.zerohedge.com/markets/fe...oversubscribed
    "May the long time sun
    Shine upon you,
    All love surround you,
    And the pure light within you
    Guide your way on."

    "Where your talents and the needs of the world cross, lies your calling."
    Aristotle

    “In a gentle way, you can shake the world.”
    Mohandas Gandhi

    Be the light that is within.

    Comment


    • #3
      Fed injects 211 billion dollars into system in last 2 business days.....


      Repo and Reverse Repo Operations
      The New York Fed conducts repo and reverse repo operations each day as a means to help keep the federal funds rate in the target range set by the Federal Open Market Committee (FOMC). Operation results include all repo and reverse repo operations conducted, including small value exercises.

      About Repo and Reverse Repo Agreements | Statements and Operating Policies | FAQ on Reverse Repurchase Agreement Operations | Repurchase Agreement Operational Details | FAQ on Repurchase Agreement Operations
      Deal Date: Friday, October 25, 2019
      Delivery Date: Friday, October 25, 2019
      Maturity Date: Monday, October 28, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 3 Days
      Term of Operation - Business Days : 1 Day
      Operation Close Time: 08:30 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 67.593 67.593 1.80 1.801 1.82 1.80
      Agency .000 .000 N/A N/A N/A N/A
      Mortgage-backed 9.750 9.750 1.80 1.805 1.82 1.80
      Total 77.343 77.343

      Deal Date: Thursday, October 24, 2019
      Delivery Date: Thursday, October 24, 2019
      Maturity Date: Friday, October 25, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 1 Day
      Term of Operation - Business Days : 1 Day
      Operation Close Time: 08:45 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 71.154 71.154 1.80 1.804 1.82 1.80
      Agency .000 .000 N/A N/A N/A N/A
      Mortgage-backed 18.000 18.000 1.80 1.811 1.82 1.80
      Total 89.154 89.154
      Deal Date: Thursday, October 24, 2019
      Delivery Date: Thursday, October 24, 2019
      Maturity Date: Thursday, November 07, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 14 Days
      Term of Operation - Business Days : 10 Days
      Operation Close Time: 08:15 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 47.550 34.256 1.73 1.747 1.77 1.72
      Agency .000 .000 N/A N/A N/A N/A
      Mortgage-backed 14.600 10.744 1.75 1.766 1.78 1.73
      Total 62.150 45.000
      Deal Date: Wednesday, October 23, 2019
      Delivery Date: Wednesday, October 23, 2019
      Maturity Date: Thursday, October 24, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 1 Day
      Term of Operation - Business Days : 1 Day
      Operation Close Time: 08:30 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 42.254 42.254 1.80 1.803 1.81 1.80
      Agency .100 .100 1.80 1.800 1.80 1.80
      Mortgage-backed 7.500 7.500 1.80 1.804 1.82 1.80
      Total 49.854 49.854



      Deal Date: Tuesday, October 22, 2019
      Delivery Date: Tuesday, October 22, 2019
      Maturity Date: Wednesday, October 23, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 1 Day
      Term of Operation - Business Days : 1 Day
      Operation Close Time: 08:45 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 54.404 54.404 1.80 1.808 1.83 1.80
      Agency 1.000 1.000 1.81 1.810 1.81 1.81
      Mortgage-backed 9.500 9.500 1.80 1.813 1.83 1.80
      Total 64.904 64.904


      Deal Date: Tuesday, October 22, 2019
      Delivery Date: Tuesday, October 22, 2019
      Maturity Date: Tuesday, November 05, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 14 Days
      Term of Operation - Business Days : 10 Days
      Operation Close Time: 08:15 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 39.900 31.141 1.76 1.772 1.81 1.75
      Agency .000 .000 N/A N/A N/A N/A
      Mortgage-backed 12.300 3.859 1.78 1.788 1.80 1.75
      Total 52.200 35.000
      Deal Date: Monday, October 21, 2019
      Delivery Date: Monday, October 21, 2019
      Maturity Date: Tuesday, October 22, 2019
      Type of Operation: Repo
      Auction Method: Multiple Price
      Settlement: Same Day
      Term of Operation - Calendar Days : 1 Day
      Term of Operation - Business Days : 1 Day
      Operation Close Time: 08:30 AM


      Results Amount ($B) Rate (%)
      Collateral Type Submitted Accepted Stop-Out1 Weighted
      Average2
      High Low
      Treasury 50.950 50.950 1.80 1.804 1.82 1.80
      Agency .500 .500 1.82 1.820 1.82 1.82
      Mortgage-backed 6.700 6.700 1.80 1.817 1.83 1.80
      Total 58.150 58.150
      https://apps.newyorkfed.org/markets/...ate=01/01/2000
      "May the long time sun
      Shine upon you,
      All love surround you,
      And the pure light within you
      Guide your way on."

      "Where your talents and the needs of the world cross, lies your calling."
      Aristotle

      “In a gentle way, you can shake the world.”
      Mohandas Gandhi

      Be the light that is within.

      Comment


      • #4
        https://apps.newyorkfed.org/markets/...ate=01/01/2000

        Deal Date: Monday, October 28, 2019
        Delivery Date: Monday, October 28, 2019
        Maturity Date: Tuesday, October 29, 2019
        Type of Operation: Repo
        Auction Method: Multiple Price
        Settlement: Same Day
        Term of Operation - Calendar Days : 1 Day
        Term of Operation - Business Days : 1 Day
        Operation Close Time: 08:30 AM



        Results Amount ($B) Rate (%)
        Collateral Type Submitted Accepted Stop-Out1 Weighted
        Average2
        High Low
        Treasury 66.833 66.833 1.80 1.801 1.81 1.80
        Agency .000 .000 N/A N/A N/A N/A
        Mortgage-backed 9.750 9.750 1.80 1.806 1.82 1.80
        Total 76.583 76.583
        "May the long time sun
        Shine upon you,
        All love surround you,
        And the pure light within you
        Guide your way on."

        "Where your talents and the needs of the world cross, lies your calling."
        Aristotle

        “In a gentle way, you can shake the world.”
        Mohandas Gandhi

        Be the light that is within.

        Comment


        • #5
          I am not going to continue to post the daily fed repo operations. It is anticipated this action will continue into 2020.

          snip

          No matter the cause, it's clear the Fed will be forced to continue pumping tens of billions of dollars into the system daily for the foreseeable future..
          "It is worrisome that these numbers continue to rise, and we don't yet have a very clear explanation," said Colas.

          https://www.cnn.com/2019/10/25/busin...rve/index.html
          "May the long time sun
          Shine upon you,
          All love surround you,
          And the pure light within you
          Guide your way on."

          "Where your talents and the needs of the world cross, lies your calling."
          Aristotle

          “In a gentle way, you can shake the world.”
          Mohandas Gandhi

          Be the light that is within.

          Comment


          • #6
            So the government is saying that the huge injection of cash into the system since September is to provide liquidity ("ample reserves regime") and keep an equilibrium in the flow of cash ("mitigate the risk of money market pressures").

            Money Market Developments: Views from the Desk

            November 04, 2019
            Lorie K. Logan, Senior Vice President
            Remarks at the Annual Primary Dealer Meeting, Federal Reserve Bank of New York, New York City

            snip


            Over the course of the year, there have been important developments in the Federal Reserve’s framework for implementing monetary policy, and the markets in which we operate have continued to evolve. I’d like to focus today on what the New York Fed’s Open Market Trading Desk (the Desk) is currently doing to implement the FOMC’s ample reserves regime, particularly over the next several months.

            In mid-October, the FOMC directed the Desk to maintain over time ample reserve balances at or above the level that prevailed in early September, and we recently began Treasury bill purchases to achieve that objective. Since it will take some time to accumulate securities holdings, we also continue to conduct temporary repurchase agreement (repo) operations in order to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation.

            Although money market conditions have calmed since the mid-September volatility, the Federal Reserve is carefully monitoring reserves conditions and money market developments, and the Desk will continue to use its tools and adjust operational plans as needed to maintain the federal funds rate in the FOMC’s target range.

            https://www.newyorkfed.org/newsevent...2019/log191104

            --------------------------------------------------------------

            In September 2019 JPMorgan reportedly (link) stopped participating in the repo markets by supplying cash in order to buy back stock, pay dividends, and reallocate portfolio to buy long term debt (at historically low rates). Why?


            Timeline:

            September 12 - 4th Democratic debate. The various policies of the candidates are more clear.

            September 17 - Fed announces program of massive injection of cash into system using repo function effective immediately. Denies quantitative easing verbage. link

            September 24 - After weeks of debate, Rep. Pelosi announces official impeachment inquiry 5 business days after fed announces the beginning of huge cash flows into system. link

            September 25 - Quinnipiac poll publishes final version of report that Biden (a moderate and establishment candidate) has slipped and is now tied with Warren (a progressive who advocates for income equality through taxation) for lead in Democratic race. link

            October 14 - JP Morgan Chase (largest US bank) shares rise after bank posts record revenue above Wall Street expectations. link

            November 1 - JP Morgan Chase officially announces buyback of $900 million of its stock (all series P preferred stock) on 12/1/19. link

            November 4 - Fed promises continued cash injection into system "over the next several months". (see above for link)

            November 5 - DOW hits another record high of 27,492.63. link
            "May the long time sun
            Shine upon you,
            All love surround you,
            And the pure light within you
            Guide your way on."

            "Where your talents and the needs of the world cross, lies your calling."
            Aristotle

            “In a gentle way, you can shake the world.”
            Mohandas Gandhi

            Be the light that is within.

            Comment


            • #7
              November 6th, 2019, 7:55 AM EST

              Deutsche Bank AG President Karl von Rohr discusses the challenge that low interest rates pose to Europe's financial industry. "With inflation factored in, the result is a creeping erosion of our European customers' assets, and this doesn't in any way take into account the wealth destruction in the pension systems," Rohr said Wednesday at Bloomberg’s Future of Finance conference in Frankfurt.

              https://www.bloomberg.com/news/video...-retreat-video

              "May the long time sun
              Shine upon you,
              All love surround you,
              And the pure light within you
              Guide your way on."

              "Where your talents and the needs of the world cross, lies your calling."
              Aristotle

              “In a gentle way, you can shake the world.”
              Mohandas Gandhi

              Be the light that is within.

              Comment


              • #8
                snip

                For investors looking over the long haul, the developments should be “massively concerning,” said Morgan Stanley’s Shalett.

                “The market is diverging from the fundamentals quite a bit,” she said. “This entire cycle has been proof in the pudding that liquidity is going into the financial markets. It’s not going into the real economy.”


                https://www.cnbc.com/2019/11/07/the-...in-stocks.html
                "May the long time sun
                Shine upon you,
                All love surround you,
                And the pure light within you
                Guide your way on."

                "Where your talents and the needs of the world cross, lies your calling."
                Aristotle

                “In a gentle way, you can shake the world.”
                Mohandas Gandhi

                Be the light that is within.

                Comment


                • #9
                  Challenger, Gray & Christmas -


                  172 CEOs left their jobs in October, "a new high in a record-setting year,.."

                  http://www.challengergray.com/press/press-releases
                  "May the long time sun
                  Shine upon you,
                  All love surround you,
                  And the pure light within you
                  Guide your way on."

                  "Where your talents and the needs of the world cross, lies your calling."
                  Aristotle

                  “In a gentle way, you can shake the world.”
                  Mohandas Gandhi

                  Be the light that is within.

                  Comment


                  • #10
                    Powell, the Federal Reserve Chairman, on the current repo effort:


                    Powell called the operations “technical measures” that do not reflect a change in monetary policy, though the moves have led to a $270 billion expansion in the Fed balance sheet.

                    He also repeated that fiscal policy is on an unsustainable path and could limit the ability to respond to an economic downturn. (This comment is in reference to the budget deficit. ss.)

                    https://www.cnbc.com/2019/11/13/feds...continues.html
                    "May the long time sun
                    Shine upon you,
                    All love surround you,
                    And the pure light within you
                    Guide your way on."

                    "Where your talents and the needs of the world cross, lies your calling."
                    Aristotle

                    “In a gentle way, you can shake the world.”
                    Mohandas Gandhi

                    Be the light that is within.

                    Comment


                    • #11
                      October 28, 2019

                      snip

                      In recent days, executives at JPMorgan Chase & Co. and Goldman Sachs blamed stringent post-crisis liquidity rules that penalized banks if they didn’t hoard cash reserves beyond usual capital requirements, or excess reserves. Part of the issue was their holdings of Treasurys weren’t considered on par with cash.

                      Analysis by the Fed last year showed a select few banks held the majority of the reserves in the financial system, drawing questions why they did not pass them round to other cash-starved market participants.

                      “Banks did not have a distribution problem, they have a concentration issue,” Cabana said. “The banks could have lent their reserves, but they didn’t want to. Because banks are told by their supervisors they need to hold a high amount of assets in the most liquid form — reserves — those who had reserves didn’t want to have them falling further,” he said.

                      https://www.marketwatch.com/story/th...ain-2019-10-22
                      "May the long time sun
                      Shine upon you,
                      All love surround you,
                      And the pure light within you
                      Guide your way on."

                      "Where your talents and the needs of the world cross, lies your calling."
                      Aristotle

                      “In a gentle way, you can shake the world.”
                      Mohandas Gandhi

                      Be the light that is within.

                      Comment

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