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US - Do US banks have a liquidity problem? Or a "good" collateral shortage? QE4 implemented using repo market as excuse - since September 2019 & now what in 2021?......2022

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  • US - Do US banks have a liquidity problem? Or a "good" collateral shortage? QE4 implemented using repo market as excuse - since September 2019 & now what in 2021?......2022

    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

  • #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?


    ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

    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

      Comment


      • #4


        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

        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.

          The New York Federal Reserve has vowed to ease the turmoil that erupted last month in the overnight lending market. Keeping that promise is proving to be a very heavy lift.

          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.



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

            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

            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.



              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.”


                Comment


                • #9
                  Challenger, Gray & Christmas -


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

                  Explore the latest press and thought leadership from Challenger, Gray & Christmas, the outplacement industry’s leading executive coaching and outplacement firm.

                  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.)

                    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.

                      Comment


                      • #12
                        Federal reserve extends pay back time in over night markets calling it "operations". Any other name but QE4.


                        Statement Regarding Repurchase Operations
                        November 14, 2019

                        The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo) operations for the monthly period from November 15, 2019 through December 12, 2019. In accordance with the most recent FOMC directive, the Desk will continue to offer at least $35 billion in two-week term repo operations twice per week and at least $120 billion in daily overnight repo operations.

                        The Desk will also offer three additional term repo operations during this calendar period with longer maturities that extend past the end of 2019. These additional operations are intended to help offset the reserve effects of sharp increases in non-reserve liabilities later this year and ensure that the supply of reserves remains ample during the period through year end. They are also intended to mitigate the risk of money market pressures that could adversely affect policy implementation. The Desk will adjust the timing and amounts of repo operations as necessary to maintain an ample supply of reserve balances over time and based on money market conditions, consistent with the directive from the FOMC.

                        Detailed information on the schedule and parameters of term and overnight repurchase agreement operations are provided on the Repurchase Agreement Operational Details site.


                        https://www.newyorkfed.org/markets/o..._policy_191114



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


                        Look at the terms...all are 2 week minimums. Some are a month or more.


                        Schedule of Overnight and Term Repurchase Agreement Operations
                        Tuesday, 11/19/2019 Tuesday, 12/3/2019 14-days At least $35 billion
                        Thursday, 11/21/2019 Thursday, 12/5/2019 14-days At least $35 billion
                        Monday, 11/25/2019 Monday, 1/6/2020 42-days At least $25 billion
                        Tuesday, 11/26/2019 Tuesday, 12/10/2019 14-days At least $35 billion
                        Wednesday, 11/27/2019 Thursday, 12/12/2019 15-days At least $35 billion
                        Monday, 12/2/2019 Monday, 1/13/2020 42-days At least $15 billion
                        Tuesday, 12/3/2019 Tuesday, 12/17/2019 14-days At least $35 billion
                        Thursday, 12/5/2019 Thursday, 12/19/2019 14-days At least $35 billion
                        Monday, 12/9/2019 Monday, 1/6/2020 28-days At least $15 billion
                        Tuesday, 12/10/2019 Monday, 12/23/2019 13-days At least $35 billion
                        Thursday, 12/12/2019 Thursday, 12/26/2019 14-days At least $35 billion
                        Friday, 11/15/2019 - Thursday, 12/12/2019 At least $120 billion

                        https://www.newyorkfed.org/markets/d...details#_blank

                        Comment


                        • #13
                          Are the banks hoarding cash? If so, why?

                          Blaming regulations? Why did the banks suddenly need to move money around with long standing regulations in place and why is this problem getting worse?



                          snip

                          He said in further testimony Thursday that the repo chaos might have been caused by bank reserves getting too scarce two months ago. But he also addressed the possibility -- something raised recently by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon -- that regulations clogged the plumbing, preventing banks from moving money around.

                          There are aspects of regulations that could be adjusted to allow liquidity “to flow more freely in the system without undermining safety and soundness,” Powell said.



                          Comment


                          • #14
                            And China too. The world's 2nd largest economy.

                            China’s central bank injects 200 billion yuan to boost liquidity, keeps rate unchanged

                            PUBLISHED THU, NOV 14 201911:31 PM EST


                            snip

                            The move to add long-term funds caught the market off guard as the central bank had already injected funds last week.




                            Comment


                            • #15
                              It's a party! omg....97.9 BILLION today. Banks had asked for an additional 17.55 but it was not accepted. 25 billion of the 97.9 billion is a loan for 42 days.

                              eal Date: Monday, December 02, 2019
                              Delivery Date: Monday, December 02, 2019
                              Maturity Date: Tuesday, December 03, 2019
                              Type of Operation: Reverse Repo
                              Auction Method: Fixed-Rate
                              Settlement: Same Day
                              Term of Operation - Calendar Days : 1 Day
                              Term of Operation - Business Days : 1 Day
                              Operation Close Time: 01:15 PM
                              Participating Counterparties: 2
                              Accepted Counterparties: 2



                              Results Amount ($B) Rate (%)
                              Collateral Type Submitted Accepted Award3 High Low
                              Treasury .015 .015 1.45 N/A N/A

                              Deal Date: Monday, December 02, 2019
                              Delivery Date: Monday, December 02, 2019
                              Maturity Date: Tuesday, December 03, 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 52.950 52.950 1.55 1.550 1.55 1.55
                              Agency .000 .000 N/A N/A N/A N/A
                              Mortgage-backed 19.950 19.950 1.55 1.550 1.56 1.55
                              Total 72.900 72.900

                              Deal Date: Monday, December 02, 2019
                              Delivery Date: Monday, December 02, 2019
                              Maturity Date: Monday, January 13, 2020
                              Type of Operation: Repo
                              Auction Method: Multiple Price
                              Settlement: Same Day
                              Term of Operation - Calendar Days : 42 Days
                              Term of Operation - Business Days : 28 Days
                              Operation Close Time: 08:15 AM



                              Results Amount ($B) Rate (%)
                              Collateral Type Submitted Accepted Stop-Out1 Weighted
                              Average2
                              High Low
                              Treasury 29.750 16.405 1.60 1.617 1.65 1.56
                              Agency 1.000 .000 N/A N/A 1.58 1.57
                              Mortgage-backed 11.800 8.595 1.62 1.629 1.65 1.58
                              Total 42.550 25.000

                              Comment

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