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Non issue.
Another stinker from RG
The give-away to the hyperwealthy from the Trump tax-cuts has some predictable, and unintended consequences as massive federal borrowing crowds out other investments for a sudden cash crunch in short term borrowing market.
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As the Fed was meeting to consider cutting interest rates, it lost control of the very benchmark rate that it manages.
It’s been a rough week in the overnight funding market, where interest rates temporarily ed to as high as 10% for some transactions Monday and Tuesday. The market is considered the basic plumbing for financial markets, where banks who have a short-term need for cash come to fund themselves.
The odd e in rates forced the Fed to jump in with money market operations aimed at reining them in, and after the second operation Wednesday morning, it seemed to have calmed the market.
In a rare move, the Fed’s own benchmark fed funds target rate rose to 2.3% on Tuesday, above the target range set when it cut rates at its last meeting in July. The target range is 2% to 2.25%, and the funds rate was at 2.25% on Monday.
A second rate the Fed watches, the secured overnight financing rate, or SOFR, shot up to 5.25% on Tuesday from 2.43%. That is the median rate for $1.2 trillion in short-term funding transactions that occurred Tuesday. SOFR affects floating rates on about $285 billion outstanding in corporate and other loans.
Fed Chairman Jerome Powell is expected to face questions on the issue when he briefs the press, after the central bank’s 2 p.m. rate decision Wednesday afternoon. The Fed is projected to cut the fed funds target rate by a quarter point to 1.75% to 2%.
“This just doesn’t look good. You set your target. You’re the all-powerful Fed. You’re supposed to control it and you can’t on Fed day. It looks bad. This has been a tough run for Powell,” said Michael Schumacher, director, rate strategy, at Wells Fargo.
Schumacher and other strategists said the Fed’s two operations Tuesday and Wednesday seem to have calmed the market for now, but the question is why did the wild swing in rates happen in the first place. Strategists say it seems to be the result of a cash crunch, not, for now, the makings of a credit crisis.
https://www.cnbc.com/2019/09/18/fed-...look-good.html
Non issue.
Another stinker from RG
https://www.thestreet.com/investing/...rkets-15094169The New York branch of the U.S. Federal Reserve added billions more in liquidity to gummed-up intrabank lending markets Wednesday, following the first intervention in more than a decade only yesterday, as a worrying e in overnight borrowing costs continues to perplex investors and complicate today's Fed rate decision.
The New York Fed offered $75 billion in cash to broader markets, in exchange for eligible collateral such as U.S. Treasury bonds or mortgage-backed securities, in order to hold the Fed's key rate inside its target range of between 2% and 2.25%. It accepted its full allotment, even as bids totaled $80 billion, lowing the range from 2.6% to 3% prior to the operation to 2.25% to 2.6% immediately afterwards.
The New York Fed was forced yesterday to inject $53.2 billion after overnight borrowing costs surged close to 10%, thanks in part to the hefty burden of primary dealers in the Fed system taking down nearly $45 billion each day in gross U.S. Treasury bond issuance, and reducing spare cash -- known as excess reserves -- at the same time. In fact, excess reserves have fallen by $171 billion so far this year, according to Fed data, and are down $1.4 trillion from 2014 levels.
Nonetheless, the repeat overnight repo operation later today -- only the second in ten years -- will add to market jitters as to what Powell and his colleagues are likely to say about future rate hikes, and the unwinding of the Fed's $3.8 trillion balance sheet, in the months ahead.
$125,000,000,000 pumped into the markets over two days for the first time in ten years is not quite a "non-issue"
You wish this is a non-issue.
Personally I hope it really is a blip, noteworthy only because it points out a "crowding out effect" of government borrowing.
A quarter trillion non-issue.
As long as the president has the magic "R" behind his name you have to downplay bad news. I get it. You are a loyal drone in that way.
Fed to Inject Cash for Fourth Day to Quell Funding Market Stress
The Federal Reserve is set to add liquidity to a vital corner of the funding markets for a fourth straight day on Friday amid signs that the stress seen earlier in the week is rebuilding.
The New York Fed said it will once again inject as much as $75 billion on Friday through an overnight repo operation. It follows liquidity doses of the same size Thursday and Wednesday and $53.2 billion on Tuesday.
The prior actions have helped calm the funding market, with repo rates declining to more normal levels after soaring to 10% Tuesday, four times last week’s levels. However, swaps spreads tumbled to record lows Thursday amid concern the Fed policy makers, following a two-day meeting that ended Wednesday, didn’t announce more aggressive steps to keep rates from ing. Swaps are signaling less appe e for Treasuries, out of concern traders won’t be able to fund purchases of U.S. debt through the repo market.
A few days ago, as required by law the Fed named the banks involved in its 2019 Q3-4 emergency repo operations, which reached somewhere in the neighborhood of 4.5 trillion dollars (~$11T through July 2020). One wonders what might have caused such a protracted lack of liquidity for the nations biggest banks and broker-dealers, but the financial press -- that I've seen -- hasn't thrown much light on it.
https://www.newyorkfed.org/markets/O..._data.html#rrp
https://en.wikipedia.org/wiki/Septem...S._repo_market
One of the opinion writers at Market Watch wrote late last week that the Fed is in ‘stealth’ intervention mode after the Fed injected $99.9 billion in temporary liquidity into the financial system and $7.5 billion in permanent reserves as part of a program to buy $60 billion a month in Treasury bills.https://thedig.substack.com/p/the-fe...o-intervene-inBut market demand for overnight repo operations far exceeded even the $75 billion the Fed allocated. So, on Wednesday, the Fed added $45 billion in addition to the $75 billion repo facility for a daily total of $120 billion.
There’s nothing stealth about continuing to pump billions into the repurchase market long after it said it would be needed.
The Fed originally said it planned to conduct daily repo operations until October 10. That intervention has now gone on beyond the end of the month of October with no end in sight.
Something is cooking but no one who knows what is telling the rest of us who is suddenly chronically illiquid.
The brisk activity at the Fed repo desk during the past few years has passed mostly without comment from the business press. Money markets must be hard up for a buck, either that or the action at the repo desk is too sweet to pass up.
Either way, it's billions in direct, risk free subsidies to banks and market makers.
https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements
A few days ago, as required by law the Fed named the banks involved in its 2019 Q3-4 emergency repo operations, which reached somewhere in the neighborhood of 4.5 trillion dollars (~$11T through July 2020). One wonders what might have caused such a protracted lack of liquidity for the nations biggest banks and broker-dealers, but the financial press -- that I've seen -- hasn't thrown much light on it.
https://www.newyorkfed.org/markets/O..._data.html#rrp
https://en.wikipedia.org/wiki/Septem...S._repo_market
cross referenced at:
https://www.spurstalk.com/forums/sho...1#post10875227
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