More Job Losses Are More Lives Saved

The mind boggling loss of jobs last month was not caused by an economy out over its skis in need of a correction, but is a measure of the country’s resolve to meaningfully damage the rapid spread of COVID-19. More job losses are more lives saved. Losing 20 million jobs in a month is a… Read more »

Will the Coronavirus Make the Fed Sick?

As seen in Bond Buyer. Continued uncertainty regarding the life cycle of the new coronavirus contagion is flattening the yield as a flight to quality is driving down treasury yields.  With the Fed expected to stay on hold this week, shorter maturity bond yields have declined less than long term maturities. So this week the… Read more »

Repo Crisis Continues

The Fed is still supplying an incredible $200 billion of short term financing to repo markets.  The Fed plans on printing money in order to buy nearly $50 billion in T-Bills a month in a misguided attempt to end the emergency injections of cash. The Fed already printed so much money that banks have $1.3… Read more »

Fed Can’t Fix Repo Market by Printing Money

Financial light tunnel

bondbonAs seen in Bond Buyer. On Tuesday, the New York Fed provided only $30 billion of 14 day financing despite more than $60 billion in demand.  The New York Fed also provided $75 billion in overnight lending that came close to meeting the $80 billion in demand.  These actions are helping to bring overnight financing… Read more »

Release Excess Reserves to Save Repo

Excess reserves are nearly $1.4 trillion and yet the Fed needed to inject $53 billion to bring overnight repo rates down from a high of 10%.  The assumption is that we do not have enough excess reserves.  It’s not that there aren’t enough reserves, but that they are difficult to pry loose from the Fed… Read more »

Inflation Isn’t Dead Yet

Core CPI was higher than expected at +0.3% for July and 2.2% year over year.  Inflation expectations have taken a nose dive according to the breakeven inflation rate on TIPS (“breakeven” is the difference in yield between an inflation protected treasury bonds (TIPS) and an equivalent maturity traditional treasury yield since TIPS also appreciate at… Read more »

Collateral for Excess Reserves

As featured in Bond Buyer. The minutes from the June 18-19 Fed meeting show that the Fed is considering allowing banks to use collateral, such as T-Bills for excess reserves. They are considering setting up a repo facility that essentially results in banks simply posting T-Bills instead of cash for excess reserves. The minutes reveal… Read more »

Imagine Libra as an ETF

There is a lot of confusion over Facebook’s proposed electronic currency, Libra, because, well…it is confusing.  No one, not even Facebook, is sure of how Libra will take shape.  The goals of the currency are generally to improve the ease of electronic transactions and broaden the access to banking.  It’s like mobile banking on steroids…. Read more »