Discover and read the best of Twitter Threads about #repo

Most recents (12)

Let us briefly #Reflect on the #SARB's first #MPC #Meeting of 2020 and their #MonetaryPolicy decision to cut rates by 25bps from 6.5% to 6.25%...
Everyone with some interest in such matters is without a doubt already aware that the #SouthAfricanReserveBank's #MonetaryPolicyCommittee cut its key #PolicyRate, the #Repo by 25 basis points from 6.5% to 6.25%. The move can perhaps best be summarised by the following statement:
It is clear from the statement above that the SARB moved on the back of a growth story. They would want to see the level of #inflation creep closer to 4.5% but they didnt tighten to achieve this end. Rather, they provided more accommodation for growth & inflation might pick up...
Read 11 tweets
I promised that we'd publish a new #Repo -blog today, with some "breaking info". Unfortunately, we discovered an error in the background info, which trashed the basis of our argument.

What we were trying to explain was this. 👇

Thread 1/
@Amdalleq @BradHuston
After the #Fed started its #repo -operations, #StockMarket has been in state of relentless melt-up.

As suggested by @zerohedge , hedge funds have been likely to use repo to increase their leverage.

But, what have the new repo-ops caused? 2/…
Like nicely elaborated by @bondstrategist , they have at least "thrown the moral hazard out of the window".

The #Fed is guaranteeing liquidity in the #repo -market, which basically removes all the risk, at least, in the markets of short-term paper. 3/
Read 13 tweets
It's rather baffling, why so many think that #recession of 2020 could be avoided.

Yes, the #Fed has cut rates aggressively and started to support the #stockmarkets and hedge-fund leverage, but it will not save the real #economy. 👇

#recession thread. 1/…
We first warned of the impending #recession in March 2019. Then, before the aggressive rate cuts and Not-QE, the timeline for its onset was Q1 2020.

In our recent forecast, the onset has been postponed between Q2 and Q3 due to the aggressive stimulus. 2/…
Why so little has changed in our forecast?

First, it should be noted that the #repo -panic of the #Fed was justified. It's evident that there are serious problems in the financial plumbing.

Without Fed's swift response, we'd be in recession already. 3/…
Read 19 tweets
So, why the collapse (not a recovery) of 2020?

1) There has not been an actual "recovery".
2) China running out of road.
3) Extension of the cycle through bailouts, alone.
4) No one left to "pivot" (bailout the markets).

Thread. 1/…
I've been raising this graph several times.

Yet, some try to disregard it's message, which is extremely simple: global productivity growth has collapsed.

The most likely reasons are the growing share of zombie corporations and extremely low interest rates. 2/
The 'megalomanic' debt-stimulus, #China enacted in 2015-2017, effectively emptied China's coffers.

Corporations, households and banks have become such highly indebted that their ability to absorb more debt is gravely limited. 3/…
Read 10 tweets
Many are hoping for a "recovery of 2020", but unfortunately we're going to the opposite direction.

In our latest forecast -report, we detail the reasons why. 👇

Everything starts with from the notion that tremors in the credit markets have started. 1/…
Both the collateralized loan obligation (CLO) and leveraged-loans markets have been "acting out" since summer.

For example, the leveraged loans market was hit with a deluge of downgrades, exceeding upgrades at a pace last seen in 2009. 2/…
Moreover, the IMF warned that in a global downturn, corporate debt at risk of default would rise to $19 trillion in eight major economies.

So, it's no wonder that there have been jitters also in the junk bond markets, while they have subdued lately. 3/…
Read 11 tweets
I've written on this few times before, but I just cannot help it.

It's truly strange how analysts and economists keep making predictions about "stable growth", while we've been in constant state of central bank induced bailouts for over two years.

Why the complacency? 1/
The first two bailouts are not generally acknowledged, but they were important.

In November 2017, the BoJ and PBoC stopped the rout in the junk bond ETF:s that threatened to spread to the asset markets.

This went mostly unnoticed, like the following bailout. 2/
In March 2018, the #ECB was forced to bailout European corporate debt markets that became clogged due to over-issuance, as corporations were preparing for the end of QE and rise in interest rates.

The BoJ also participated by increasing its stock ETF purchases. 3/
Read 10 tweets
The #repo "problem," goes much deeper than what most, if not all experts suggest.

I've been too busy to write a full note on it, but the signs of stress are manifesting all over and it's not just the traditional places where people look (xccy, libor, repo, etc.)
Global unrest is finally upsetting the very foundation of the system

London may be the beating heart of the Eurodollar system, but people are ignoring the circulatory system....…
Most analysts won't make the connection, but it's the tax havens that absorb the excess supply of $s which leak out of the US and launder the dirty money which keep it going.

As global unrest increases, capital flight from these centers accelerates (think $HKD)
Read 3 tweets
Has the #Fed fixed the problem?

No, #repo is still setting higher than Fed Effective
They have managed to bring repo back below their upper target range for EFFR, but so long as repo yields > EFFR, their is an incentive to switch
Will buying TBills fix the problem?

No. Banks are already flattish TBills so they are not adding to the float of collateral that is being financed in the Treasury Repo market.

Banks will simply gobble up all the supply at auctions and flip it to the Fed
Read 20 tweets
EVM Theme: Fiscal > Monetary

TBAC Minutes Q4 2017 - Supply Matters

Rising UST supply to fund deficits in itself isn't a big deal, but it was THIS meeting in which supposed finance industry titans made a decision which hastened the onset of the current predicament in #repo
At the time, few had paid attention or cared. However, I was keenly focused on it as the effects of post crisis regulation combined with rising deficits and low yields / flat curves which created a toxic mix for UST demand
TBAC members made a fateful decision to issue primarily in the front end - Tbills, 2s, 3s, and 5s
Read 7 tweets
#fed #repo #dollar #dxy thread w/ a couple new points about timing/catalyst related to cash repatriation and buybacks.
Issue 1) Widening $1T fiscal deficits are causing large supply of UST at unprecedented % of GDP outside of recession/war.
Issue 2a) In last five years, foreign sources and Fed not buying UST. Private domestic balance sheets (blue line) have thus absorbed $3T in new UST in those five years.
Read 9 tweets
So many hot takes on #repo floating out there, yet I have so little time to debunk them all

1. Repo yield move is not a sign of financial armageddon

2. Yes, it is technical but

3. It's not temporary. It wasn't a one off caused exclusively by auction settlements and corporate
Tax payments. Funding pressures have been slowly building for over a year

4. It's not the Fed's fault

5. Regulation (Basel 3), inverted yield curve (ECB & BoJ are more to blame for this than the Fed), rising deficits, TBACs decision to front load issuance in 2017 (Bills, 2s, 3s
5s) rather than issue equally across the curve - these are some of the contributing factors. Maybe I'll do a deeper dive on each to show how each played it's part in a separate thread.
Read 5 tweets
I did Powell this AM, so might as well do the mins now. Thread 1/x
There's this ongoing discussion among #FOMC about deterioration in conditions. I'm really not seeing it...but my opinion doesn't count for as much. "Many participants" means it's a majority opinion of voters. 2/x
The ongoing labor market slack argument, advanced most prominently by @neelkashkari and @Jamesbullard (prolly not his real handle) gets a little attention, but not much. Can't employ everybody. 3/x
Read 14 tweets

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