1/ RRP analysis that you won't get elsewhere
EOQ is the window dressing time for EU/Japanese banks, because how their Basal III compliance is put in place.
End-of-quarter balance-sheet composition very important for GSIBs in those areas.
EOQ is the window dressing time for EU/Japanese banks, because how their Basal III compliance is put in place.
End-of-quarter balance-sheet composition very important for GSIBs in those areas.
2/ They don't want to hold bank reserve at EOQ, so the fastest way is to quit doing Repos (taking in bank reserve and lend out UST/MBS etc)
EU/Japanese Banks do a lot of repos with money-market funds. And they will stop on 3/31, 6/30, 9/30 and 12/31 every quarter, for ONE day.
EU/Japanese Banks do a lot of repos with money-market funds. And they will stop on 3/31, 6/30, 9/30 and 12/31 every quarter, for ONE day.
3/ we have 90 counter-parties today actively using Fed RRP. 92 MMFs are participating + Fannie and Freddie.
So 90 out 94 users are using it today, which reflects that some major Repo players (EU/Japanese banks) are leaving the playground for 1 day.
So 90 out 94 users are using it today, which reflects that some major Repo players (EU/Japanese banks) are leaving the playground for 1 day.
4/ RRP balance rose by $151Bn today, which is really the bank reserves Eurobanks absorbed from US MMFs, which gives you a RARE glimpse on how much liquidity is absorbed there and the scale of the problem if Eurobanks' balance sheet is full.
5/ RRP balance will fall back quite a bit tomorrow (maybe $100Bn, since the Treasury will unleash $63Bn tomorrow), when the quarter-end has passed.
6/ I am almost done with my 3-part Q3 outlook piece. stay tuned. quite a bit of drama ahead.
Oh, BTW, at the moment, remember that higher RRP balance is bullish.
Oh, BTW, at the moment, remember that higher RRP balance is bullish.
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