“Don’t fight the U.S. consumer. They are a very strong force and you can see them very healthy. Their loan balances are down, they have plenty of borrowing capacity and they have plenty of spending capacity.”
IG Index trading at +119bps…
IG US Bank Index trading at +122bps… gets the benefit of Regionals that are still super tight… a good sign for Credit..if there was a Recession there’s no way Credit wouldn’t be punting Regionals…..
IG Banks would be way inside the IG Index if not for heavy Money Center GSIB TLAC Supply for the last really 12 months…this overhang might actually be coming to an end or at least slow down based on a few things:
1) SLR related Supply for HoldCo is needed less actually coz QT
Hate to break it to some of these Perma Bears… but the Fed hasn’t run out of Bullets to fight inflation… they can continue to Hike rates & slow down QE or even step up RRP cash disbursements that make the Banking system even more ridiculously liquid.
The act of liquifying Banks in a Post Basel III & Gold Plated (including CCAR etc) world.. & creating M2 doesn’t in & of itself create inflation.. the Regulatory framework pushes money out of Banks on Supply side when it meets an optimal demand function. $XLF #Reflation
The calculus was to push Inflation blame game on Russia…. Instead they are gonna get the Alt Left War on American Energy made Putin Richer & Americans Poorer.
Really bad optics…& factually correct. If I was him… I’d quickly come to some Russian resolution..