Many think of Fed's BTFP as a liquidity injection, but it is quantitatively and qualitatively different from QE. I discuss why in the article. Thanks @EthanYWu for a clear and balanced article on the topic.

https://twitter.com/FT/status/1672121172455051264

@GordonJohnson19 @FedGuy12 @EthanYWu @DiMartinoBooth The S&P was 4200 in February, it fell to 3800 in March when the bank failures began. And yes, the FDIC action (not the FED) resulted in a rally as cascading failures were taken off the table. The S&P rallied back to pre SVB highs in April, just in time for NVIDIA to guide higher

Fed's latest Financial Stability Report is out. It's always worth a read. Here are some things I found interesting:

federalreserve.gov/publications/f… Interest rates rose aggressively, but corporate can still easily cover their interest payments. Earnings are solid, and lots of fixed rate low interest debt.

Notably only 5% of BBB and 1% of high yield bonds are due within a year. The maturity wall is in the future.

So $SVIB has $200b in assets, of which $116 are securities. About $80b of that are high quality liquid assets that could be sold or repo'd for cash. Looks good until.. You get to the next page and it looks like $55b of it has already been pledged as of year end 2022. Perhaps even less is available today.

When I think of "Fed credibility" I think of two types of credibility - 1) standard inflation fighting credibility that some think anchors inflation expectations and 2) the IMO more important "implementation credibility" that appears to be weakening now Implementation credibility is whether the market prices in what the Fed is suggesting - if Fed says it will go to 5% and stay does the market price it in? Fed influences the economy via rates, so Fed needs market to believe its suggestions to move rates and thus the economy

Fed Reserve banks are technically private, yet they make policy, have an unlimited budget via QE, and little public accountability.

They are vulnerable to mismanagement and capture by insiders. Reform is very much needed.

https://twitter.com/DavidBeckworth/status/1601208138505781249

My sense at FRBNY was that power was largely held by a group of lifers that got there via tenure. They held the power and could never be removed so basically owned the bank.

When you own something the temptation is to run it the benefit of you and your friends.

As gov as been hinting - they want to move the tsy market to all to all trading, like the stock market. This will help market liquidity, but doesn't get to the key problem IMO.

So today if you sell or buy a Tsy, you trade with a dealer.

https://twitter.com/JackFarley96/status/1590707562735112195

dealer buys securities from investors, holds them in inventory, then resells them to other clients. However, sometimes dealers reach their limit and cannot buy another more securities. When this happens then investors have trouble selling tsy and mkt liquidity goes down

Fed's latest Financial Stability Report is out. It's always worth a read.

Here are some things I found interesting.

federalreserve.gov/publications/f… Report suggests that stocks aren't really 'overvalued' - they are around historical median from fundamental and relative valuations.

Let me explain why this is really bad for those with no public sector experience. The public sector is different from private sector because it can't fail. This fundamentally changes organization dynamics. 1/

https://twitter.com/AndreasSteno/status/1523039224051617793

I remember from my private sector experience - in biglaw, the partner will know smoke you in any aspect of law. In a credit analysis shop, the senior analyst will know the issuers and their structures inside and out.

That makes sense - biz would fail otherwise. 2/