(1/9) As another round of stimulus hits bank accounts, we are already seeing the impact the waves of money is having on financial plumbing. While certain short-term rates are being pushed negative, a different type of "repo crisis" may be building.
(2/9) The current round of stimulus is being funded primarily through the TGA drawdown and not new UST issuance. QE is continuing at $120B/mo which drains collateral and replaces it with reserves. Both increase the supply of money relative to collateral.
(1/10) The continued steepening of the yield curve caused by the simultaneous rise in long-term US Treasury yields and decline in short-term US Treasury yields is telling an important story that investors should pay close attention to.
(2/10) Long term yields are rising on the back of increasing inflation expectations and a broad industrial & commodity led "reflation". The sharp and unexpected consumer shift towards durable goods away from services last year caught many manufacturers and suppliers off-guard.
