ZeroHedge, by Tyler Durden — December 8, 2019
Excerpt:
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The growing significance of these new cash sources “can result in unfamiliar market dynamics“, said BIS’ Claudio Borio. Dynamics such as the one where impossible moves such as repo rates exploding from 2% to 10% in seconds become a daily occurence.
So where does that leave us? Well, as the BIS concludes, since 17 September, “the Federal Reserve has taken various measures to supply more reserves and alleviate repo market pressures. These operations were expanded in scope to term repos (of two to six weeks) and increased in size and time horizon (at least through January 2020). The Federal Reserve further announced on 11 October the purchase of Treasury bills at an initial pace of $60 billion per month to offset the increase in non-reserve liabilities (eg the TGA). These ongoing operations have calmed markets.”
We have covered all these “mitigating events”, and the problem is that even though the Fed has now injected $208BN in liquidity via overnight and term repos, and $114BN via permanent T-Bill purchases, or POMO (i.e. “Not QE”), expanding the Fed’s balance sheet by $322 billion, the repo market still remains broken…
... and the world may find just how broken it is as soon as December 31, when the next repocalypse event is tentatively scheduled to strike. The big question is whether the world’s mega hedge funds, the Millenniums, the Citadels, the Point72s afraid they will lose access to the precious repo funding that permits them to lever up as much as 10x, will sharply deleverage ahead of this event, in the process sending risk prices tumbling and precipitating the next market crash.
But don’t take our word: here again is the top financial expert at the BIS, Claudio Borio, warning that that September’s dislocation suggests that such repo “events” are only just starting and the repo markets “may again find themselves in the eye of the storm should financial stress arise at some point”, a point which as the Fed recently revealed in its October FOMC Minutes could take place as soon as year-end.
View the complete article including images and links at:
Video: Jaws – Official Trailer 2019
Get ready for QE4, says Credit Suisse analyst, as Fed fails to calm short-term markets
https://www.marketwatch.com/story/get-ready-for-qe4-says-credit-suisse-analyst-2019-12-10
Is Zoltan’s Market Doomsday Imminent? Here Are The Two Things To Watch
ZeroHedge, by Tyler Durden — December 12, 2019
Excerpt:
In the aftermath of Zoltan Pozsar’s stunning “doomsday” report about an upcoming crisis in the repo market, which we discussed extensively yesterday, and which predicted that the Fed may “lose control of overnight rates” leading to a vicious dislocation in repos coupled with a paralysis in the FX swap market, many traders who (pretend to) understand the implications of what the former Fed strategist said, have quietly hunkered down and are looking carefully for sings that Pozsar is correct, a worst case scenario that could then lead to a spike in Treasury yields, a forced deleveraging of hedge funds, and a plunge in equities. In short: a stock market apocalypse.
But what are the signs that Pozsar is looking at, to determine that a liquidity crunch is imminent? There are two key leading indicators that serve as an advance warning that all hell may be about to break loose.
The first thing to watch to determine if the repocalypse 2.0 is about to hit, is the repo rate itself.
While the overnight general collateral repo rate remains dormant, the same can not be said about its forward cousin, the “turn” repo rate which covers the year end period of Dec 31-Jan 2, and which as we pointed out last night, has jumped to 4.10% as of Tuesday, and which on Wednesday moved wider by another 5bps to 4.15%, according to Curvature securities.
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View the complete article at:
https://www.zerohedge.com/markets/zoltans-market-doomsday-imminent-here-are-two-things-watch
“Massive… Huge… Largest Ever”: Fed Will Flood Market With Gargantuan $500 Billion In Liquidity To Avoid Year-End Repo Crisis
https://www.zerohedge.com/markets/avoid-repo-crisis-fed-will-flood-market-gargantuan-365-billion-year-end-liquidity
It’s D-Day For The Repo Market: On Monday $100 Billion In Liquidity Will Be Drained – What Happens Next?
https://www.zerohedge.com/markets/its-d-day-repo-market-monday-100-billion-liquidity-will-be-drained-what-happens-next
Fed’s Emergency Repo Operation Oversubscribed As Repo Rates Spike To December High
https://www.zerohedge.com/markets/feds-emergency-repo-operation-oversubscribed-repo-rates-spike-december-high
Repo Panic Returns As Fed Injects $99BN In Liquidity, Including First Oversubscribed Term Repo In Three Weeks
https://www.zerohedge.com/markets/repo-remains-paralyzed-fed-announces-first-oversubscribed-term-repo-mid-december
Nine States Headed For Recession In Six-Months, Most Since Financial Crisis
https://www.zerohedge.com/economics/nine-states-headed-recession-six-months-most-financial-crisis