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Member since: Tue May 13, 2014, 05:50 PM
Number of posts: 5,911

Journal Archives

Repo Crisis Fades Away: For The First Time, A "Turn" Repo Is Not Oversubscribed

It looks like the year-end repocalypse that was predicted by Credit Suisse strategist Zoltan Pozsar is taking a raincheck.

Today's Term Repo saw $26.25BN in security submissions ($15.75BN in TSYs, $10.5BN in MBS), below the $35BN in total availability. This was the first "turn" repo that was not fully subscribed (on Monday, there was $54.25BN in demand for $50BN in repos maturing on Jan 17).

As such, it now appears that banks finally have their fill of what they believe will be sufficient year-end liquidity, and all subsequent "turn" repos will likely see a lower allotment as the Fed's $500BN liquidity backstop bazooka ends up being underutilized.

In his latest comment on the repo market, Curvature's Scott Skyrm noted that "once the term RP operations switch to being undersubscribed, it either means most of the Street's year-end funding need is fulfilled, or banks are close to their balance sheet limits."

DOW 28239

Previous close 28264. 52 wk high 28337. 52 wk low 21712. Today's low 28239. High 28323.

NASDAQ : 8827 ▲

S&P : 3191 ▼

Oil WTI : 60.97 ▲

Soybeans : 9.27 ▼

Massive spending, tax packages headed for Senate

The House approved $1.4 trillion in spending for the fiscal year that began almost three months ago, in an almost surreal business-as-usual fashion that seemingly ignored the historic articles of impeachment scheduled for the floor the very next day.

Lawmakers made a show of dividing the spending measures into two bundles, in order to avoid the oft-ridiculed omnibus bill that both sides say represents the worst of the “swamp.” But the rushed nature of the vote, and in particular the late-night deal that tacked on a nearly $54 billion tax package, runs counter to promises of a more transparent process where the rank-and-file has input and time to study the legislation.

“I’m not going to do it again. Nobody read it. It’s only hours old. Some people don’t even know what is in” it, President Donald Trump said in March 2018 when he signed a $1.3 trillion fiscal 2018 omnibus bill.

The Senate is expected to vote on the spending packages this week and key White House aides have indicated Trump plans to sign the bills before a temporary spending bill expires at midnight Friday.

Appropriators hit Air Force's 'disturbing' diversion of funds

Service officials moved $1.3 billion from pilot training accounts without telling Congress

“The review of the fiscal year 2020 budget request uncovered some disturbing data points that have called the budget formulation process for flying hours in the overseas contingency operations (OCO) request into question,” appropriators said in the report accompanying the compromise fiscal 2020 Defense spending measure released Monday night.

The Air Force moved just under $1.3 billion in fiscal 2018 and 2019 to “unbudgeted expenses,” according to the report. Appropriators did not elaborate on where the Air Force moved the money.

DOW 28264

Previous close 28235. 52 wk high 28328. 52 wk low 21712. Today's low 28220. High 28328.

NASDAQ : 8823 ▲

S&P : 3192 ▲

Oil WTI : 60.91 ▲

Soybeans : 9.28 ▲

New highs.

DOW 28235

Previous close 28135. 52 wk high 28337. 52 wk low 21712. Today's low 28191. High 28337.

NASDAQ : 8814 ▲

S&P : 3191 ▲

Oil WTI : 60.25 ▲

Soybeans : 9.21 ▲

New high for the NASDAQ and the DOW.

DOW 28135 for Friday 12-13-19

Previous close 28132. 52 wk high 28290. 52 wk low 21712. Today's low 28028. High 29290.

Last Friday 12-6-19 close 28015.

NASDAQ : 8734 ▲

S&P : 3168 ▲

Oil WTI : 59.78 ▲

Soybeans : 9.07 ▲

Almost forgot it's Friday...Stay safe...and enjoy the weekend...Merry Christmas

Opinion: Boris Johnsons massive victory leaves Brexit uncertainty hanging over U.K. economy

Markets and investors have two ways to look at the results of the U.K. general election that gave Prime Minister Boris Johnson’s Conservatives a commanding, near-40-seat majority in Parliament.

The first would be to salute the end of the hung Parliament that proved incapable of deciding on Brexit in the last year, and the resounding defeat of the Labour Party that campaigned on a radical platform of nationalizations, massive spending and higher taxes that seemed to scare voters as much as it did investors.

But looking beyond January, what is also clear is that Johnson’s victory, as impressive as it may be, won’t change much about the U.K. prime minister’s predicament. He will now enter negotiations over the U.K.’s “future relationship” with the EU, namely the treaty that will govern trade and financial relations between the two sides. But his promise that he will never, ever ask for an extension of the 11-month transition period that will follow the U.K.’s departure early next year, and his proclaimed optimism that a treaty can be struck within that period, sound hollow.

For now, the only “extension” happening is that of the economic uncertainty created by Brexit. Investors will keep delaying their decisions pending the outcome of the U.K.-EU talks. Businesses will keep losing market shares abroad and, after a burst of euphoria, the pound could resume its slide, adding to inflationary pressures.

The only way out of uncertainty would be for Johnson to break his promises yet again, as he did when he agreed to leave Northern Ireland within the EU’s customs union for an indefinite period. He has the majority that gives him the freedom to do so. For now, it is unclear whether he wants to use it.

Trump announces phase-one China trade deal and scraps Dec. 15 tariffs

President Donald Trump announced a phase-one trade deal with China on Friday, saying Beijing had agreed to purchases of U.S. goods and will avoid tariffs that had been set to go into place on Sunday.

The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal,” the president wrote, tweeting as Chinese officials were briefing reporters in Beijing.

Trump also agreed to slash by half — from 15% to 7.5% — the tariffs on about $110 billion of goods that he imposed in September. But he said 25% levies on $250 billion in goods, imposed in 2018, would remain.


U.S. stocks rose Friday morning after Chinese officials confirmed a U.S.-China trade deal during a news conference, though neither U.S. nor Chinese officials have offered details on the exact nature of the agreement.

The Fed Has 'Absorbed' 90% Of Treasury Issuance Since September

The Fed is pumping $145 billion per month into the system. That’s more than under QE One. Powell has said that it’s Not QE, and now says that it won’t have macroeconomic effects. Oh please. Humor me.

The obvious question here is, “Why?” And the answer is that if they hadn’t reversed course from shrinking their balance sheet, the stock and bond markets would have crashed, and short term rates would have soared.

Powell: And the purpose of all this, let’s remember, is to assure that our monetary policy decisions will be transmitted to the federal funds rate, which in turn affects other short-term rates. We have the tools to accomplish that and we will use them.

Powell: To go through with sort of like in time, we started off really on September 17th with overnight operations, by October 11th we had created and put into effect to plan, that plan is in effect.

++++ We live in interesting times.
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