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Member since: Tue May 13, 2014, 05:50 PM
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QE4 Officially Begins

QE4 Officially Begins: Fed's First T-Bill Purchase Is 4x Oversubscribed Amid Massive Liquidity Demand

As previewed yesterday, moments ago the Fed concluded the first POMO - as in Permanent Open Market Operation, not to be confused with Temporary - from previously announced T-Bill purchases ($60 billion per month, $7.5 billion per operation), and what it showed is a confirmation of message sent by today's repo operation: there is an unprecedented demand for liquidity.

Specifically, the Fed purchased $7.501 billion in Treasury Bills out of $32.569 billion in T-Bills submitted. In other words, the operation was 4.3x oversubscribed, and when combined with the oversubscribed repo operation announced earlier today, confirms that there is a dramatic need for liquidity among the Primary Dealer community.

Also worth noting, the scramble to sell Bills to the Fed directly refutes what the FT reported earlier today that "money market funds that are among the largest holders of U.S. Treasury bills say they are reluctant to sell them to the Federal Reserve."


Looks a lot like those Obama days during the great recession.

DOW 27025

Previous close 26787. 52 wk high 27398. 52 wk low 21712. Today's low 26811. High 27120.

NASDAQ : 8148 ▲

S&P : 2995 ▲

Soybeans : 9.33 ▼

Oil WTI : 52.91 ▼

POMO Is Back: Here's What Treasury Bills The Fed Will Buy

As it pre-announced last Friday, the Fed will resume QE by purchasing $60billion/month in bills at least until 2Q 2020 starting on October 17. As has been widely discussed, and mocked, already, the Fed highlighted that these purchases were for reserve management only and have "no material implications for the stance of monetary policy", although how a restoration of financial conditions hit during the greater monetary policy experiment in history is not seen as, well, monetary policy is ludicrous.

The US Treasury’s general account at the Fed: after reaching a low of ~$125 billion in mid August, it has grown to ~$330 billion by the end of September.

Rebuilding the Treasury’s cash hoard will usually lead to a temporary liquidity drought. As we have previously discussed, the cash build-up beginning in August was quite likely one of the factors contributing to the recent repo market inconvenience.

Nevertheless, as the recent pace of demand deposit growth indicates, the effect is mitigated by accelerating bank credit growth and the fact that the Fed is expanding its balance sheet again.

As of September, growth in demand deposits and total bank lending has accelerated to 6% y/y and 6.6% y/y, respectively.

As an aside to this, the Fed’s balance sheet is actually expanding since July. In other words, the recent announcement of upcoming “reserve management/please don’t call it QE” activities seems to have been in reference to a process that has been underway for some time already.


Liquidity is the grease that keeps the wheels turning, there are more squeaky wheels around the world than there is grease. From the looks of it, the FED expects it will need much more grease sooner than expected.

"Hard To Obtain Liquidity" - South Korea's Largest Hedge Fund Halts Redemptions

As Bloomberg reports, Lime Asset Management, South Korea’s largest hedge fund with about $4 billion of assets, suspended withdrawals from more funds on Monday, freezing a total of $710 million of its portfolio, after the firm said last week it couldn’t sell assets fast enough to meet redemption demands.

The hedge fund halted an additional 243.6 billion won ($210 million) today after freezing funds worth 603 billion won on Oct. 10, Won Jong-Jun, chief executive officer at the Seoul-based firm, said in a press briefing this afternoon.

This also explains why GAM, Woodford, H20, Arrowgrass and many more funds (in the near future), will be similarly gated once their investors discover there is no liquidity to sell into and the only "real time" liquidity is offered to those who have a "first seller mover advantage", to wit:

If investors anticipate severe losses on the fund’s investments, they could be incentivised to “run for the exit” to be the first to redeem their shares.
The first-mover advantage in open-ended funds arises because losses on asset sales to meet redemptions are incurred by investors which remain in the fund.
As in a ‘bank run’, the asset manager is, in principle, forced to sell assets in a fire sale in order to meet its short-dated liabilities

Beijing Wants Tariffs Removed Before Committing To $50BN In Agri Purchases

And on Tuesday, with the US back from the long holiday weekend, Chinese officials have essentially confirmed that they are back to their old tricks, and that the progress on the 'Phase One' deal that was touted last week is a sham. Beijing can make good on the $50 billion of annual agricultural goods purchases that it has promised - but only if Washington agrees to remove all of the trade war tariffs.

DOW 26787

Previous close 26815. 52 wk high 27398. 52 wk low 21712. Today's low 26749. High 26874.

NASDAQ : 8048 ▼

S&P : 2966 ▼

Soybeans : 9.40 ▲

Oil WTI : 53.47 ▼

Partial trade deal

WASHINGTON — President Trump said Friday that the United States had reached an interim deal with China that would forestall a tariff increase slated for next week, providing a temporary détente in a prolonged and economically painful trade war.

Mr. Trump, speaking from the Oval Office, said negotiators had reached a “Phase 1” agreement that would take several weeks to write and that both sides could officially sign by November.

“After so much has been sacrificed, Americans will settle for nothing less than a full, enforceable and fair deal with China,” Mr. Grassley said. “I look forward to learning more details in the coming days.”

Mr. Trump and his advisers also did not mention any progress in areas that the American business community has identified as critical to its ability to compete with Chinese companies — including China’s subsidization of industries, the role of the government in the economy and the country’s restrictions on transfers of data across its borders.

WH desperate for the farm vote. China set the hook.

DOW 26815 for Friday 10-11-19

Previous close 26496. 52 wk high 27398. 52 wk low 21712. Today's low 26697. High 27013.

NASDAQ : 8057 ▲ ( 52 wk high 8339 )

S&P : 2970 ▲ ( 52 wk high 3027 )

Soybeans : 9.34 ▲ ( 52 wk high 9.39 )

Oil WTI : 54.81 ▲

Trump Accountant Ordered To Give Tax Records To House Oversight Panel

President Trump on Friday lost an appeal to stop a House subpoena of his tax records from Mazars USA, his longtime accountant.

The US Court of Appeals for the District of Columbia Circuit ruled in a 2-1 decision to uphold a lower court ruling requiring the firm to turn over eight years of accounting records, meaning that unless the full court reconsiders the decision or the US Supreme Court blocks it, Trump will lose control of his records.

The ruling follows a Monday order by a federal district court that Mazars turn over Trump's tax records to New York state prosecutors - a move which was blocked in a last-minute repreive for the president.

DOW 26496

Previous close 26346. 52 wk high 27398. 52 wk low 21712. Today's low 26314. High 26603.

NASDAQ : 7950 ▲

S&P : 2938 ▲

Soybeans : 9.23 ▲

Oil WTI : 53.71 ▲

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