Cracks emerging in money markets?

Discussion of the Cash portion of the Permanent Portfolio

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Tortoise
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Re: Cracks emerging in money markets?

Post by Tortoise » Mon Sep 23, 2019 5:29 pm

I still don’t quite understand. Has the Fed been injecting billions of dollars into the repo market each day (e.g., giving it to the banks like “free money”), or has it simply been lending that money to the banks at below-market interest rates?

If the repo lending rates spiked this past week because the banks lack sufficient reserves, then doesn’t that mean the reserve requirements are doing their job, i.e., maybe the banks should dial back their lending a bit to correspond to the reserves they actually have?
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Re: Cracks emerging in money markets?

Post by Kbg » Mon Sep 23, 2019 11:30 pm

Its way complex...but the bottom line is it isn’t the liquidity being injected but the spread that matters. Wide spread basically means trust is breaking down.
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Re: Cracks emerging in money markets?

Post by boglerdude » Tue Sep 24, 2019 1:43 am

https://fred.stlouisfed.org/graph/?g=mc6A

Looks like a lot of e-cash sitting around compared to before 08. Thats still not enough liquidity?
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shekels
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Re: Cracks emerging in money markets?

Post by shekels » Tue Sep 24, 2019 8:23 am

boglerdude wrote:
Tue Sep 24, 2019 1:43 am
https://fred.stlouisfed.org/graph/?g=mc6A

Looks like a lot of e-cash sitting around compared to before 08. Thats still not enough liquidity?
Exactly Kbg
"Wide spread basically means trust is breaking down."


"The increased role of non-bank institutions in providing credit means that an increasing proportion of international finance comes from unregulated sources. Effectively, this means that these institutions, including money market funds, investments banks, etc., have unwittingly assumed even bigger risks in their lending practices than commercial banks. This also means that when the downturn comes, the share of non-performing and/or defaulted loans will grow higher than before."

I can hear them asking ..What's in your Wallet I mean Portfolio/Collateral?
¯\_(ツ)_/¯
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Re: Cracks emerging in money markets?

Post by jhogue » Tue Sep 24, 2019 8:37 am

Kbg wrote:
Mon Sep 23, 2019 11:30 pm
Its way complex...but the bottom line is it isn’t the liquidity being injected but the spread that matters. Wide spread basically means trust is breaking down.
+1

For even more detail and analysis, see "Securitized Banking and the Run on the Repo," by Gary Borton and Andrew Metrick, a National Bureau of Economic Research working paper available on-line:
https://www.nber.org/papers/w15223

For me, the bottom line is that Uncle Harry's wisdom still prevails. Own each asset in the purest form possible, with the fewest pieces of paper between you and your money. Avoid the repo market. Buy Treasurys.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Cracks emerging in money markets?

Post by ochotona » Tue Sep 24, 2019 6:57 pm

The Fed said they will inject liquidity until October 10-ish. So what happens after then???
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Re: Cracks emerging in money markets?

Post by Kbg » Wed Sep 25, 2019 5:44 pm

Fuhget about it, it don’t mean nuthin.
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Re: Cracks emerging in money markets?

Post by dualstow » Mon Sep 30, 2019 10:33 am

I hope Pug won’t mind if I add a WSJ link. Actually, the link in the OP is from the WSJ.

Fed Adds $63.5 Billion to Financial System in Repo Transaction
https://www.wsj.com/articles/fed-adds-6 ... 1569846438
Feels like the end of the everything rally.
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Re: Cracks emerging in money markets?

Post by pugchief » Mon Sep 30, 2019 8:31 pm

dualstow wrote:
Mon Sep 30, 2019 10:33 am
I hope Pug won’t mind if I add a WSJ link. Actually, the link in the OP is from the WSJ.

Fed Adds $63.5 Billion to Financial System in Repo Transaction
https://www.wsj.com/articles/fed-adds-6 ... 1569846438
Why would I mind?
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Re: Cracks emerging in money markets?

Post by dualstow » Tue Oct 01, 2019 7:32 am

pugchief wrote:
Mon Sep 30, 2019 8:31 pm
dualstow wrote:
Mon Sep 30, 2019 10:33 am
I hope Pug won’t mind if I add a WSJ link. Actually, the link in the OP is from the WSJ.

Fed Adds $63.5 Billion to Financial System in Repo Transaction
https://www.wsj.com/articles/fed-adds-6 ... 1569846438
Why would I mind?
I thought you always asked for a non-paywalled alternative. I’m probably thinking of someone else, then.
Feels like the end of the everything rally.
In Britain they have made burglary a safe occupation. It's like OSHA for burglars.
- Thomas Sowell on gun control
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Re: Cracks emerging in money markets?

Post by pugchief » Tue Oct 01, 2019 2:06 pm

dualstow wrote:
Tue Oct 01, 2019 7:32 am
pugchief wrote:
Mon Sep 30, 2019 8:31 pm
dualstow wrote:
Mon Sep 30, 2019 10:33 am
I hope Pug won’t mind if I add a WSJ link. Actually, the link in the OP is from the WSJ.

Fed Adds $63.5 Billion to Financial System in Repo Transaction
https://www.wsj.com/articles/fed-adds-6 ... 1569846438
Why would I mind?
I thought you always asked for a non-paywalled alternative. I’m probably thinking of someone else, then.
Maybe I did. Always better for the masses. But I have a subscription now, which I probably didn't back then.
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shekels
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Re: Cracks emerging in money markets?

Post by shekels » Tue Oct 15, 2019 10:59 am

When is QE not QE?
The new-new-new plan.


https://wolfstreet.com/2019/10/11/10-ye ... ury-bills/
¯\_(ツ)_/¯
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ochotona
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Re: Cracks emerging in money markets?

Post by ochotona » Tue Oct 15, 2019 2:54 pm

shekels wrote:
Tue Oct 15, 2019 10:59 am
When is QE not QE?
The new-new-new plan.

https://wolfstreet.com/2019/10/11/10-ye ... ury-bills/
Through Q2 2020. I wonder if they can really stop at that point.
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Tortoise
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Re: Cracks emerging in money markets?

Post by Tortoise » Tue Oct 15, 2019 6:39 pm

Sounds like a de facto standing repo facility, which the Fed proposed earlier this year.

If so, maybe at some point they'll just "make it official" and replace their current ad hoc repo market interventions with a standing repo facility.
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sophie
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Re: Cracks emerging in money markets?

Post by sophie » Wed Oct 16, 2019 7:22 am

Oh of course. That would be because I just bought long bonds!
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Re: Cracks emerging in money markets?

Post by Libertarian666 » Sat Oct 19, 2019 6:30 pm

sophie wrote:
Sun Sep 22, 2019 8:42 am
77% repos? That's gone up since I last checked (was about 60%). Crazy.

I only wish FDLXX could be used as a sweep account. It's not that hard to keep shifting cash into it though. With the smartphone app I can do it while walking to work, or while stuck in boring meetings. I also have 3 sets of T bills on autoroll, and it looks like you can add to those positions anytime with the "buy" button. Pugchief have you tried that?
Thanks for this info, everyone.
Most of my Fidelity assets are in two sets of T-bills with autoroll.
I have just entered an order to move most of my "cash" (about 25% of my Fidelity account) from SPAXX to FDLXX, which should be executed on Monday.
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Re: Cracks emerging in money markets?

Post by Kriegsspiel » Sun Oct 27, 2019 6:43 am

https://www.marketwatch.com/story/the-f ... 2019-10-25

This chart has vertical lines on it.

Image
[It is a] fact beyond question that soldiers' battles, where one side is entrenched and invisible and the other advancing in attack, are things of the past, except in a wooded country or where all preliminary movements are concealed. We had soldiers' battles here, but by fighting them the lesson has been taught which the world will learn.
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Re: Cracks emerging in money markets?

Post by Smith1776 » Tue Jan 14, 2020 2:08 pm

Kriegsspiel wrote:
Sun Oct 27, 2019 6:43 am


This chart has vertical lines on it.
lmao.
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Re: Cracks emerging in money markets?

Post by shekels » Wed Jan 15, 2020 10:56 am

Repo Market Simplified, or maybe not. :-\
Printing is always an option until it is not.
Jeff Snider has his opinion explained.


https://www.youtube.com/watch?v=w5AR-KBVgJ0&t
¯\_(ツ)_/¯
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Re: Cracks emerging in money markets?

Post by welderwannabe » Wed Feb 05, 2020 1:38 pm

Im not sure there are cracks emerging in money markets. There are many theories on why this is happening. One is the concern about counterparty risk which really came to the forefront with the MBS crisis.

My theory is that is is more likely because the Fed started paying interest on reserves, both required and excess. The fed pays 1.6% right now on any reserves held with it. If a bank can just deposit with the fed and earn a guaranteed 1.6%, why bother with the repo market and take whatever limited repo risk?

They started paying interest on reserves to make it more palatable for banks to have higher reserves....making them stronger. However, this is a form of money tightening IMHO.

Therefore the Fed is stepping in.

Its definitely broken, but im not sure I would read in that there is a lot of risk in money markets now.
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Re: Cracks emerging in money markets?

Post by Smith1776 » Thu Feb 06, 2020 3:59 pm

I keep reading this thread title as something like "emerging markets money market funds".

And i'm like... why the hell would anyone buy something like that??? :D
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