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Home / Business / US overnight rate hikes to 10%, Fed injecting crisis $ 75 billion

US overnight rate hikes to 10%, Fed injecting crisis $ 75 billion



What happens?

Bloomberg reports overnight funding rates to record levels.

U.S. Money market rates rose for another day on Tuesday as the cash reserves in the banking system remained out of balance with the volume of securities in the merchant's balance sheet.

In the midst of the squeeze, the effective feed rate rose to 2.25%, in line with the peak of the Federal Reserve's target range from 2% to 2.25%.

The rate of overall overnight general repurchase agreements increased by more than 600 basis points to 8.75%, based on ICAP prices, before settling around 7.25%. Surgery is common only around the quarter and end of the month, so market participants expected things to return to normal.

On Monday, the overnight repo rate rose by as much as 248 basis points to 4.75%, its highest level since December, according to ICAP prices amid the settlement of Treasury coupon auctions and the inflow of quarterly tax payments, possibly worsening of last week's bond market, where investors sold securities back to traders.

Separately secured overnight financing rates, supported by overnight GC repo transactions, rose to 2.43% Monday from 2.20%, data from the New York Fed show. It is the highest since July 31.

Federal Reserve raises $ 75 billion into financial system

Financial Times reports Federal Reserve injects $ 1 billion into financial system

TD securities point their finger at bank reserves.

We believe that the culprit is the lack of bank reserves, which is the only asset that provides banks with intraday liquidity. The reserves have been declining since 2014, and we expect them to fall further as Treasury's cash balance increases and the currency in circulation grows .

It appears that the Fed has solved what the problem was with the $ 75 billion deposit. The repos are down, for now.

Technical Factors

One reader commented: "Analysts said that it was technical factors that pushed the repo market instead of the systemic problems that drove overnight rates much higher during the financial crisis. What are the technical factors now?"

Sometimes it is a monthly clip, but this happened on September 16 and again on September 17.

"This half-month wave was attributed to a coincidence of events that knocked the cash system bank out of balance with the volume of securities in the dealer's balances: a payment date for corporations, settlement of last week's state auctions, and last week's sales market in bond markets, back to the dealers. "[19659018] Chris Whalen Chimes In

Still Crazy After All These Years

China Theory

Quadruple Witching

We also have Fired doubles witch on Friday.

quadruple sorcery refers to the third Friday of each March, June, September and December. These days, market index futures, market index options, stock options and stock futures expire.

Wall Street Journal Chimes In

The Wall Street Journal reports Fed Steps Into Repo Market to control rising rates

Scott Skyrm, a curator at Curvature Securities LLC, said he had seen cash trading with the repo rate as high as 9 , 25% Tuesday. "It's just crazy that the courses can go so high so easily," he said.

On the trading screens, Mr. Skyrm said he could see traders holding security papers as they tried to exchange cash. The rates they provided would begin to rise to an investor with cash available for trading would begin to accept their bids, gradually getting the reporters down until the investors had used up the money, he says. Then the courses would resume the climb.

While there are technical factors that may explain why cash would be in high demand this week, including corporate tax payments, settlement of recently issued government securities and the quarterly approach, they did not appear to explain the "crazy market volatility," he said. Skyrm.

" It seems there is something underneath that we know nothing about, " Skyrm said. [19659033BottomLine

Someone was in dire need of cash and got it .

Mike "Mish" Shedlock


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