The Federal Reserve Bank of New York executed a $45.55 billion weekend liquidity operation Friday, which resulted in led overall temporary central bank liquidity to tick lower.
The Fed added the money to financial markets via what’s called a repurchase agreement operation, or repo, that expires on Monday. It took in $28.2 billion in Treasurys, $1 billion in agencies and $16.35 billion in mortgage bonds from eligible banks, known as primary dealers.
With $48.78 billion in outstanding repos maturing Friday, overall temporary liquidity provided by the Fed via repo transactions ebbed $3.2 billion to $170.5 billion.
Fed repo interventions take in Treasurys, agency and mortgage bonds from the dealers, in what is effectively a short-term loan of central-bank cash, collateralized by the bonds. Primary dealers are limited in the amount of liquidity they can take in exchange for their securities, and they pay interest to the central bank to get the funds.
The Repo Market, Explained
The repo market shook the financial world in September when an unexpected rate spike choked short-term lending, spurring the Federal Reserve to intervene. WSJ explains how this critical, but murky part of the financial system works, and why some banks say the crunch could have been prevented. Illustration: Jacob Reynolds for The Wall Street Journal
Fed money-market interventions are aimed at keeping the federal-funds rate within the central bank’s 1.5%-to-1.75% target range. The interventions also limit but not eliminate the volatility in other money-market rates. The Fed controls the fed-funds rate to influence the overall cost of borrowing in the U.S. economy as part of its efforts to achieve the job and inflation goals set for it by Congress.
Jan.10 — Former U.S. Treasury Secretary Lawrence H. Summers and Roger Ferguson, TIAA president and chief executive officer, discuss the emergence of secular stagnation and the challenges that central bankers will face in a new decade. They speak with David Westin on “Bloomberg Wall Street Week.”
Is fiscal stimulus on the horizon? Kevin Muir, market strategist at East West Investment Management and author of “The Macro Tourist,” argues that the declining efficacy of monetary policy will force governments to run-up even larger budget deficits. In the face of central bank impotence, he predicts that politicians across the political spectrum will turn to Modern Monetary Theory, or MMT, to avert a disaster. Muir suggests that this flood of spending poses serious inflation risks and that a monetary “day-of-reckoning” is forthcoming, but not imminent. He argues that this trend makes negative yielding sovereign debt highly imprudent — particularly in Europe, where he sees a “sovereign debt bubble.” Filmed on October 4th, 2019 in Toronto.
future inflation.
I think that those that were expecting higher bond, sorry, higher yields because of higher
rates in the US, I think they’re mistaken, that will not be the trigger.
In fact, the trigger will be a Fed that is too easy and doesn’t actually chase the market
higher.
That is what the true bond bear market will be created was when we finally get the inflation
and the Fed should be raising rates and they deem that they can’t afford to because there’s
too much debt out there.
That will create a self-fulfilling inflationary loop in my opinion.
Peter Schiff discusses how the Federal Reserve plays an integral role in the economic recessions of the past. Peter covers cause and effect, and how different functions of the markets, politics, national debt, and central banks influence and shape the future of the world economy. He also gives insight on where he sees the economy heading, and how his prediction is likely to pass in the near future. Las Vegas MoneyShow 10/13/2019