The Fed did not add reserves for the third day in a row this week. The fact that both the stock market and Treasury market rallied without support from the Fed at the same time that the Treasury was settling $11 billion in new paper suggests that a significant amount of cash has built up. The Primary Dealers continued to tell the Fed, thanks, but no thanks, we don’t want you in our business. The PDCF stayed at zero for the second week in a row while Discount Window Borrowings and TAF financing to banks remained elevated. Meanwhile, FCBs cut back on their buying. It’s too early to say if it’s the beginning of a trend, but any reduction in FCB subsidies for any length of time are always harmful to US market health. The Treasury calendar may be a little lighter than it has been lately, and the panic out of Agencies has caused cash to flood into the money markets again pushing down Treasury yields. There may be enough here for a temporary respite for the broader stock market, but that’s about all. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.
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