Macro Liquidity Pro Trader

Analysis of the major forces of macro liquidity that drive markets. Click here to subscribe. Subscribers, click the post headline to access reports.

The Fed’s Rate Hike Hoax- There Is No Short Term Money Market

The Fed has “raised interest rates” (wink-wink). Its primary tools in this make believe policy are interest on excess reserves (IOER) and the interest paid on reverse repos (RRP). The new Fed Funs target rate is now 25-50 bp. Fed Funs were reported to be trading at a weighted average rate of 36 bp on December 22.

Cash Destruction Not Yet Showing Up In Banking Indicators, But It Will

The macroliquidity indicators this week do not show any sign that a significant change is at hand. Yet, we know that plunging commodities, emerging markets, and leveraged junk bond markets are destroying cash. That should begin to show up in these indicators, particularly in bank deposits, in the weeks ahead.

Fed’s Balance Sheet Liabilities Little Changed, Treasury Cash Falls

The Fed’s liabilities rose slightly last week mostly due to incidental items, with no material impact overall. The Fed did a 7 day Term Deposit Facility Operation at 1 basis point above the interest rate on excess reserves, which pulled $43.8 billion from regular reserve deposit accounts into term deposits. The Treasury spent $22 billion…

Bulls Are Overeating The Thanksgiving Turkey, But They’ll Be Puking Next Week

The recovery rally in stocks in October was a direct result of Treasury paydowns, which was a temporary effect. That has been reversed as the debt ceiling was raised and the Treasury returned to the market with a vengeance, pounding it with $310 billion in net new supply since the end of October. $100 billion…