Macro Liquidity Pro Trader

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US Bank Loans and Deposits Keep Growing as European Banking System Goes Haywire

US bank deposits and loans continue to grow rapidly. The same cannot be said for Europe, where we now have the monthly banking system data for December (Fed reports US data weekly). As you know if you are even minimally familiar with the headlines on Germany’s giant douchebank Deutsche Bank, negative interest rates joined at the hip with QE in Europe have been a disaster. They have promoted loan shrinkage and deposit growth, exactly the opposite of what was intended.

Slow Growth Macroliquidity is Effectively Tight Money In Overleveraged Markets

Macroliquidity was little changed last week. The trend is still slightly positive, but slow money growth is effectively tight money in a system overloaded with free interest carry trades. As these trades were one way going in, unwinding them without putting overwhelming downward pressure on the prices of the carried securities to be sold, becomes…

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…