The Fed twiddled its thumbs again on Wednesday with a nominal net drain of $500 million. They added $7 billion in two day repos, against $7.5 billion in expiring repos. That allowed the 5 day net to drop to a paltry add of $1.5 billion, which is nothing considering the tidal wave of new Treasury paper that the market has to absorb, some $37 billion over the next week. They have a $29 billion Cash Management Bill settling Friday. This is in addition to $11 billion in new cash being raised in the two and five year note auctions. $11 billion in CMBs maturing on Friday will help somewhat, but next week’s auctions will ask for yet more cash, and new T-bills will suck $8 billion in new cash out of the market tomorrow. The Fed also faces a big rollover tomorrow. This is not a happy picture, liquidity wise. But somehow, the markets have temporarily seemed to find a supplemental fuel source. Needless to say, I’m skeptical that it can last. Click here to download complete report in pdf format (Professional Edition Subscribers).
Try the Professional Edition risk free for thirty days. Unbundled subscription service packages starting from as low as $39! Click here for more information.
