Liquidity Trader – Macro Liquidity- Fed and Banking

Analysis of the major forces of macro liquidity that drive markets, including the Fed, foreign central banks, and the US and European banking systems. Resulting market strategy recommendations. Click here to subscribe. Now published at Lee Adler’s Liquidity Trader.

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Negative Interest Rate Arb Means Herky Jerky Bear Is Here To Stay

The markets have gotten a boost from the Fed and from a small Treasury paydown this week, but the Fed goes back to the sidelines after Monday’s final MBS settlement for this month. That leaves the only real help for US stocks and bonds being the money printing and negative rate policies of the BoJ…

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.

Record US Liquidity Does No Good As Confidence In Central Banks Deteriorates

Macroliquidity rose in the past 2 weeks, mostly on the strength of the Fed’s regular mid month settlement of MBS purchases. The trend is still slightly positive, but slow money growth is effectively tight money in a system excessively burdened with free interest carry trades. Follow the money. Find the profits!Liquidity is money. Regardless of…

Banking Indicators Steady At Record Bubble Levels

The Fed’s balance sheet shrank slightly in the week ended Jan 20 as MBS were paid down. Those paydowns will be replaced as the Fed settles its MBS replacement purchases next month.  There were no other material changes in the data over the past two weeks. Here are the charts that show the record altitudes, or…

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 Coming Loss of Faith In The Church of Central Banking

The time is coming when the acolytes of central bank monetary market manipulation lose their faith, leave the church, and rebel against it. Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall Street. So if you want to know the…

Congress Goes All Animal House On The Fed

The Fed’s liabilities rose last week due to an increase in printing press output of Federal Reserve Notes, and a big increase in US Treasury deposits at the Fed. Bank reserve deposits fell sharply as those funds moved to the Treasury, but mostly due to the banks shifting their reserve deposits into the Fed’s Reverse…

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.