A decline in outstanding T-bills is set to exacerbate Fed tightening, but the market impact of increased net coupon supply is nuanced, with gross issuance likely below market expectations.
This is terrific. I like to think that I understand this stuff, but you put me to shame. I've been puzzled by the 4Q financial markets and now I understand them much better. A couple of questions:
To your knowledge, do bank reserves play any role at the Fed whatsoever? If so, do you know what "excess" reserves might be?
I think we must keep an eagle eye on bank liquidity and capital regs especially with the possible passage of "Basel End-game." If banks start losing deposits again through Fed operations, they will try to hang on to shorter term treasuries. The only lever they will have will be to reduce lending. We could easily have a nasty credit crunch. I'm not convinced that monetary authorities are fully aware of this danger.
Every American has a conspiracy theory these days, and this is mine: I think Chair Powell HATES Donald Trump and he is setting things up to ease sharply around midyear to get Biden elected. Which is pretty much what Arthur Burns did. Whew. Biden or Trump. Talk about a Hobson's choice.
This is terrific. I like to think that I understand this stuff, but you put me to shame. I've been puzzled by the 4Q financial markets and now I understand them much better. A couple of questions:
To your knowledge, do bank reserves play any role at the Fed whatsoever? If so, do you know what "excess" reserves might be?
I think we must keep an eagle eye on bank liquidity and capital regs especially with the possible passage of "Basel End-game." If banks start losing deposits again through Fed operations, they will try to hang on to shorter term treasuries. The only lever they will have will be to reduce lending. We could easily have a nasty credit crunch. I'm not convinced that monetary authorities are fully aware of this danger.
Every American has a conspiracy theory these days, and this is mine: I think Chair Powell HATES Donald Trump and he is setting things up to ease sharply around midyear to get Biden elected. Which is pretty much what Arthur Burns did. Whew. Biden or Trump. Talk about a Hobson's choice.
always insightful!!
Nice piece!