dChan
Anonymous ID: d39a8b June 13, 2021, 5:09 p.m. No.62729   🗄️.is đź”—kun   >>2767 >>2783 >>2789

>>62380 pb >>62681

EXEC1F USAF C-32A inbound to JBA from Heathrow Int'l depart earlier

Flauxtus and, as mentioned previously, in the same AC that a week ago caused the return to JBA on kneepads intial departure to Guatemala City.

This AC was a VENUS flight on Tuesday and Thursday as SAM579 went to Tucson Int'l for an overnight returning on Friday-see here >>62311, >>62063 pb

 

TITAN25 USAF E-4B Nightwatch joined by RCH879 USAF C-5 Galaxy that departed from Dover AFB

Anonymous ID: d39a8b June 13, 2021, 6:52 p.m. No.62761   🗄️.is đź”—kun   >>2767 >>2783 >>2789

The Fed's Punchbowl Is Overflowing Into Money Markets: What Happens Next

 

Last Wednesday, when the Fed's reverse repo facility hit just shy of half a trillion dollars (it has since risen to a new record $547.8BN), we said that "Wall Street Scrambles To Figure Out What Comes Next" in which we showed that while some banks expect the Fed to hike its IOER and Reverse Repo rates (such as BofA, JPM and Wrightson ICAP), others see the Fed standing pat again (Jefferies, Credit Suisse and BMO), a case bolstered by the WSJ's Fed whisperer, Michael Darby, who suggested that the Fed was ok with the reverse repo being at half a trillion, and thus is unlikely to make any changes to its adminstered rates.

 

Alas, with the Street evenly split in two camps on the fate of the IOER/RRP rates, the confusion among traders remains, and so in attempt to explain away some of the confusion, late last week, Std Chartered's top FX and rates strategists, Steve Englander and John Davies, penned a report describing why the "Punchbowl is overflowing into money markets" and what the Fed can do in response.

 

Here is the one minute summary:

*The Fed may eventually feel compelled to tweak IOER and RRP but can avoid doing so at the June FOMC

*RRP usage is likely to rise further as the drawdown in the Treasury cash balance continues

*Yellen’s view that a higher rate environment would be a plus makes sense without being UST-negative

*Still, higher long-term yields could take the pressure off short-term rates

As we have discussed extensively in recent weeks, the decline in EFFR as largely driven by the boost to liquidity from the recent drawdown in the Treasury’s cash balance on top of ongoing quantitative easing (QE) by the Fed.

 

This drawdown is related to the debt-ceiling suspension that expires end-July and could have $600bn further to go. The Fed has no say in this, and adjusting the pace of QE to try to deal with the consequences would be a blunt and risky approach. Near-term, RRP usage is likely to rise further. Average demand per counterparty has reached $10-12Bn in recent days but the Fed’s counterparty limit was raised to $80Bn in March. Yet remarkably, recent remarks from Treasury Secretary Yellen that “a slightly higher interest rate environment…would actually be a plus for society’s point of view and the Fed’s point of view” caught the market’s attention but triggered only a temporary blip higher in UST yields. She has mentioned higher yields twice in recent weeks, so it is unlikely to be an accident or misstatement"" according to the Std Chartered duo who note that "nevertheless, it is unusual for a treasury secretary to endorse higher borrowing costs." Yellen also commented that “we’ve been fighting inflation that’s too low and interest rates that are too low now for a decade”. In our view, both her comments and the market reaction are fair. In the 1930s Jacob Viner argued for fiscal policy on the grounds that it would push up long-term interest rates and make short-term monetary policy more effective. Yellen’s comments on inflation and (presumably) real yields can be seen in the same light. If real yields increase because of government borrowing for long-term investment, that is a plus provided that the real return on the investment exceeds borrowing costs.

 

Similarly, if inflation and inflation expectations move towards target rather than undershooting, any level of nominal policy rates becomes more stimulatory. Aggressive macro policy settings can push both real yields and inflation breakevens higher while improving economic outcomes. As Englander explains, "if unchanged policy rates accompany the higher market yields, then the lower real yields would mean employment and inflation targets are reached more quickly" while from the Fed’s perspective, it would suggest that its new policy framework is gaining traction and ultimately mean that it has more ammunition to support the economy if and when the next recession arrives. From the market’s perspective, Std Chartered thinks that such an outlook is already largely priced in. Indeed, the breakeven curve implies a near-term pick-up in inflation beyond what the Fed’s transitory view assumes, but longer-term spreads look consistent with the 2% average inflation target. 5Y5Y USD OIS is currently around 2%, so below the Fed’s 2.5% median longer-run policy rate projections, but it hit 2.4% when UST yields registered their YTD highs in Q1.

moar

https://www.zerohedge.com/markets/feds-punchbowl-overflowing-money-markets-what-happens-next

 

>>62285 pb Federal Reserve Bank of New York Reverse Repo. Operations-week of June 6-$2.569T