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Old 09-22-2019, 03:06 AM
Danny B Danny B is offline
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,849
Volatility, liquidity,,, credit derivatives

" from the economy to geopolitics to the natural world — things are swiftly worsening.
Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency."
" from the economy to geopolitics to the natural world — things are swiftly worsening.

Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency."
https://www.peakprosperity.com/the-i...esilient-life/

"What a nightmare it’s been over recent months for those attempting to hedge interest-rate risk. After trading to 4.10% in November, benchmark MBS yields were down to 3.02% near the end of March. MBS yields then rose to 3.34% in April, before reversing lower to trade all the way down to 2.51% by late June. Yields were back up to 2.91% in mid-July – only to then reverse to a three-year low of 2.30% on September 4th."
Volatility writ large
"“The Federal Reserve Bank of New York will offer to add at least $75 billion daily to the financial system through Oct. 10, prolonging its efforts to relieve funding pressure in money markets. In addition to at least $75 billion in overnight loans, the New York Fed… will also offer three separate 14-day repo contracts of at least $30 billion each next week… On Friday banks asked for $75.55 billion in reserves, $550 million more than the amount offered by the Fed, offering collateral in the form of Treasury and mortgage securities. The Fed’s operation was the fourth time this week it has intervened to calm roiled money markets."

Dumping Treasuries and MBs for cash.
"If risk suddenly becomes an issue for this shadowy network, the cost and availability of Credit for highly leveraged players is suddenly in question. And any de-risking/deleveraging at the nucleus of the global financial system would pose a clear and present danger for sparking “risk off” throughout Credit markets and financial markets more generally."
"The Fed’s return to system liquidity injections after a decade hiatus received abundant media coverage. "
"$18 TN of global investment-grade bonds traded at negative yields, including European corporate debt. " INVESTMENT GRADE
" While a deficient indicator of system liquidity, it’s still worth noting M2 “money” supply has expanded $560 billion over the past six months. Money market fund assets (retail funds included in M2) are up $350 billion since the end of April. Where’s all this “money” been coming from?"
"Bond markets have turned unstable – on both the up- and downside. Long/short strategies have been bludgeoned. "
"rom the Fed to the ECB to the BOJ. Is monetary stimulus the solution or the problem?

Autumn is set up for some serious instability. There’s all this talk of the need for the Fed to create additional bank reserves. The issue is not a shortage of reserves but a gross excess of speculative leverage. It started this week. The Fed’s balance sheet will be getting much bigger."
Yes but, they want to shrink it. Apparently, many players are dumping treasuries and mortgage backed securities.

"repo deep freeze as it has now been abundantly clear that the US financial system will need about $400BN more in reserves,"
"New York Fed president John Williams, who earlier this year unexpectedly fired not only the head of the NY Fed's markets desk, Simon Potter, arguably the most important trader in the world, manning the world's most important trading desk but also the second most important person at the NY Fed's "Plunge Protection Team", the head of the Financial Services Group, Richard Dzina,"
"New York Fed is examining "why banks with excess cash failed to lend to the overnight money market,"
"Fed officials have said it's not their fault, and instead have focused on the role played by banks, or rather the role banks with excess liquidity did not play but stepping into fund their liquidity-challenged peers.

Specifically, Williams and Lorie Logan, senior vice-president in the markets group at the New York Fed, said officials were looking at why cash failed to move from banks’ accounts at the Fed into the repo market, where banks and investors borrow money in exchange for Treasuries to cover short-term funding needs."
https://www.zerohedge.com/markets/cl...alt-repo-panic
OK, so we're in a big liquidity shortage. Some of the banks have cash,,, some don't. The repo market froze up because the banks with cash held on to it. This happened before in the LIBOR markets. As things get more volatile, more banks will refuse to offer funds to the overnight market.

Armstrong cautioned the founders of the EU that no currency union had ever survived unless they had a debt union. "They" said that Germany would NEVER agree to take on the debts of southern Europe. Now, "They" are saying that Germany will have to reluctantly agree to take on those same debts. Is it any wonder that Germany is looking to dump the EU and, pair up with Russia?
https://www.forbes.com/sites/johnmau.../#5c04947adb98

They are finally getting serious about putting bankers in jail.
https://www.theguardian.com/business...-trial-in-bonn
9/21 Goldman Sachs says the market is about to get wild in October – CNBC
9/20 Interest rate derivatives trading explodes to $6.5 trillion/day – Wolf Street

Somebody is going to get burned. It might all depend on the flap of a butterfly's wing,,,, or a tweet.
Or even a hurricane.
https://www.zerohedge.com/health/cal...t-time-history
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