OK, lots of bad takes on X over the past few days. Is there a banking crisis? (no) Is there a dollar funding crisis? (not really - yet) Is the Fed doing QE? (no) So what's going on? The current funding/banking issues are largely being fueled by a rebuild of the Treasury
And we've also seen some small-scale take-up at the Fed's Standing Repo Facility by banks. This is essentially an overnight loan from the Fed to banks. $50bn was tapped on Friday October 31. This shows that one entity or more than one entity did not have the liquidity it
@TomasOnMarkets Yes Tomas, well said, especially this summary: It's clear that dollar liquidity is tightening and bank reserves are heading towards levels that could be considered "scarce" (bad). The Fed needs to stop QT (which they are doing on December 1) which will largely stop downward
@jameslavish Yep that’s right @jameslavish - I’m expecting something along the lines of ‘reserve management’ 😂. Some nuance here though in exactly what is done and how it is done, in terms of its potential impact on asset markets.
@TomasOnMarkets Tomas there is no one doing what you do here. Thanks
@TomasOnMarkets Yea, unfortunatelly there are no plans of draining the TGA down in the next two quarters.
@erkoPollo Yeah. Not expecting a big drain. But it should come back down to the target level of $850bn.
@TomasOnMarkets So what do you think will happen with liquidity coming weeks? Have we had the worst yet or will we see more tighetning ? And short-mid term (1-3-6 months) you think we will see more liquidity injecting coming into markets? Thanks for taking the time
@TheTNetHunter Probably seen the worst on October 31, but it might deteriorate again at the end of Nov. In terms of mid-term liquidity - it depends what the Fed does with its balance sheet after QT ends, and more crucially how it is does it. There's a lot of nuance here.
@TomasOnMarkets Can the Fed engage in some shadow QE or QE-like easing?
@PDmytriiev Yes. It has done so on multiple occasions in recent years.
@TomasOnMarkets One thing that is interesting to me and no one is covering is seeing that there is still money being placed in the reverse repo facility. Friday Oct 31 when we saw the headlines about 50bn injected through standing repo, RR facility was also equaling around that amount as well.
@TomasOnMarkets @LynAldenContact is very well informed on this too, could you share your thought?
@TomasOnMarkets @TomasOnMarkets good read, whats your short-midterm view on the assetmarkets for the coming weeks, considering the liquidity situation and shutdown
@TomasOnMarkets @MilkRoadMacro for more!
@TomasOnMarkets solid analysis, Tomas
@TomasOnMarkets Good one!
@TomasOnMarkets Fully agree and well explained as usual Thomas
@TomasOnMarkets My stock strategy for this week ⬇️
@TomasOnMarkets good information and new knowledge for me, I was following since early this year. Right now, the liquidity is dry. Any possibility the fed will pump again the liquidity not from normal QE but from total reserve depository institution?
@TomasOnMarkets Thanks for analysis!
@TomasOnMarkets 🙏🧐🙏🫡👏
@TomasOnMarkets This is exactly what's happening indeed