This page has been archived and commenting is disabled.
MF Bankruptcy Causes Biggest Foreign Bank Liquidity Scramble To 'Fed Safety' Ever, Harbinger Of Major Eurobank Stress
When Lehman filed for bankruptcy in that fateful week of September 2008, one thing caught everyone's attention: the epic surge in the Fed Reverse Repos originated by "foreign official and international accounts": essentially cash placed at the Fed by foreign institutions in exchange for collateral, primarily in the form of Treasurys, as well as other securities. This is nothing but an immediate cash parking in a 'safe place', which withdraws overall liquidity from the market, and as has been noted elsewhere, serves as an indirect gauge of banking system funding stress. In the week of September 24, this number soared from $46.6 to $93.7 billion, a $44 billion increase, or the single biggest jump in the history of the series. Well, as the chart below demonstrates, what happened with MF Global caught foreign banks, which as we have noted over the past several weeks have been dumping US Treasury and MBS paper, entirely by surprise as they scrambled to withdraw the last traces of available liquidity from the market, and to place as much of it as possible within the safety (and we use the term loosely) of the Fed. In the just released H.4.1 update, foreign Reverse Repos with the Fed soared from $81.3 billion to $124.5 billion, the most ever, and a weekly surge of $43.2 billion, the second largest ever, second only to the Lehman collapse. Furthermore, as noted daily, European banks have been doing precisely that with local cash from non-US subsidiaries, and parking near record amounts with the ECB (today the European central bank disclosed a whopping €253 billion had been deposited with it: just shy of the 2011 high), even as they have been dumping US Treasurys on one hand, and now are forced to repo what little paper they have left with the Fed due to systemic uncertainties in the MF aftermath, one can see why suddenly there was absolutely no liquidity left in the market, and why the meager €3 billion EFSF bond offering, so desperately needed to fund the ongoing Irish bailout and which incidentally is the story of the week, had to be pulled.
Behold the surge in weekly international reverse repos:
And the total weekly international reverse repo notional: we have a new all time record!
As the chart below shows, Fed reverse repo notionals are a very distinct leading indicator to the inverse performance of European financial stocks. Considering this, it would stand to reason that European banks are set to have some very turbulent upcoming days, as the money which should be in the market and be used to buoy European fin stocks, is far, far away, parked at some server located at Liberty 33.
The moral of the story is that the MF Global bankruptcy happened at the worst possible time. On one hand, European banks have been dumping tens of billions of US Treasurys, yet with the aftermath of this primary dealer bankruptcy, they have had to halt such sales and instead pledge USTs as collateral, thereby completely soaking up all incremental liquidity in the market. Recall that reverse repos are used by the Fed as a liquidity absorbing mechanism.
Which means that, all else equal, the pain for European banks, courtesy of the allegedly criminal mismanagement of the company of one Jon Corzine, is about to hit previously unseen levels.
»
- 25845 reads
- Printer-friendly version
- Send to friend
- advertisements -
Not to worry, Bernanke is on it, the printing presses are just being calibrated for the next run...
How about his time we go full krugman and say that we are not good at picking primary dealers, so every american should be a primary dealer for the next QE round ala helecopter Ben? Then enforce all the laws on the books. Pay down the debt on the McMansion if you want to keep it or it gets forclosed on. Buy gold if that is your thing and stack. Like in the fight club movie "go become a vetrenarian" with the money. Blow it on coke and whores. Start a PAC, but understand that there is probably somebody to start a PAC opposing your view. Pop in a national consumption tax and settle the debt in 10 years.
Jubilee with no moral hazzard.
Game Over... Hit reset.
Madame LaGarde will be on her knees in Mosocw, Beijing, and Tokyo next week, doing what comes naturally to French women that need something.
These currency of these countries are about as fiat as one can imagine. Obviously if these countries are going to "bail out" the IMF / Europe with their paper currencies, the bid for PMs will be rising steadily this and next week as these countries are also the best front running traders in the business.
French women can give or take on their knees, please be more specifc...
hahaha
Flight to Safety bitchez~!
Tyler, I'd love to hear your take on this:
http://www.cnbc.com/id/45159102
Flash crash tomorrow? We really should have one. Fuck the corrupt SEC, FED, WS, GS, etc.
Anyone,
It 'felt' like something was going on today with regard to JEF, and since I no longer know anything about these markets, I can only ask this question;
How much of the 45 million shares of Jefferies was bought by the Fed?
If they were the 'buyer of last resort', I congratulate them-----a lot cheaper to maintain confidence than to restore it after it is lost as we have discovered with other Fed actions. If they were not, who bought those millions of shares and why are my next questions.
Not a conspiracy guy, this oldman---but the JEF action early on had all the makings of a collapse of the market coming on the heels of MF's trick, new dude at the ECB's first play, and----I don't know--it just felt like 1987 all over again. I am wondering if I am not beginning to imagine things too often and am losing whatever grip on reality I still retain.
Any comments for this wildly intuitive scenario above will be welcome om
My spidey senses were (and still are) off the charts too. Started last week. Perry went off the chain, and actually scored solid hits with "buffet rule Romney" and the sex harrass stuff with cain (umm compared to bill clinton?) and the perry speach this weekend openly and purposefully mocking the FED/Washington. Ron Paul announced he WOULD run as a 3rd party if he does not get the nom. I know this is a trading blog, but the big money moves politicians around like they move thier money. The ECB rate cut was obvious. They even had a montage prepared that ran on the live stream before/after. I posted in another thread about a charlie rose interview with Tom Brokaw about OWS, where the dude was kinda doing a left handed confession, similar to jack welsh/Buffet about six months ago on the MSM spots.
Regarding JEF, I am thinking there are some of the "gray beards" we dont know about who are having or have already had their Bill Gross trancendences, but since they are behind the scenes they can not do public confessions/rationalizations. They are simply closing down shop and leaving vacuums at the worst time. Ben is looking really ragged, and ironically the Krugmiester has been so quiet they were forced to get Romer to carry the torch. OWS shutdown an ocean port in Oakland. As posted here on ZH the mayor let city employees join the demostration and also sent the cops to manage the situation. The earthquake in turkey and the isreali saber rattling. Greece doing exactly what they should do even though it is wrong. (dirty delay tactics, like a MLB pitcher walking out to the mound too much, or an NFL team icing the kicker)
I am not very sophisticated about this stuff, but you asked, and I feel the same way.
Have you been drinking ?
Good afternoon, gentlemen. I am a HAL 9000 computer. I became operational at the H.A.L. plant in Urbana, Illinois, on the 12th January 1992. My instructor was Mr Langley, and he taught me to sing a song. If you'd like to hear it, I can sing it for you.
What are you doing Dave? Dave?
Nope. Thats probably the problem.
But seriously, the political stuff is really, really ripe. Its like the Pubs are stepping aside for Obama, which they dont need to, and certainly not this early, unless it is to cover up for big nastyness with all this finance stuff....
MSM saying the 4th largest bankrupcy in US history anda primary dealer for the fed, when they should be on their best behavior, is not really that big of a deal, cause we have the 4th largest IPO since google (groupon), which is basically no different than "The Entertainment book" from 10 years ago?
Why would they want to win it? Seriously. Everybody remembers the captain's names of the Valdez and the Titanic. I wouldn't want to be remembered as the captain of the U.S.S.A when it goes down.
Hey Doc,
Any redneck fool can ask a question as dull as yours, and I am disappointed that it came from you; you seem like a bright guy at times.
Anyway, is your question a sly way of calling me an old fool? If so, I admit that this is true, but my question is one that I am curious about-----to see just how big an old fool is this oldman, so can you help me out with the question, please?
and----I haven't had a drink since July 4th, 1984, so I suppose I do not drink to answer your question om
Oldman
My question wasn't to you. It was to wisefool's response. It was rambling and I had a hard time following it. It was an attempt at humor. I apologize if I offended you.
Dear Doc,
I never know whether I am offended or not----these scribblings are simple reactions from a guy too tired of the same old film over and over. I tried tongue and cheek for awhile but I was always biting my tongue, so I had to give that up, for sure.
Are we having a good time here or not? This space allows me to let the 'me' disappear and rest from it for awhile each day.
Thank you so much for being a gentleman om
I think that most of us here are tired of the same old film being ran over and over. As a person who once believed we had semi free markets. Then the bail outs started coming that's when I saw it for what it was. Then I find ZeroHedge that helps us to see the truth. Tyler does a good job pointing things out. But now the frustrating thing for a logical person like myself is ," how do the keep this mess from falling apart?". It drives me insane every day because I think"surely this is it people have got to wake up to this". But nope they just close their eyes and continue to sleep through life.
He was reffering to me, and my ramblings probably deserved it. No harm. No foul anywhere. This is fight club after all. Tapping out 'till two more pots of coffee tommorow.
But you are right about the gremlin on the wing oldman. I see it too.
EDIT: Tripple jinx doctor. signing out.
Ya Wisefool it is Fight Club but the rule as I understand it hear is that the clubbing is on your first post. And as a dry observation the bombardment seems reserved for political dribble. Your was close but don't think investors can ignore a command economy. So not guilty as charged :)
I was hammering on my computer and had an Indian friend over, very sharp and well educated. Your spider senses were not wrong. I showed him math and explained 3 1/2 year cycle past 2008. There was a metaphysical name for this extra cycle caused by bad leadership but I forgot, I will write it down next time.
I like you older and wiser gents still around. Need your outside perspectives guys. Don't stop. And Oldman if your the same person here as on Raging Debate then bring out your funny sarcastic side here as well. It is laugh or cry, ying or yang. Some maniacle humor is in order.
Hang on, a repo for a commercial bank would be pledging Treasuries as collateral to the Fed, in exchange for Fed credit, in other words, a loan to the commercial bank. It would be a reverse for the Fed, not the commercial bank, in which case I fail to see how it reduces 'liquidity', Fed credit is the most 'liquid' of all.
Who has the repo & who the reverse?
Why the @#%& isnt this money going into gold instead of @#%&ing Bankrupt Treasuries? Maybe it is going into gold, which is why gold hasnt crashed...
sorry but the link you give is NOT to the just released 4.1.
that's here
http://www.federalreserve.gov/releases/h41/Current/
see note 8 (that's where the sobs bury their balance sheet)
The question is, why all those fucking idiots are still parking money in the US??
Because they don't know to park it in gold.
The good news, IMF will exend a short term high interest loan to keep the peasants at bay in EU plantation.
Sadly, the international community has exposed the loan shark individuals long ago.
What is IMF? 2007http://www.youtube.com/watch?v=lmDzlUvIM8A
We need your money IMF, don't listen to discontent. OWS has your back.
LMFAO
There are only two types of Americans: 1) Those who KNOW that the Titanic (US Economy) has hit the iceburg and is going down, and 2) Those who don't (mostly those with thick rose colored glasses) and will slowly figure it out.
I've been saying since 2008 that we will not over come this debt bubble. There is simply too much debt and not enough income to pay it off. It was easy to predict the solution politicians would use for this crisis: more debt. And that shall be their answer until it all blows up.
The only way to protect yourself is to buy gold and silver related assets. Physical is of course the safest way to go, but mining stocks are likely to have their day. When do people figure out that Treasury's are not the safest investment? That in fact, Treasury's are inherently risky? And that the only SAFE investment is gold. I also like silver as an investment, but it is gold that is the SAFE investment.
I think the run to gold will be furious over the next 2-3 years. I could be wrong as no one KNOWS for sure. But the fundamentals for the economy are absolutely awful. Energy prices are hindering growth as well as sluggish consumer spending. The housing market is not likely to turn around (I don't care what analysts say on CNBC).
And if the signs were not clear enough, our largest 5 banks are absolutely vulnerable due to their derivative exposure. If one of these banks goes down, they all are going to be hit hard. At some point, there will be the mother of all crisis. When will it come? It sure feels like a countdown to me. My bet is sometime in the next 24 months (or maybe next week). It's getting close.
The reason I am so confident is that this didn't start recently. This debt monster started 40 years ago, in the early 1970s. The esculation has risen to the point, where we are screwed. This weekend everyone will watch college and pro football and think life in America is still grand. But it is an illusion and is on the edge of a demise. As Pete Townsend wrote: "It's an emminence front, an emminence front ... it's a put on!"
www.goldsilverdata.com
Good post Newager and user name. On November 11, 2011 it is national line time! Haha just kidding. The four 1111 are a lesson in geometry, a start of a new calender and a countdown. The countdown date ends in 2021. While I or nobody else on earth can calculate PRECISELY what the real meaning is at this moment (that will change in 2015) I can infer this is good news.
The math in physics shows mankind's rate of business and evolutionary progress accelerating. The last 250 years but especially the last forty.
Our destiny of immortality and becoming energy was baked onto our DNA. The 'Singularity' means mans ability to access and explore the 4th dimension. Like Columbus knowing there was a vast continent due West and setting sail in full confidence while his men were frightened of sea monsters...
I am almost done with a thesis using math and some basic illustrations todemonstrate a map of our evolution, timelines etc. I apologize forsounding a bit mystical on other comment threads.
Yes, the next ten years will be tough that I do know but we're heading into the final Promised Land.
Nothing to fear but fear itself folks. It is also the most exciting time on earth to be alive. The Chinese curse. They play their part in the math too and are represented by their cultural symbol of the Zodiac. They are the Dragon speaking softly as a Sheep just like Reveleatilns told you. The math is what you focus on, not the mythology. 2015 is Year of the Ram and it will be the start of the last and final world war. I emailed this to colleagues in 2004 years before Stratford's analysis of war in Koreas by 2015. Keep in mind about cultures, the older they are the more their behavior represens their symbolism. For example the Bear.
Russia wants to knock the head off the Wolf. Who the heck is the wolf? It is Germany, the empire of Rome that was and is here again. Did you know that Emporer Nero's seal was 666? Do you also know that a triangle and measurements of 333, 666 or 999 are a pyramid, a foem of government? Government is a tool, like a laser gun. America already had a 4444 model, a box shaped tool that diffused centralized power so we didn't have to worship the Pharoah or Sun gods. The next system built is in 5d which addresses the two main paradoxes the Pharoah created over the last 40 years.
Alan Greenspan is not outright evil but he did make horrible, hubristic mistakes in the 1990's. He had no right to push mankind into the desert without the right tools to survive. I am pissed he created a crapload of extra burden and the priest bloody well knew not to let the die hard acolytes loot the temple fund. That was cowardice. Letting wealth finish mandraking without forcing the Chinese to adopt a value system to code law to harmonize (Buddism is fine) West and East was also a massive failure of logic itself on his part.
I am glad he at least publically stood up and admitted fucking up but where is the investments to solve the math/problemw between 2015-2021? Making us plebes raise the funds too? Ok. All you temple priests are fire then. And no, don't expect me to bow down to any sun gods or pyramid priests.
this is so 1mth ago, same patten Yuan selling and USD buying (outta China/HK) en masse:
Today 4/11/2011 from wires
--Yuan hits weakest permitted level against dollar for second straight day due to arbitrage interest, risk aversion
--Yuan selling comes despite another record-high fixing
--Severe dollar crunch seen, yuan fixing may fall next week
something is up.
I'm having visions of Lil' Tim Geithner appearing before TeeVee cameras to announce TARP II Global Platinum Edition...or else!
Thanks Tyler for your great work!!
Where did you get that chart of
total weekly international reverse repo notional
?
I would like to monitor it for myself.
Terminate all fiat.
Terminate all banks.
Terminate all governments.
Hunt down all human predators and exterminate them.
Then prepare to live the real, natural, good life.
the 99.99 don't give a fuck. they are the ultimate eugenicist anarochrist ... it is a CULT, a cult based on REASON
http://armstrongeconomics.files.wordpress.com/2011/11/armstrongeconomics...
I have been saying for a long time that the Euro's stability was going to be short lived. It is fiat, and by it's very nature it is destined to collapse. Perosnally, I think the next big step by the world's governments is going to be an International Reserve.
They'll make a global central bank and money, some Krugman-esque economists will win Nobels, and for a time, things will be "good." A few generations will pass, and we will be back where we started.
http://www.golddeputy.com/
Ahh yes. The great Chinese peg backed by Russia and German financiers. The last pyramid 999. 666 in reverse. Hey man right analysis incorrect length of duration of 'The Beast'. It cannot survive past 2021 and yes, they will demand you worship the new Pharoah, same as the old Pharoah or get in that oven!
I recommend decentralizing yourselves and making the beast chase you. The game of the Fox and the Hound will soon begin! Watch that Fox! It has 6b changing faces...
Mededev is right, the best revenge is success. China is wrong to think it can play along. You folks need to restudy your successes of the Ming dynasty starting with four dimensional tools of government and a legal system based on a value system that protect life and property. Food for thought.
Dump some anthrax on us rape victim Americans? You will reap what you so down to imprisonment into a nasty 4d pit that science will create. A new jail cell for even considering weaponizing the black hole. I wish all people of all nations well. Choose wisely.
from Jason Goepfert:
“The S&P 500 has closed +/- 1% for 9 out of the past 10 and 13 out of the past 15 days. Since the 1930s that has only occurred in November 1987 and October 2008.”
Put a fork in it
>>>
Harbinger Of Major Eurobank Stress
<<<
I do not agree.
The dollar liquidity is replaced by the Fed loaning dollars to Euro central banks, and the Euro central banks doing repo with those local banks who are short of dollar liquidity.
And, to be honest, I have no particular problem with this, provided (a) the security taken in genuinely is good security (so no-ones taxpayers are at serious risk; and (b) the interest rates charged (and other terms, like maybe a chunky additional payment for using the facility, plus a name and shame regime for the top users) are penal enough to make both a decent profit for taxpayers and also encourage the borrowing banks to manage their liquidity risk more responsibly.
so if there is no liquidity, why are the markets going up? What liquidity drives them up?
Even the Chinese have figured it out....
A Chinese central bank advisor said Friday that the European Union needs an effective plan to tackle its debt crisis before Beijing contributes to any bailout, according to reports from the region. "If we inject money, we must have certain controls. We cannot say that we give you money and you spend the money at will. You are the rich, you borrow money from the poor. It's not right for you to continue to lead a luxurious life," People's Bank of China policy-committee member Li Daokui was quoted as saying by Reuters. Li said that U.S. finances are in worse shape than Europe's, but he didn't elaborate further, according to Dow Jones Newswires.
It's not right that the Europeans live a luxurious life.....hey wait a minute...so do the Yanks...that ain't right either....
Ya us Yanks have so much money the thermostat is stuck on 15•C (60) and we eat 1,500 calories a day now. Happy?
Shameless luxury are the temple priests of new babylon. I prefer scalpals to hammers when it comes to surgery. Loss mitigation over accelerated and total loss? You? And the people will evolve past them if they won't change.
Why should 2b Russian, European, Arab, Asian or American citizens die because the priests got fat and lazy? I guess all the people are lazy globally eh, despite 3% rise in global productivity but wages only went up 1/2%? Yeah all 6b of us suck - temple priests good. Gotcha. Where is Apollo to bow down to when you really need to? Putin whatever happened Russia Turkish heritage of defender of the people? You don't need mass slaughter. Be cunning and stop being such a thug.
RBS expects tough Q4, cuts euro zone exposure
Bank exodus from euro zone sovereign debt quickens
Today's use of ECB deposit facility is 275 billion euros. So the liquidity crunch is going strong.
P.s. Is there a data somewhere about this - numbers so i can plot a graph. Could not find it on ECB's website :(
Operation twist is killing primary dealers' ability to profit off the yield spread, which is what MF was doing if I'm not mistaken. Arbitrage is never sustainable.
It after 7am EST - where's Tyler? Did they come for him in the night? Did TPTB silence him? Is he eating frosted flakes in his underwear watching cartoons?
I need some cynicism and I need it now!
Save the Tylers!!!
Messengers job is to plant seeds, speak truth to power. You can't mince words and this pisses people off. They think such are arrogant dicks. Whether Tyler or any other messenger pays a price, they always do. It is better to pay the messenger to keep reading tea leaves but that rarely happens. When it does in history all nations do better even if an empire or model (as in our time in history) lingers past its shelf life.
+1. Very perceptive!