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Overnight Repo Surges By Over 100% In One Day

Tyler Durden's picture




 

There are some who may read the following article from Bloomberg titled "Banks Find Few Signs of Default Distress in Repo, Credit Markets" and be left with the impression that banks find few signs of default distress in repo, credit markets. These same people would then be very surprised by the chart below which shows that the overnight repo rate has more than doubled from 0.055% to 0.115%, or the highest in months, overnight. "Big deal, this is just a small jump" others may say. To those others we will retort that in a market as massively levered as the ON repo, which is a primary source of risk free financial institution funding in conjunction with the Reserve market (via the Fed's IOER rate), a relationship we have discussed extensively before. This simply means that the O/N GC-IOER spread is probably the most levered synthetic "instrument" in the known universe. Apply 100x leverage to the spread and the 0.06% change effectively wipes out capital buffer for an entity that was picking up pennies in front this particular steamroller, and has a firmwide leverage of 16x or a Tier 1 buffer of under 6%.  Luckily, that same entity will quietly approach the Fed and using one of a plethora of secret and not so secret rescue mechanism, the Fed will merely transfer more electronic ones and zeroes backed up by future tax receipt claims to said entity's debit account and all shall be well, with nobody but the Chairsatan and the occasional Wall Street CEO knowing just how close we came to yet another systemic implosion.

 

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Thu, 07/28/2011 - 13:39 | 1501622 FranSix
Thu, 07/28/2011 - 14:00 | 1501684 carbonmutant
carbonmutant's picture

It's unfortunate that AA's pricing doesn't reflect the success of this strategy...

Thu, 07/28/2011 - 14:46 | 1501728 Zero Govt
Zero Govt's picture

next step for The Parasite Club cartel, shutter competitiors with "Blood Aluminum" hysteria

then another media stitch-up job, supermodel Naiomi Campbell up in court for buying peaches in a non-Cartel sourced tin can with puppet President O' on Twitter disturbed by the "morality" of non-catrel sourced canned fruit and vedge and ladies lipstick tubes 

...so we have monopolists Goldman Sucks and JP Morgan moving into aluminum and just heard Rothchild has taken a large stake in Alcoa.. just coincidence ...aren't these 3 'players' just great news for free markets and the consumer?? ..afterall look at the toxic bankrupt mess they made vandalising finance, banking and the US property market ...good effort boys, what a CV you're building up!!

..and presumably a vote of "No Confidence" fro Club Parasite in Banking and Finance having made such a mess.. there they go slinking into the Commodity space where there's value (wealth) left to rob

It's looking good round here, looking real good    

 

Thu, 07/28/2011 - 13:43 | 1501633 hedgeless_horseman
hedgeless_horseman's picture

...the Fed will merely transfer more electronic ones and zeroes backed up by future tax receipt claims to said entity's debit account and all shall be well...

...especially for the counterparty that made assloads of money.  Thank you Mr/Mrs Taxpayer!

Thu, 07/28/2011 - 14:40 | 1501794 Pure Evil
Pure Evil's picture

 

 

How do I get in on the transfer of electronic ones and zeros?

Sounds orgiastic.

Thu, 07/28/2011 - 14:31 | 1501647 greyghost
greyghost's picture

did spxu have a mini crash at 13:15pm?

edit: now the chart doesn't show the 15 cent drop at 13:15 and the volume was reduced from aprox. 33,000 to 18,000

Thu, 07/28/2011 - 13:48 | 1501650 Dr. Engali
Dr. Engali's picture

the Fed will merely transfer more electronic ones and zeroes backed up by future tax receipt claims to said entity's debit account

That's making the assumption that there are tax payers to pay said receipts.

Thu, 07/28/2011 - 15:27 | 1501946 DollarMenu
DollarMenu's picture

Tax payers?

Isn’t there an app for that?

A set of algos that generate virtual tax payments from 

virtual taxpayers residing in virtual prosperous counties assigned to each state.

The virtual payments are submitted to the system thru virtual banks located in those counties, and once the ones and zeroes hit the imcome pool, they are indistinguishable from the ‘real’ stuff.  Tax receipts magically rise to support any level of debt necessary.

 

Thu, 07/28/2011 - 13:50 | 1501656 SheepDog-One
SheepDog-One's picture

Teetering on systemic implosion at any moment if a dime slips between the cushions. But overall all is well, DOW 36,000.

Thu, 07/28/2011 - 13:50 | 1501657 anyways
anyways's picture

Hi Tyler, is this News for you:

Spiegel Online: Top bankers urge Obama and Congress to reach agreement

http://translate.googleusercontent.com/translate_c?hl=de&ie=UTF8&prev=_t...

 

Thu, 07/28/2011 - 13:51 | 1501660 SheepDog-One
SheepDog-One's picture

LOL, giving the impression that Obama is in the drivers seat and not a bankster hand puppet all along. Cute.

Thu, 07/28/2011 - 13:54 | 1501673 TruthInSunshine
TruthInSunshine's picture

Jamie Dimon, Lloyd Blankfein, and the rest of the Outfit, dressed up in their Sunday Best, pretending to politely ask the POTUS & Congress: "We can haz more cheezeburgers, pleeze?"

Thu, 07/28/2011 - 13:58 | 1501681 anyways
anyways's picture

Here is the letter from the banksters, right to Obama:

http://www.financialservicesforum.org/index.php/commentary-and-speeches/...

 

 

Thu, 07/28/2011 - 14:01 | 1501688 SheepDog-One
SheepDog-One's picture

Come on, man.

Thu, 07/28/2011 - 13:53 | 1501668 FranSix
FranSix's picture

The fact that very short term rates have risen shows that negative rates on increasingly longer intervals on the yield curve have been averted.  For instance, a negative yield on the discount rate might lead to a negative policy rate, or if the intent is to resort to place emphasis along longer maturities, then this might cause lower rates along the yield curve, but temprorarily higher rates at the shortest maturity.  It would be thoroughly ironic if negative rates metastisized eventually to longer maturities past the three month treasury into the 12 month or the two year.

stockcharts.com $IRX daily

http://ow.ly/5PJjs

Thu, 07/28/2011 - 13:57 | 1501680 phraseshifter
phraseshifter's picture

short "thin air"...

Thu, 07/28/2011 - 14:05 | 1501691 Zero Govt
Zero Govt's picture

"Apply 100x leverage to the spread and the 0.06% change effectively wipes out capital buffer for an entity that was picking up pennies in front this particular steamroller, and has a firmwide leverage of 16x or a Tier 1 buffer of under 6%."

Nice to see, 3 years down the road to 'a New Safer Regulated Place', the Fed, SEC and other regulatory Einsteins have addressed and taken so seriously the serious systemic risk of leverage

Way to go porn surfers, way to go

Thu, 07/28/2011 - 14:04 | 1501697 Catullus
Catullus's picture

I really miss those daily TED spread charts. Come on, guys, you know you miss the Shit My Pants Panic days or visions Neel Kashkari in the fetal position eating whole bags of Cheetos.

Thu, 07/28/2011 - 14:24 | 1501751 Quixote
Quixote's picture

Off topic--

 

Question for Sacrilege: Are our votes for or against comments tied to our ZH accounts on the back end of the new UI?  

Thu, 07/28/2011 - 16:06 | 1502058 Catullus
Catullus's picture

Over the past 10 days, the SOMA for sum of loans outstanding has doubled from $6b to $12.7b. The availability to borrow under SOMA has also expanded to $691b

Interestingly, the Fed just accepted both Fannie and Freddie as counterparties to the reverse repo counterparties list. Was Treasury concerned that a prolonged delay in the debt ceiling talks would have severely impaired the ability for Fannie and Freddie to make guarantees on their debt whole?

Fri, 07/29/2011 - 03:47 | 1503650 qing
qing's picture

removed content (spam)

Fri, 07/29/2011 - 11:23 | 1504945 forgetalpha
forgetalpha's picture

Talk about fear mongering...maybe you should put this crappy observation in perspective ZH by noting that this same repo rate was 5.00% going into the GFC...meaning that today's rate of 0.225 is a full -97% down from its high in 07'. Good job ZH, you're fear mongering is worse than whats coming out of DC.

Wed, 09/14/2011 - 03:53 | 1667141 chinawholesaler
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