Repo Market

The Fallacy Of Central Planning (Exposed By South Park's Underpants Gnomes)

In the 1980s, the Fed decided that economists had learned sufficiently from the grave, global mistakes of the Great Inflation such that they would compensate for the evolution of money by controlling just a single interest rate. It was, essentially, an underpants gnome schematic: "1. Target federal funds rate. 2. .... 3. Control Economy."

Frontrunning: October 17

  • Bonds Selloff Spreads on Inflation Concern; Stocks Fall With Oil (BBG)
  • Trump charges U.S. election results being rigged 'at many polling places'  (Reuters)
  • CNN’s Stelter Blames Firebombing of NC Republican Office on Trump's 'Over Heated' Rhetoric (Newsbusters)
  • Britain, France seek EU condemnation of Russia over Syria (Reuters)
  • Inside the Secret Society of Wall Street's Top In-House Lawyers (BBG)

Strong Demand For $24 Billion In 3 Year Paper In Today's First Treasury Auction

In the first of two Treasury auctions today, moments ago the US Treasury sold $24 billion in 3 Year paper at a high yield of 1.045%, stopping through the when issued by 0.5bps. The strong headline performance was somewhat unexpected in light of today's curve action, as well as the lack of any "specialness" in the 3Y repo market. Underscoring the strength of the auction, the bid to cover jumped from last month's 2.773 to 2.922, well above the 6 month trailing average of 2.815.

Jeffrey Snider: All Signs Point To Systemic Reset

"... what’s happened in stocks is more a myth than actual reality. Investors in stocks are buying at ridiculous valuations based on the premise that the Fed can create a recovery through liquidity. And what 2014 and 2015 show us is that this simply wasn’t true! ...the longer the earnings recession lingers, the higher the risk that stock investors will realize that they’ve been following the wrong story all along!"

Connect Just Two Dots, See All The Rest

Dealers, the bedrock of the global monetary system, are hoarding collateral and it shows. That, however, doesn’t fit within the recovery narrative, so the media resorts to the easy and absurd to obscure what “should” not be happening...

Treasuries Slump After Foreign Buyers Flee From Mediocre, Tailing 2 Year Auction

One look at today's repo market levels before today's 3 Year auction would have suggested that just because 3 Year paper was trading special in repo, that we would be primed for another short squeeze. However, that did not happen. Instead, and contrary to last month's stellar 3 Year auction, moments ago the US Treasury reported that today's auction printed at a high yield of 0.93%, tailing the When Issued 0.928% by 0.2 bps.

"Stellar" 3 Year Auction Leaves Shorts Running For Cover

We had a feeling there would be a squeeze into today's 3Y auction after this morning reports of that the OTD was trading tight, and quite "special" at -0.5% in repo, traditionally indicative of a notable lack of deliverable and underlying on the day of the auction. The repo market is also why just before the auction we wondered if there would be another tradtional repo-driven squeeze into today's auction.  And, sure enough, just moments later we got confirmation of precisely such a squeeze because the $24 billion in 3Y paper which according to the When Issued was supposed to price at 0.89%, instead printed at 0.875%, stopping through the WI by a whopping, for this tenor, 1.5 bps.