Treasury Borrowing Advisory Committee

Tyler Durden's picture

The Real Reason Why There Is No Bond Market Liquidity Left





"Central bank distortions have forced investors into positions they would not have held otherwise, and forced them to be the ‘same way round’ to a much greater extent than previously... unless fundamentals move so as to justify current valuations, when central banks move towards the exit, investors will too.... The way out may not prove so easy; indeed, we are not sure there is any way out at all."

 
Tyler Durden's picture

Citadel Head Bond Trader (And TBAC Member) "Leaves" After Losing $1 Billion





It is almost too coincidental to be a coincidence: on the day Ben Bernanke, who until a year ago was the biggest fixed income portfolio manager in the world courtesy of the Fed's $4.5 trillion in assets, joins Citadel as an advisor, the massively levered "market-neutral" hedge fund which as we showed earlier has $176 billion in regulatory assets, "loses" its global head of fixed income, senior managing director Derek Kaufman. Well not exactly loses. The reason for his "voluntary" departure: according to Bloomberg Kaufman is leaving Citadel not because he is about to be replaced by the former Fed chairman but because last year he lost $1 billion "in a variety of trades."

 
Tyler Durden's picture

This Is What Happens When The US Treasury Market Is Taken Hostage By "Malfunctioning Algos"





"In some instances, malfunctioning algorithms have interfered with market functioning, inundating trading venues with message traffic or creating sharp, short-lived spikes in prices as a result of other algorithms responding to the initial erroneous order flow."... "If liquidity is as bad as it is now, what’s going to happen when things really get adverse?” said Richard Schlanger, who co-manages about $30 billion in bonds as vice president at Pioneer Investments in Boston.

 
Tyler Durden's picture

6 Months Before The Fed Is Said To Hike Rates, It Still Has No Idea How It Will Do That





Tt has become quite clear that the Fed neither has the intention, nor the market mechanism to do any of that, and certainly not in a 3-6 month timeframe. Which may explain the Fed's hawkish words on any potential surge in market vol. After all, if the nearly $3 trillion in excess reserves remain on bank balance sheets for another year, then the only reason why vol could surge is if the Fed lose the faith of the markets terminally. At that point the last worry anyone will have is whether and how the Fed will tighten monetary policy.

 
Tyler Durden's picture

BusinessWeek Wants YOU To Become A Keynesian Debt Slave





And then there is BusinessWeek, which quite to the contrary, is urging its readers in its cover story, ignore common sense, and do more of the same that has led the world to dead economic end it finds itself in currently. In fact, it is, in the words of NYT's Binyamin Appelbaum, calling the world governments to become the slaves of a defunct economist.  And spend, spend, spend, preferably on credit. Because, supposedly, this time the resulting crash from yet another debt-funded binge will be... different?

 
Tyler Durden's picture

Monetary Policy And Impact On Assets





The last note briefly addressed the benefits associated with the reverse repurchase facility (RRF). Indeed liabilities have increasingly moved from bank balance sheets to the Fed, freeing lending capacity. One must recall reserves are not fungible outside of the banking system (but can act as collateral for margin). With flow decreasing, the opportunity for small relative volume bids spread over a large quantity of transactions (most instances per unit time) decreased with market prices in many asset markets. Is more downside coming?

 
Tyler Durden's picture

The Loudest Warning Yet: "This Stage Should Lead To Increased Risk... System Less Able To Deal With Such Episodes"





"Suppression of yield and vol induces investors to take on more risk (QE III). The market clings to perception of certainty regarding outcomes, despite the Fed shifting commitment modes from time or level-based to data dependent. This stage of policy should eventually lead to increased uncertainty and risk."  Translation: the TBAC itself - i.e., America's largest banks - whose summary assessment this is, is now actively derisiking.

 
Tyler Durden's picture

Is This The Reason For The Relentless Treasury Bid?





Over the weekend, Bloomberg had an interesting piece about two of the main reasons why while stocks continue to rise to new all time highs, the expected selling in bonds - because in a normal world, what is good for stocks should be bad for bonds - isn't materializing, and instead earlier this morning the 10 Year tumbled to the lowest since February, while last week the 30 Year retraced 50% of its post-Taper Tantrum slide, or in short a complete disconnect between stocks and bonds.

 
Tyler Durden's picture

Hugh Hendry Capitulates: "Can't Look At Himself In The Mirror" As He Throws In The Towel, Turns Bullish





"I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends."

- Hugh Hendry

 
Tyler Durden's picture

Buying Time In A Brought-Forward World... And Why There Is No Plan B





Here we go again, creating another asset bubble for the third time in a decade and a half, is how Monument Securities' Paul Mylchreest begins his latest must-read Thunder Road report. As Eckhard Tolle once wrote, “the primary cause of unhappiness is never the situation but your thoughts about it," and that seems apt right now. After Lehman, policy makers went “all-in” on bailouts/ZIRP/QE etc. This avoided an “all-out” collapse and bought time in which a self-sustaining recovery could materialize. The Fed’s tapering threat showed that, five years on from Lehman, the recovery was still not self-sustaining. Mylchreest's study of long-wave (Kondratieff) cycles, however, leaves us concerned as to whether it ever will be. More commentators are having doubts; and the problem looming into view is that we might need a new "plan." The (rhetorical) question then is "Have we really got to the point where it's just about more and more QE, corralling more and more flow into the equity market until it becomes (unsustainably) 'top-heavy'?"

 
Tyler Durden's picture

While Bernanke May Not Understand Gold, It Seems Gold Certainly Understands Bernanke





"We see upside surprise risks on gold and silver in the years ahead," is how UBS commodity strategy team begins a deep dive into a multi-factor valuation perspective of the precious metals. The key to their expectation, intriguingly, that new regulation will put substantial pressure on banks to deleverage – raising the onus on the Fed to reflate much harder in 2014 than markets are pricing in. In this view UBS commodity team is also more cautious on US macro...

 
Tyler Durden's picture

US Treasury Finally Admits The Truth: It's All POMO





Back in 2010, when few still dared to question that the entire move in the market is predicated on the Fed's daily POMO (then still on QE2), we laid out, in a way so easy even a caveman could grasp it, how every tiny move in the stock market is nothing but a function of the Fed's daily POMO on those days in which Bernanke would be directly injecting liquidity into the capital markets using his Primary Dealer frontmen. Since then nearly three years have passed, and thousands of POMO days. All of which brings us to this quarter's Treasury refunding presentation, and specifically the section "Effects of policy and market structure" from the Presentation to the Treasury Borrowing Advisory Committee, in which we learn that we had in fact been right all along, and that perhaps for the first time ever, the Treasury admitted that not only "no one dares fight the Fed" but that, as expected, it is "all POMO."

 
Tyler Durden's picture

Phantom Markets Part 1: Why The TBAC Is Suddenly Very Worried About Market Liquidity





Perhaps the best source of real, actionable financial information, at least as sourced by Wall Street itself, comes in the form of the appendix to the quarterly Treasury Borrowing Advisory Committee (TBAC, aka the Goldman-JPM chaired supercommittee that really runs the world) presentation published as part of the Treasury's refunding data dump. These have informed us in the past about Goldman's view on floaters, as well as Credit Suisse's view on the massive and deteriorating shortage across "high quality collateral." This quarter was no different, only this time the indirect author of  the TBAC's section on fixed-income market liquidity was none other than Citi's Matt King, whose style is well known to all who frequent these pages simply because we cover his reports consistently. The topic: liquidity. Or rather the absolute lack thereof, despite what the HFT lobby would like.

 
Syndicate content
Do NOT follow this link or you will be banned from the site!