Andy Costan Interview on Blockmacro
The reverse repo facility has been flat lately, and there’s still $433 billion in it. The big draining of the reverse repo facility from over $2 trillion in May 2023 to the current low levels was the main reason why the Fed was able to keep performing quantitative tightening without causing further liquidity problems in the banking system.
Lyn Alden • Deep Dive: Emerging Markets
Therefore, unless the US Fed restarts QE, the omens for Global Liquidity are not great. Does this mean that investors face a threatening financial crisis? We are not this downbeat simply because the heightened demands for debt refinancing that so offer trigger crises are unlikely to bite until 2026. However, a future threat remains, even if we are ... See more
Michael Howell • US Fed QE Needs to Restart Fast
Notably, Stephen Miran and Nouriel Roubini recently published a paper about “Activist Treasury Issuance” which is their term that refers to the Treasury Department taking unusual actions to offset the Fed’s tightness. Both Miran and Roubini are economics PhDs and worked in various capacities with the Treasury Department in the past.
In the paper, th
... See moreLyn Alden • Potential Asset Rotations: Deep Dive Analysis
With growing demands coming from pending debt roll-overs as the ‘maturity wall’ of debt termed out during the COVID emergency comes nearer, to say nothing of the 30% of US Treasury debt that Treasury Secretary Scott Bessent must refinance, the Fed will be forced to raise US liquidity levels.
US Fed QE Needs to Restart Fast
(Early 2020 was a big exception to that, since the fiscal impulse and the rate of quantitative easing were so big that they overrode the rise in the TGA, which on its own would be negative for liquidity. The TGA was only increased that high basically for extra financial buffer to support everything else that was happening, since the sheer magnitude
... See moreLyn Alden • Deep Dive: Emerging Markets
Since then, liquidity has continued to be problematic, and so recently, the Treasury re-introduced buybacks. With buybacks, the Treasury can buy off-the-run illiquid securities with newly-issued on-the-run securities. Despite the fact that their total debt is growing, the Treasury is regularly buying back some of the bonds it has previously issued.