In this report, I cover the early market action from London on Friday, September 27th, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I will be doing an update on what is going on in the repo market which of course has been in the news for the last couple of weeks. The repo market is a very arcane part of Wall Street but as has been said it is the plumbing for the financial sector.
The repo market is used by major financial institutions or primary dealers to the New York Fed to fund their operations by lending their Treasury and Agency bond holdings for cash on usually an overnight basis but sometimes also on a term or fortnightly basis.
From having read different articles this week about how the repo market is still not fixed and has forced the Fed to intervene in it for the first time since the financial crisis of 2008 the conclusion I and others have come to is that nobody really knows what is going on in this specialist but very important sector of the financial system.
"Second Term Repo Oversubscribed As Funding Shortage Keeps Getting Worse": https://www.zerohedge.com/markets/second-term-repo-oversubscribed-funding-shortage-keeps-getting-worse-and-nobody-knows-why
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Your title had me laughter even before listening to your podcast. If they don't know then there is not much hope for us all. Incredible that they are the ones advising and running the system.
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Thanks Mario. Isn't this repo like fractional reserve on top of fractional reserve? Part of an amplify/leverage loop that just flood the market with fiat? But that not mean a much longer chain of dominos to fall over when default hits.
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Yes, and then there are also the derivatives on top as well. Truly mind-boggling.
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Thanks again, Maneco64. The currency crisis has been out of control for too long. But as long as everyone has confidence in it, it will stay on auto-pilot. At least get a little Precious Metal.
Good morning mario, yes repo! basically QE in another name! up to 75 billion a day with no ceiling so i read j powell said? it will lead to infinite pretty much? in years to come i see a new movie titled the big short 2 coming out! have a great day my friend
The o/n repo is now up to $100 billion and the term (2-week) repo is up to $60 billion. I like the original Big Short so the sequel should be a good one. Have a nice day too my friend.
yes i see 100 billion! hard to keep up mario! which is why i watch and share your video's every day and thank you so much for this! watching german pmi lately basically from what i can conclude it is already technically in recession!
Yes, we are in a recession and Brexit will be blamed of course. Very few will be pointing the finger at the corrupt monetary and banking system.
I seem to remember that during the last financial crisis the overnight repo market completely dried up. This struck me as the impetus for the central banks and treasuries to inject huge amounts of liquidity into the markets during that time. It's interesting to me that we're seeing this kind of action in the repo market with no catalyst driving it. Last time there was lots of drama in the markets before we saw this, this time it's hitting before we see any other problems. I'm certainly not seeing the reasons for this manifestation.
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