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Traders Eye Accounts Of High-Stakes Fed, ECB Meetings At Pivotal Moment For Global Economy
Trade talks and Beltway brawls won't be the only thing worth watching for market participants in the week ahead.
Also on deck are minutes from the September ECB and Fed meetings, where policymakers expressed divergent views on the correct path forward at a pivotal juncture for the global economy.
By most accounts, Mario Draghi faced an unprecedented "rebellion" while trying to marshal support for a comprehensive easing package that ultimately included a rate cut, tiering and the restart of net
I’ll add-in my FRED chart and just say that something is going on in the world of money. My gut feeling is that something weird happened as treasury rates fell fast, over the last few months, (years) making both the Fed & Treasury uncertain about how to manage collateral. Maybe I’ve read one to many posts by Jeff Snider, but I wonder if all the players in the IOER tri-party game collectively decided they didn’t want junk for collateral and that caused some weird lag in trading, or hesitations.
The following FRED chart shows that as trump entered office, Treasury changed its behavior with TGA and then radically went the other direction a year later — pulling away funds as IOER rates climbed. It looks like one or the other was trying to hit a fast moving target – and the volatility of rates impacted everyones strategies. That concept opens up a weird black hole as to how to value treasuries in terms of yield and price and thus what role that played in hedging bets or some dynamic related to the trump budget and the deficit …. which may have been dependent on the Fed having a certain amount of capital surplus needed for the next budget negotiation. Is that too weird?
https://fred.stlouisfed.org/graph/?g=p5hX
I have long been suspicious of the role of the IOER component that your displayed chart has a tendency to place in good context… Thinking you’re on to something!!!
Parts of Jeffery Snider posts are sometimes tough to understand at least for me….