There’s an oft-quoted number in the debate raging over liquidity in the bond market.*
It is, depending on the week, 75-78 per cent — the amount by which dealer banks’ inventories of corporate bonds are said to have declined since their peak of $235bn in 2007, according to Federal Reserve data. Read more
What if the persistent number of settlement fails was deliberately done?
A sort of unconventional financing for the market participants doing the failing, if you will. Read more
Settlement fails are on the rise and many are beginning to worry about the systemic implications associated with a market culture that routinely shuffles the problem under the carpet. Particularly, they worry that fails are beginning to migrate to new asset classes, like exchange traded funds.
FT Alphaville spoke this week about the matter with Susanne Trimbath of STP Advisory services, an expert in the field who routinely appears as expert witness in cases involving settlement issues. Read more
Seventeen out of the 29 biggest dealers and investors in Treasuries believe that spending cuts alone will not be able to fix federal deficits, according to a Reuters survey. However, primary dealers were much more favourable to spending cuts than money mangers polled. Twelve out of 23 fund managers and economists polled said that Congress had until late July to work out a deal before bond markets would begin to worry. The Treasury has forecast that August 2 is the deadline to deal with the debt ceiling. Respondents were divided on whether reforms to entitlements such as Social Security and Medicare should be part of a debt deal this year or could be left to after the 2012 elections.
The Federal Reserve bought $7.72bn worth of US Treasuries on Wednesday, and specifically $675m of Cusip No. 912828PL8 and some $7bn of Cusip No. 912828PQ7.
Why do we bring it up? Read more
US government bond dealers and Japanese investors returned as buyers of Treasury debt late last year reducing their scale of negative positioning in the market, the FT reports. Overall Treasury holdings by dealers rebounded to $2.34bn by the end of December from minus $2.45bn the prior week, they are sharply down from $81.3bn in late November.
The Federal Reserve has just released details of its Primary Dealer Credit Facility — the programme that allowed the Fed’s official ‘trading partners’ to borrow from the central bank in return for posting collateral. It was created in March 2008 to help ease liquidity after the credit crunch and the collapse of Bear Stearns. Read more
Cast your minds back to 2007, 2008 and 2009 — and think hard.
You’ll need to. The Federal Reserve has just released the mother-of-all data dumps — showing who received payouts from its circa $3,000bn bailout programmes, how much and against what collateral. The release is part of the US central bank’s response to Dodd-Frank, which requires the Fed to reveal borrowers in its emergency facilities after a two-year delay. It does, however, exclude the revelation of who used the Fed’s discount window. Read more
That, we imagine, is what a purported Federal Reserve survey sent to the central bank’s 18 primary dealers looks like. According to Bloomberg News, which says it has seen a copy of the document, the New York Fed asked the dealers, its official trading partners, to estimate the size, impact and duration of QE2. Read more
Thursday’s US 30-year Treasury auction proved more telling than might have been expected.
As Reuters reported (our emphasis): Read more
Blink and you would’ve missed it, but JP Morgan Securities has just changed its legal status, and name.
From the Federal Reserve’s primary dealers update: Read more
When, in the spring of 2008, there came a sudden burst of CLO issuance, there was some speculation that the securitisations were being created to take advantage of a new Federal Reserve facility.
The Fed’s Primary Dealer Credit Facility, or PDCF, was initiated in March 2008, in response to troubles at Bear Stearns and the seizing-up of money markets. The facility let primary dealers, the Fed’s official trading partners, borrow from the central bank in return for posting investment-grade collateral. Read more
Poor primary dealers.
They are the official trading partners of the Federal Reserve Bank of New York, currently numbering 18, but they’ve had to contend with some difficult newsflow in recent weeks. Read more
Remember how the Fed was testing reverse repos with money market funds as a potential way to drain QE liquidity out of the system further down the line?
Well, some blogosphere talk (Zero Hedge, ahem) appears to suggest the Fed may now be backing away from the idea of using non-traditional participants like money market funds altogether, after a bad experience with its October test. Read more