The Phaserl


Disorder In The “Repo” Markets: Fed Policy Has Sharply Narrowed The Exit Ramps

by Jeffrey Snider, Contra Corner:

There is so much about the repo market that gets lost in the minute details that are more often than not counterintuitive. It can sometimes be confusing as to why counterparties might be willing to pay you to borrow their cash, which is what a negative repo rate actually indicates. In that situation, which is what we are talking about of highly “special” securities, it is the actual security that is in demand far more than the cash. It is basic supply and demand dynamics just flipped over to the other side.

On that “other” side are those that are persistently “lent” out credit securities. In the “old” days before repo went ballistic (the 1990’s) those that would pay you to borrow their cash did so because they needed a particular security to close a short position. Shorting is essentially borrowing a security and selling it with the very real need to replace it in the future – and in a lot of instances at a time not of your choosing. So in that position, the need for a security is far greater than any need to generate a return on cash you are “lending”, to the point that you actually pay a negative interest rate.

Read More @

Help us spread the ANTIDOTE to corporate propaganda.

Please follow SGT Report on Twitter & help share the message.

2 comments to Disorder In The “Repo” Markets: Fed Policy Has Sharply Narrowed The Exit Ramps

  • rich

    A Bond Paid For and Denominated In Gold: A Rhyme From the Past

    I don’t think that we have seen such a thing since the gold bonds issued in the US, which went the way of the twenty dollar gold piece in the early part of the 20th century.

    There is a Bloomberg story on this today that is not generally available so I do not have a link as yet. It will be added as it becomes available. An astute reader sent it my way.

    Here is a link to the actual bond announcement on the JSE site.

    As you may recall, South Africa puts the ‘S’ in BRICS.

    I am not so sure whether it is a good investment or not. But it is certainly an interesting development.

    Gold Bond Harks to Gilded Age and Presages Future
    By Mark Gilbert

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>