I’m pretty exhausted, how about you?

There’s been a lot happening and I’m not going to try to cover it all – there’s plenty of coverage out there. Anyone with specific questions just post a comment or hit me on email.

The big news at the Fed was the rollout of the ‘bazooka’ – twin $500bn repo ‘offers’ Mar 12 and 13, plus another bump in the ‘usual’ program.

Hey, look! An emergency $1 trillion line of (theoretical) support – remember the implications of the TOMO + POMO liquidity support that had been building up? Recall that in 2008, the culmination primary dealer bailout was $1.25 trillion par bailout of MBS. But that was versus a much lower notional problem… And it was effected.

So here is the latest worksheet for those keeping score at home: repo-analysis-2020312

I’m not sure how to classify the accepted parts of the new twin $500bn repo lines as they are done – should these contribute to ongoing implied problems, or be considered toward ‘solutions’? I don’t know. For now, I’m just rolling them in.

So, why didn’t it ‘work’ (in terms of generating a sustainable bounce yet)?

I can think of two reasons:

1. As discussed in the past – the Fed can offer anything it wants. Watch what’s done, not any notional figures thrown around. As you can see in the worksheet, only part of the 1st $500bn got done today, and a relative fraction at that. Although TOMO out increased by more than 50%, still less than 1/2 the $500bn figure.
2. Significantly, the reasons behind (or target) of this operation is DIFFERENT. According the the statement here Statement Regarding Treasury Reserve Management Purchases and Repurchase Operations, the Fed is now responding to a general Treasury market financing problem. Bank of America note covered the issues well. It looks like some big deleveraging events going on out there (no shit Sherlock!)

Until the next update…