The Fed is moving around some of its support ops, drawing down TOMO significantly today, but continuing to ramp POMO and agency MBS purchases. Overall, TOMO + POMO remains at or near highs. repo-analysis-20200325

Elsewhere the Fed has now introduced some obscurity around the PDCF, and likely other programs. To do this, they’ve altered the H.4.1 report, Factors Affecting the Balance Sheet, where they’ve rolled the line item ‘Loans’ from Table 5 into ‘Securities, unamortized premiums and discounts, repurchase agreements, and loans’. This hides the exact size of what they are doing.

Meantime, we’ve got most of the filings now on Primary Dealer broker/dealer entities. Of these, only Daiwa and Barclays are still due to report (early June 2020). Recall that Ronin Capital, a CME clearing firm, failed last week and at the same time we’ve started to see the Fed issue waivers of Regulation 23A and W, allowing banks with access to the Fed to step in and try to bail out their broker/dealer affiliates by exceeding normally limited asset purchase limitations. So why should this make you nervous? For example, an entity levered 50:1 would have its equity wiped out by a 2% decline in its asset prices. No surprise then that Ronin had a problem, given the wild volatility going on everywhere. If you’re 22:1, then a 4.5% decline in your asset values wipes out your equity. And you’ll fall foul of minimum capital requirements before it goes to zero.

Here is the latest state of the primary dealer system. pd-leverage-20200325

Once again, I ask, HOW IS HSBC STILL PART OF THAT SYSTEM?

Also, it would take up too much space here to list every new acronym the Fed has activated to go out and buy stuff with your savings.