The Fed greatly expanded its buying program, adding facilities to buy munis and CARES loans as well as broadening eligible bond purchases to fallen angels and a wider swath of investment grade bonds.... Read More
A look at the assets on the Fed's balance sheet... Read More
In the wake of the government's $2 trillion stimulus bill, the Treasury has ramped up T-bill issuance.... Read More
We are about to undergo the worst recession in the modern era.... Read More
Something extraordinary is happening in the Treasury market and few really seem to understand it. The Fed bought $1 trillion of bonds in the last three weeks and bond yields have barely budged. Why?... Read More
China needs dollars. They have $1 trillion of Treasuries to sell to generate dollars. The Fed does not want this to happen. So the Fed created a new swap line Treasuries as collateral for dollars. ... Read More
The dealers are offsides. They are too exposed to interest rate risk going into a period of lower growth, larger deficits, and potentially more inflation.... Read More
Fund outflows are the most extreme ever seen and financial market stress remains.... Read More
Private pension funds have much smaller funding gaps than their government counterparts.... Read More
Defined benefit plans continue to be replaced by IRAs and defined contribution plans.... Read More
A look at outstanding amounts of Treasuries, corporates, agencies, munis and open market paper.... Read More
The amount of outstanding private credit in the U.S. experienced a brief decline during the financial crisis, but government debt grew throughout the entire period. Both are now at new highs.... Read More
The floodgates are open. Look for forecasts for Q2 2020 and the rest of the year to drastically change to some of the most extreme readings ever seen. At this point, these are no more than wild guesses. Take this as a signal that quantitative approaches at fair value are not possible in this environment.... Read More
It is difficult to find a superlative to describe what the Fed announced this morning. At first blush, it looks like they are nationalizing financial markets, except for equities and high yield.... Read More
The dealers' balance sheets are full and post-crisis rules are preventing them from expanding. The Fed is trying the drain dealers' balance sheets via QE, allowing more room for dealers to operate. The problem is the markets are repricing for a new post-virus world. When banks are able to make a market, there is only selling. This stops when markets fall enough that the full damage is priced in.... Read More