RE: A genuine must read for all Alien Metals holders28 May 2021 00:27
On March 17, a little over two months ago, there was no volume at the Feds RRP window. Nothing. Today it was almost $400 billion! How do you go from zero to $400 billion in two months?
Not only was todays activity at the RRP one of the largest ever, it was also the largest non quarter end , non year end print.
There's an incredible amount of cash in the repo market right now! Clearly the fed took too much collateral out of the market , or added too much cash.
And while Powell and Co pretend that they can continue business as usual for years to come, the repo market is not only cracking but banks, full to the gilld with inert reserves and which increase by $30 billion ever week are on the verge of pulling Mr Creosote....
And banking at even a penny of additional liquidity. How the fed will continue to monetize debt then, when the repo system is now out of collateral, is anyones guess.
By mid July we will have even more reserves to absorb due to the debt ceiling and while a lot of that cash will go to the o/n RRP facility, some of it will chase higher yields in the FX swap market amid a lack of demand for the U.S dollar . (Nap pointed this out earlier in one of the videos he posted)
Three month cross currency bases may flip positive by mid July and those implied yields may drag three month U.S dollar Libor OIS slight negative.
Assuming inflation not only continues to rise but accelerates to the upside while bond yields are capped we have an asymmetric risk to the downside in real yields.
Precious metals and miners have long term reverse correlation to real yields. Said simply , if and when real yields dump, watch silver and the metals soar. I estimate the time for that scenario to play out in weeks
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