Today Feds drained $13 billion. How that happened? If you look at the bids the pigmen came with $13.5 bln of treasury collateral with bids ranging from 3.55% to 3.77%. The Feds are trying to defend the target rate of 4.25%, or at least somewhere close to it. But nobody is interested to borrow above 3.77%.
Well, how to put it simpler? Imagine that “helicopter” Ben is throwing the money out of helicopter but people collect those money into boxes and send them back to Washington. “We don’t need no stinking money”!
Why this happens? Start with the don comment here. The big banks are losing trust to small banks and prime brokerage clients are not meeting their margin requirements to borrow more, so broker-dealers are accumulating piles of money and don’t need to borrow unless the cost of money is below 3.77%. But even in that case they need only $13 bln, less than the drain.
What we’ve seen so far in the stock market is nothing. The real collapse is coming.
My opinion here is that the damn Feds must stop the damn drain! I also think that 50pbs cut is practically given