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Resilience Redux in the US Treasury Market (Clone) (Clone)

Darrell Duffie Federal Reserve Bank of Kansas City

Since 2007, the ratio of Treasuries outstanding to primary dealer assets has increased by a factor of four. @DuffieDarrell argues that this will drive increasing illiquidity in the Treasury market.

The total amount of Treasuries outstanding will continue to grow rapidly relative to the intermediation capacity of the market because of large and persistent US fiscal deficits and the limited flexibility of dealer balance sheets, unless there are significant improvements in market structure. Broad central clearing and all-to-all trade have the potential to add importantly to market capacity and resilience. Additional improvements in intermediation capacity can likely be achieved with real-time post-trade transaction reporting and improvements in the form of capital regulation, especially the Supplementary Leverage Ratio. Backstopping the liquidity of this market with transparent official-sector purchase programs will further buttress market resilience.

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Outlagging the Rest

Outlagging the Rest

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Monthly Budget Review: August 2023

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Is The Fiscal Picture Getting Better Or Worse. Yes.

Is The Fiscal Picture Getting Better Or Worse. Yes.

Paul Krugman Krugman Wonks Out

.@paulkrugman acknowledges that “we’re going to keep running deficits bigger than even fiscal doves like myself would like.” He advocates raising taxes on the rich and middle class.

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Rates Are Up. We’re Just Starting to Feel the Heat (Clone) (Clone)

Greg Ip, Joe Pinsker, Will Parker, Walden Siew, et al. Wall Street Journal

American firms have $600 billion in debt maturing this year. Between 2025 and 2028 over $1 trillion of corporate debt matures each year.

U.S. companies have $600 billion in corporate debt set to mature this year, a total that will grow to more than $1 trillion a year from 2025 until 2028. That stark data from Goldman Sachs points to a financial cliff that is coming for American corporations, which executives are trying to navigate by extending the dates their debts come due, refinancing borrowings or managing cash reserves. What’s at stake? The debt loads, coupled with the rising costs of new financing for companies, may cut into corporate profits, investor returns, spending on new ideas, hiring—and could lead to less-healthy balance sheets. Some analysts say there could be a swath of corporate credit-rating downgrades ahead.

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Resilience Redux in the US Treasury Market (Clone) (Clone)

Darrell Duffie Federal Reserve Bank of Kansas City

Since 2007, the ratio of Treasuries outstanding to primary dealer assets has increased by a factor of four. @DuffieDarrell argues that this will drive increasing illiquidity in the Treasury market.

The total amount of Treasuries outstanding will continue to grow rapidly relative to the intermediation capacity of the market because of large and persistent US fiscal deficits and the limited flexibility of dealer balance sheets, unless there are significant improvements in market structure. Broad central clearing and all-to-all trade have the potential to add importantly to market capacity and resilience. Additional improvements in intermediation capacity can likely be achieved with real-time post-trade transaction reporting and improvements in the form of capital regulation, especially the Supplementary Leverage Ratio. Backstopping the liquidity of this market with transparent official-sector purchase programs will further buttress market resilience.

Read Post

Resilience Redux in the US Treasury Market (Clone)

Darrell Duffie Federal Reserve Bank of Kansas City

Since 2007, the ratio of Treasuries outstanding to primary dealer assets has increased by a factor of four. @DuffieDarrell argues that this will drive increasing illiquidity in the Treasury market.

The total amount of Treasuries outstanding will continue to grow rapidly relative to the intermediation capacity of the market because of large and persistent US fiscal deficits and the limited flexibility of dealer balance sheets, unless there are significant improvements in market structure. Broad central clearing and all-to-all trade have the potential to add importantly to market capacity and resilience. Additional improvements in intermediation capacity can likely be achieved with real-time post-trade transaction reporting and improvements in the form of capital regulation, especially the Supplementary Leverage Ratio. Backstopping the liquidity of this market with transparent official-sector purchase programs will further buttress market resilience.

Read Post

Rates Are Up. We’re Just Starting to Feel the Heat (Clone)

Greg Ip, Joe Pinsker, Will Parker, Walden Siew, et al. Wall Street Journal

American firms have $600 billion in debt maturing this year. Between 2025 and 2028 over $1 trillion of corporate debt matures each year.

U.S. companies have $600 billion in corporate debt set to mature this year, a total that will grow to more than $1 trillion a year from 2025 until 2028. That stark data from Goldman Sachs points to a financial cliff that is coming for American corporations, which executives are trying to navigate by extending the dates their debts come due, refinancing borrowings or managing cash reserves. What’s at stake? The debt loads, coupled with the rising costs of new financing for companies, may cut into corporate profits, investor returns, spending on new ideas, hiring—and could lead to less-healthy balance sheets. Some analysts say there could be a swath of corporate credit-rating downgrades ahead.

Read Post

Furman On Jobs Report (Clone)

Jason Furman @jasonfurman

.@jasonfurman believes today’s job report is consistent with “continued moderation in inflation” and doesn’t believe the Fed needs to hike another 25bps in September.

Overall both household and payroll employment are 1.5mm higher than CBO's pre-pandemic projections. It doesn't feel that long ago that people were talking about missing workers (talking about it for longer than was justified by the data I might add). Pretty much the only thing that went in the direction of tighter was average weekly hours ticked up but this series is noisy because of rounding and measurement issues. As a result, aggregate hours grew strongly as well. Average hourly earnings growth was the slowest in over a year and a half. This is noisy, subject to revision, but even adjusting for that perhaps the biggest sign of cooling in this report.

Related: Has the Fed Tightened Enough? Guideposts to Consider and  Auto Union Boss Wants 46% Raise, 32-Hour Work Week in ‘War’ Against Detroit Carmakers and Unions’ Inflation Warning?
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Furman On Jobs Report

Jason Furman @jasonfurman

.@jasonfurman believes today’s job report is consistent with “continued moderation in inflation” and doesn’t believe the Fed needs to hike another 25bps in September.

Overall both household and payroll employment are 1.5mm higher than CBO's pre-pandemic projections. It doesn't feel that long ago that people were talking about missing workers (talking about it for longer than was justified by the data I might add). Pretty much the only thing that went in the direction of tighter was average weekly hours ticked up but this series is noisy because of rounding and measurement issues. As a result, aggregate hours grew strongly as well. Average hourly earnings growth was the slowest in over a year and a half. This is noisy, subject to revision, but even adjusting for that perhaps the biggest sign of cooling in this report.

Related: Has the Fed Tightened Enough? Guideposts to Consider and  Auto Union Boss Wants 46% Raise, 32-Hour Work Week in ‘War’ Against Detroit Carmakers and Unions’ Inflation Warning?
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