#treasury-market – Page 3 – Federal Financial Analytics

21 01, 2022

M012122

Eliza Allen2023-04-24T11:50:51-04:00January 21st, 2022|6- Client Memo|

Few Financial Fall-Out Shelters If Russia Invades Ukraine

Perhaps nothing says as emphatically that market valuations are divorced from reality as the fact that equity and bond markets are essentially ignoring the increasing risk that Russia invades Ukraine. Investors have grown used to shrugging off geopolitical risks – see just the brief chills after Russia’s previous invasions of Crimea and Georgia as cases in point. But this time is different because this time Ukraine is a critical link in Europe’s energy supply, macroeconomic stress in Europe will have immediate global repercussions, and Vladimir Putin is making it more than clear that this time he’s not just playing around with minor nations he thinks of as vassal states. This time, he will go to the economic map if he believes the Western response to his invasion might pose too much risk to Russia’s economy and his popularity and there’s no reason to doubt him. As a result, I hope Treasury and the Fed are keeping a careful eye on the Treasury market and global payment system, not to mention on the cyber-security on which core market infrastructure rests. The threat is all too real.

m012122.pdf-1…

21 01, 2022

Karen Petrou: Few Financial Fall-Out Shelters If Russia Invades Ukraine

Arezou Rafikian-12023-04-24T11:51:21-04:00January 21st, 2022|The Vault|

Perhaps nothing says as emphatically that market valuations are divorced from reality as the fact that equity and bond markets are essentially ignoring the increasing risk that Russia invades Ukraine. Investors have grown used to shrugging off geopolitical risks – see just the brief chills after Russia’s previous invasions of Crimea and Georgia as cases in point. But this time is different because this time Ukraine is a critical link in Europe’s energy supply, macroeconomic stress in Europe will have immediate global repercussions, and Vladimir Putin is making it more than clear that this time he’s not just playing around with minor nations he thinks of as vassal states. This time, he will go to the economic map if he believes the Western response to his invasion might pose too much risk to Russia’s economy and his popularity and there’s no reason to doubt him. As a result, I hope Treasury and the Fed are keeping a careful eye on the Treasury market and global payment system, not to mention on the cyber-security on which core market infrastructure rests. The threat is all too real.

Treasury has long known that the “nuclear option” when it comes to economic sanctions is denying Russia access to any financial institution with any kind of domicile in the U.S. or any point of access to the U.S. payment system topped off by SWIFT sanctions blocking Russian access to the global payment system. If Treasury fires these high-powered missiles – and it’s likely to have …

17 11, 2021

Daily111721

Arezou Rafikian2023-05-26T10:39:14-04:00November 17th, 2021|2- Daily Briefing|

Williams Emphasizes Treasury-Market Failures
FRB-NY President John Williams today reinforced the principles laid out in the recent Inter-Agency Working Group on Treasury Market Surveillance report (see Client Report TMARKET2) – i.e., the “imperative of resilience.”

OFR: U.S. Financial Stability at Mid-Range, Too Soon to Judge Climate Risk
OFR today released its 2021 annual report, concluding that overall risks to U.S. financial stability remain in the medium range. Notably, the report generally downplays risks resulting from climate change, arguing these are difficult to quantify and thus deferring conclusion until more data are available.

Waller Breaks with PWG on Limiting Stablecoins to Banks
Although FRB Chair Powell has not yet decided on the need for CBDC, Fed Gov. Waller today opposed it on grounds that private innovation suffices to ensure U.S. payments innovation. This sets up a conflict should Mr. Powell’s endorse CBDC after pending discussion the draft or if Gov. Brainard takes over the chair.

JEC Reviews Crypto Construct
At today’s Joint Economic Committee hearing on cryptoassets, Chairman Beyer (D-VA) urged Congress to update the crypto regulatory framework to better protect consumers, prevent insider trading, and ensure economic stability in part by preventing runs on cryptoassets.

Daily111721.pdf…

15 11, 2021

Karen Petrou: The Real Problem in the Omarova Hearing

Arezou Rafikian2023-06-01T13:46:35-04:00November 15th, 2021|The Vault|

Later this week, the Senate Banking Committee will hold Saule Omarova’s confirmation hearing for Comptroller of the Currency. Many expect this to be a knock-down, drag-out between the progressive bank-reform agenda and the banking industry’s antipathy thereto. This it surely will be, but to watch only these fireworks is to miss the longer-burning fire below: renewed questions about whether banks are public utilities or private companies with unique privileges fully reimbursed by virtue of unduly-burdensome regulation. It is by this choice — not Ms. Omarova’s most-uncertain confirmation — that the future of U.S. finance will be decided.

Although Ms. Omarova has surely moved on from the Marxist views of which she is accused based on an early academic paper, she clearly sides with those who think that banking is for public purpose, not private profit. Indeed, according to at least some of her work, banking can’t be trusted to banks and thus should be seconded to the federal government or outside experts presumed to be not just objective, but also disinterested in all but the public good.

This is not a new view. After the S&L crisis of the 1980s and the subsequent banking debacle in the early part of the next decade, much was made of the subsidy banks were said to enjoy from unique access to FDIC insurance and the Fed’s discount window. Bankers strongly disputed any subsidy, but I said then and believe now that banks then indeed enjoyed special-purpose charters that warranted not just tough safety-and-soundness …

12 11, 2021

GSE-111221

Arezou Rafikian2023-06-01T13:50:32-04:00November 12th, 2021|4- GSE Activity Report|

Taking Their Time On the Treasury Market

As Mark Calabria made clear earlier this year, reform of the Treasury market has direct, major impact on that for agency debt and MBS. Indeed, given ongoing Treasury-obligation issuance uncertainties at a time of brute-force fiscal policy along with continuing debt-ceiling drama, the two high-quality liquid assets are tied at the hip even if bank liquidity rules don’t recognize this. We thus review the new inter-agency Treasury-market report for its agency impact at a time of growing bond-market volatility. As our in-depth analysis of the new report makes clear, we had to look hard for near-term implications and, after doing our best, came away largely empty-handed.

GSE111221.pdf…

10 11, 2021

TMARKET2

Arezou Rafikian2023-06-01T14:24:09-04:00November 10th, 2021|5- Client Report|

Treasury-Market Reform Construct Leaves Much to Decide, Do

In this report, we build on our initial analysis of Monday’s report from the Inter-Agency Working Group on Treasury Market Surveillance (IAWG). Comprising the Treasury, the Fed, the SEC, the CFTC, and the Federal Reserve Bank of New York, the Working Group’s report narrows the scope of reforms to be discussed at next week’s closed FSOC meeting and then taken up by both the Group and FSOC. Hints about what staff may think best may be inferred from the report by virtue of where attention is focused and hints about near-term decisions are offered. From this, we infer that central clearing is a top-priority consideration and that all of the agencies support SEC Chairman Gensler’s announced plans to bring many broker-dealers in the Treasury sector under SEC authority.

TMARKET2.pdf…

9 11, 2021

SYSTEMIC92

Arezou Rafikian2023-06-01T14:47:47-04:00November 9th, 2021|5- Client Report|

Fed Ramps Up Worries, Outlines Preferred MMF Option

Late yesterday, the Federal Reserve released its most recent financial-stability report. As in its predecessor earlier this year (see Client Report SYSTEMIC91), this report takes a cautious view, counting on continuing bank resilience to counteract old worries, such as asset-price bubbles, along with containing at least some new fears. These now include meme-driven equity market volatility, Chinese leveraged debt, and emerging-market fragility. In this report, we assess the policy implications of the Fed’s findings without going into detail on data or methodology. Surprisingly, in light of the recent FSOC report (see Client Report GREEN11), climate risk is now less of a high-profile Fed systemic concern, with the Board saying its planned actions are “broadly aligned” with FSOC recommendations. Perhaps the most concrete remedy outlined in the report pertains to MMF resilience, with the Fed reiterating its preference for some form of swing pricing, minimum balances at risk, and/or capital buffers.

SYSTEMIC92.pdf…

3 11, 2021

Daily110321

Arezou Rafikian2023-06-02T12:54:06-04:00November 3rd, 2021|2- Daily Briefing|

Fed Acknowledge Climate Threat, Avoids Near-Term Commitments
The Federal Reserve today supported the most recent NGFS statement on global central-bank climate initiatives, emphasizing that the global statement allows each central bank to tailor its climate-risk efforts to its mandate and that the Fed’s mandate circumscribes efforts it recognizes to be of great importance.

Omarova Nomination Clears Formal Hurdle
Late yesterday, the White House officially nominated Saule Omarova as the next Comptroller of the Currency. As previously noted, we view this appointment to be part of a larger political negotiation over Jay Powell’s second term and the broader slate of Fed nominees.

Comment Date Set for FHFA Capital-Disclosure Proposal
The Federal Register today includes FHFA’s proposed capital-disclosure regime for Fannie and Freddie, with comment now due January 3. As previously noted, the proposed disclosures would better align the GSEs’ releases with those mandated for large banks, requiring transparency regarding standardized approach, operational, market, and leverage capital requirements.

OCC Climate Guidance Imminent
In his statement today supporting the NGFS Glasgow Declaration (see our earlier alert), Acting Comptroller Hsu expands on his comments about FSOC’s climate-risk report (see Client Report GREEN11).

Powell: Fed No Longer Contemplating SLR Rewrite
While FRB Chair Powell’s press conference today largely focused on the economy and monetary policy, he was also asked if the Fed still plans to seek comment on ways the SLR could be adjusted to increase Treasury-market liquidity.

Daily110321.pdf…

5 10, 2021

INVESTOR19

Arezou Rafikian2023-06-28T15:31:00-04:00October 5th, 2021|5- Client Report|

Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

INVESTOR19.pdf…

5 10, 2021

FedFin: Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

Arezou Rafikian2023-06-28T15:31:17-04:00October 5th, 2021|The Vault|

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…