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Fed RRPSF To the Rescue 9/22/21

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Why is this time different? I don't know about you, but to me, this looks like every other short term bottom we've had for the past dozen years. I guess it could be different, and maybe we'll know this morning.

Trend resistance is at 4387-95 between 5 AM and 7 AM NY time. Around the NY open, those lines will be  around 4380-90. If they don't clear those lines this morning, this could get ugly.

The 5 day cycle projection for this up phase is 4310. They got to 4306 yesterday. I think that's close enough for government work, but we'll see. The trendlines see all and know all. 

tvc_fc654c19ca68103595cd2b5ea8b22083.png

We have Fed circus today. The charts are set up to send a signal one way or the other. 

By the same token, the Fed just finished settling $110 billion in MBS purchases from Primary dealers over the past week. This is the regular mid month thing that almost always triggers a rally as that week draws to a close. So far, judging by the market action, almost none of the cash has been committed to equities or fixed income.

Where did it go? The Fed's RRP slush fund. The Fed RRP Slush Fund (RRPSF) rose from $1.087 trillion the day before the MBS settlements began to $1.240 trillion yesterday. The RRPSF rose by $153 billion. $110 billion was from the MBS, and the rest was courtesy of that little market selling panic last week. Sellers put the cash into MMFs, and the MMFs immediately plowed that cash into the RRPSF. What else can they do. There are no T-bills to be had. 

That will change as soon as the debt ceiling suspension is passed in the next couple of weeks. 

image.pngSource: NY Fed RRPSF page. 

I deliberately chose a start date for this chart of Feb 21. The RRPSF hadn't started yet. It was at zero. That was 2 days before the US Treasury began regularly paying down T-bills. The holders of the bills that got redeemed in the T-bill paydowns sent the cash straight to the Fed RRPSF. I've chronicled this regularly at Liquidity Trader. If you want to know what's going on with this stuff, and you should, then Liquidity Trader is for you. It's all about following the money. 
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Jeezis. From September 16-28, Treasury paydowns total $229 billion. Wow. 

I had estimated that RRPs would hit $1.3 trillion before they start issuing bills after debt ceiling is lifted. RRPs Now at $1.24 trillion. Will definitely go over $1.3 trillion next week. 

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1 hour ago, DrStool said:

Jeezis. From September 16-28, Treasury paydowns total $229 billion. Wow. 

I had estimated that RRPs would hit $1.3 trillion before they start issuing bills after debt ceiling is lifted. RRPs Now at $1.24 trillion. Will definitely go over $1.3 trillion next week. 

thats a big slush fund

https://i1.wp.com/slushpuppie.com/wp-content/uploads/2021/03/21-ICEECO-0224-Slush-Puppie-Hero-P2-dog.png?resize=1536%2C1042

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1 hour ago, DrStool said:

Jeezis. From September 16-28, Treasury paydowns total $229 billion. Wow. 

I had estimated that RRPs would hit $1.3 trillion before they start issuing bills after debt ceiling is lifted. RRPs Now at $1.24 trillion. Will definitely go over $1.3 trillion next week. 

It's pretty funny that they can't spend their cash down to the stupid statutory limit fast enough.  Is the Treasury really doing 'extraordinary measures', and then paying down bills? 

It's Fed day again already?  I'd like to ask Powell if he would support Texas banks remaining as part of the Federal Reserve system when they secede. 

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They have to pay down the bills to stay under the debt limit because they're still issuing coupons. They'll be under $100 billion in cash by end of month. A little bump from EOM coupon issuance, but they gotta make the military pension fund contribution. First couple days of October is always when this debt ceiling shit comes to a head. Makes US look like a clown banana republic. 

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15 minutes ago, DrStool said:

They have to pay down the bills to stay under the debt limit because they're still issuing coupons. They'll be under $100 billion in cash by end of month. A little bump from EOM coupon issuance, but they gotta make the military pension fund contribution. First couple days of October is always when this debt ceiling shit comes to a head. Makes US look like a clown banana republic. 

how big is the military pension fund contribution? not sure I saw it in your reports.

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I don't know. I mentioned it as something I remembered from past debt ceiling showdowns. It's big, but I don't remember how big. I tried to track it down but could not find anything on it. 

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I did mention it in a recent report but because I couldn't find anything specific published about it I was very hazy. I'm pretty sure my memory is right

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