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Saturday, June 10, 2023

Still bearishness on TGA increase

 

Many investors short term bearish on a reduction of their figure of speech “liquidity!”…






If USD reserve balances are simply transferred from the RRP account to the TGA account there won’t be any adverse regulatory effect… 


But if instead the USD reserve balances are transferred from the Depository account to the TGA account then system regulatory leverage ratio will increase allowing Depository system to apply HIGHER prices (NOT lower prices ) to remaining non-USD Reserve assets while maintaining an equivalent leverage ratio…



Though may cause more chaos in small banks that have a dearth of Reserve assets… but that would be their problem…

$400b of new Bills being issued Monday and Tuesday and will settle a few days after that… have to watch what the regulatory effect of TGA refunding is… it may be very favorable to Depositories…






3 comments:

  1. Inconsistency creates consistency?

    ReplyDelete
  2. Rather: Figures of speech don’t work…

    ReplyDelete
  3. Hi Matt,

    When you say,
    "Depository system to apply HIGHER prices (NOT lower prices ) to remaining non-USD Reserve assets."

    do you mean that banks mark up everything in the assets column( https://www.federalreserve.gov/releases/h8/current/default.htm ) and therefore can take the increased asset values as earnings?

    ReplyDelete