Have to see if this large month end settlement pattern continues…. It may be that first of the month fiscal transfers are getting so large these days that they are destabilizing reserve assets at Depositories… so Treasury might be scheduling most of the settlements the day before to reduce reserve balances within the same regulatory period as the first of the month…
Treasury issuance is not “borrowing!” despite what MMT asserts…
Treasury issuance is skewed this month. There are net paydowns and one large settlement on month-end. If we exclude month-end, there's a net paydown of $108B. O/N rates should head lower throughout the month. Every net paydown will put additional downward pressure on O/N rates pic.twitter.com/3fTwWGMwmR
— Scott Skyrm (@ScottSkyrm) May 2, 2024
"Treasury issuance is not “borrowing!” despite what MMT asserts…
ReplyDeleteIt is.
Borrowing simply means taking something with the intention of giving it back. When Treasury issues anything under chapter 31 it takes something in exchange and promises to give it back at some point in the future.
That's *all* borrowing means. Any other meaning an individual injects into the process is down to them injecting some other moral judgement into the word rather than sticking to the strict dictionary definition.
Wrong:
ReplyDeletehttps://www.wemoney.com.au/blog/what-are-debt-securities#:~:text=A%20loan%20consists%20of%20money,using%20the%20issuance%20of%20bonds.
“ A loan consists of money that an individual or business borrows from banks or financial institutions and typically has structured payment dates. The principal amount is paid to the borrower in instalments over time.
In comparison, debt securities are money that a business raises using the issuance of bonds.”
Checkmate…
Neil if she takes a science course in Finance and the instructor asks the students to determine the NPV of a 10 year bond issued 3 years ago at 2% when the risk free rate is now 5% and she answers “thats not the way loans are valued” she will get a zero..,
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ReplyDeleteThis is like when Wray said the banks borrowed 29T from the Fed because they did $1T 1 month term agreements for reserve balances for 29 months in a row…
ReplyDelete"Wrong:"
ReplyDeleteRight.
That is the dictionary definition of 'borrowing'. Loans *and* bond issues are instances of borrowing. However bond issues are not loans.
Stop with the science and arts crap as well. It's not convincing anybody of anything other than you are losing all rational objectivity.
Your insights on month-end settlements are both enlightening and valuable, Mike. Understanding the intricacies of financial settlements is crucial in navigating the complexities of the financial world.
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In "Month-End Settlements," Mike Norman Economics provides valuable insights into the intricate world of financial settlements. With a keen understanding of market dynamics, readers gain a deeper appreciation for the complexities of financial transactions.
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