Earlier today, repo market icon Zoltan Pozsar scared the living daylights out of cross-asset traders everywhere with what could be called a doomsday prediction in which the former NY Fed and Treasury staffer warned that as a result of collapsing systemic liquidity and a drought of "excess reserves", the coming days could see a lock up in the FX swap market (in the process sending the US Dollar soaring), which would then translate to a violent deleveraging of massively levered hedge funds, and a liquidation first in the bond then stock market.
Yet while Pozsar had seemingly no concerns staking his hard-earned reputation on the outcome of a potentially catastrophic event that would subsequently be used by the Fed as a catalyst for QE4, he was far less confident about "when" it would occur:
it’s hard to have a definitive answer: it depends. It depends on how equities do, which depends on the trade deal and other random tweets. It depends on how auctions go, which depends on the equity market and the curve slope relative to actual funding costs.
Still, now that the genie is out of the bottle, everyone will become a cross-asset expert, trying to isolate even the smallest notable deviation from the norm as the horseman of the coming market apocalypse, and focusing first and foremost on the most direct indication that something is (again) broken in the repo market: the overnight general collateral repo rate.
However, what concerned market watchers will find when they pull up the recent O/N G/C repo rates is... nothing. Indeed, after the turbulent repo moves in mid/late September, and one outlier event in mid-October, the past two months have seen O/N repo barely move.
more,,,,,,,,,
http://www.zerohedge.com/markets/repocalypse-20-deck-turn-repo-rates-are-blowing-out?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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