Well that was a hell of a day

G

Greenspan

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The 10 year was up 24 tics when I walked in this morning, BNP Paribas was reporting they couldn't get prices on some of their assets (sound like a Bear Stearns hedge fund?), 130Billion injection by the ECB, Fed Funds effective rate spiked up to 5.50%, Fed injects 24 Billion, I saw for the first time in my career 2 yr. AAA paper get NO BID from 9 street dealers, Dow off almost 400, my e-mail was down almost all day, and Bloomberg message system had problems as well.

Sub-prime could make the rest of this year a lot of fun.



Edited 1 time(s). Last edit at Thursday, August 9, 2007 at 08:44PM by Greenspan.
 
Greenspan Wrote:
-------------------------------------------------------
>>I saw for the first
> time in my career 2 yr. AAA paper get NO BID from
> 9 street dealers

Wow. This liquidity problem spreading is the real killer. Heck with the market being down 2.5% (or whatever) because that's supposed to happen. Now a liquidity problem on debt like this will cause huge economic problems.
 
I logged on saw o/n libor at 5.86 and thought wtf is going on? given how i felt at that point the day ended up better than I expected, at least in credit. i haven't been around that long but people are telling me things haven't felt like this in a while.
 
Had to chart that 5.86 Libor using Bloomberg, back 5 years, to get the point to me boss...that's one mean unusual spike, something ain't right!
 
right, like JDV says libor is an interbank add-on lending rate so movements reflect liquidity in the money markets, not flight-to-quality. looking worse today, o/n up to 5.96. ECB stepped in again, we'll see what the fed does.

When considering these liquidity injections, however, it's important to keep in mind that the fed adding liquidity via its open market operations does NOT signal a change in monetary policy. Rather, they are exercising their tools to enforce existing policy. Today the fed funds rate is opening at 6%, so injecting liquidity is just a means of bringing it down towards their 5.25% target.
 
Well, they can just keep "exercising their tools" (which is a very interesting term for it). It's going to be quite the day (week?, month?) regardless of what they do.
 
Well, they can just keep "exercising their tools" (which is a very interesting term for it). It's going to be quite the day (week?, month?) regardless of what they do.
 
interesting because it's poor english (as in hindsight I realize you don't really exercise a tool, you use a tool so it's sort of non-sensical) or because you disagree with my point?
 
I saw "exercising my tool" and I have very poor self control. Sorry.

I agree with your post although I think that the discussion gets semantic pretty quickly. The Feds policy is to use open market operations to keep the Fed Funds rate at the target rate. Is the Fed's policy to continue to try to use open market operations to keep the Fed Funds rate at the target rate no matter what the cost? At some point, the answer to that question sounds a lot like a monetary policy. Since I don't know what the policy is on that now, I don't know when it would be a change.

I'm not a fan of big government intervention
 
haha, i see.

yeah, i see what you are saying. after a certain point how is one different from the other. looks like they injected $19Bn today bring FFR down to 5.375 from 6.00.
 
fed just added second round... 16billion injected for weekend RP, 35billion all day.
 
i saw the FFR tick down to 5.25 and was wondering what happend.



Edited 1 time(s). Last edit at Friday, August 10, 2007 at 11:11AM by Big Nodge.
 
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