Post by blackfeather on Dec 19, 2015 18:46:00 GMT
As I was listening to people talk about the hike I learned in order to hike the rate money has to be withdrawn from the system. Amounts needed to be withdrawn were speculated between 310 billion to 1 trillion for the rate to go up .25% Many believed the Fed wouldn't hike rates because the didn't think they'd remove the money from the system. But up went the rate so the money had to be removed. The place to remove the money was through the reverse Repo window. Today this...
www.zerohedge.com/news/2015-12-19/repo-market-experts-stumped-how-could-fed-hike-without-draining-any-liquidity-market
So they used some smoke and mirrors and decreed a rate hike but did nothing to move the market. So was there really a rate hike? Will it all settle out in a few weeks or a month or two and the rate drop back to what it was?
From the comments section:
As we reported a little after 1:15pm on Thursday when the details of the Fed's first post-hike reverse repo operation were revealed, something very strange and unexpected happened: not only did the Fed not drain $1 trillion, or $800 billion, or even $310 billion, the Fed did not drain any incremental liquidity at all! .....
The Fed didn't really drain any liquidity yesterday. They moved the IOER up to .50%, moved the RRP rate up to .25%, and the RRP volume
came in at $105 billion, only $3 billion more than the day before. Where was the draining? But interest rates moved up anyway to reflect the
tightening, without any fundamental change. Basically, the Fed decreed a rate tightening and the market moved rates higher.
The Fed didn't really drain any liquidity yesterday. They moved the IOER up to .50%, moved the RRP rate up to .25%, and the RRP volume
came in at $105 billion, only $3 billion more than the day before. Where was the draining? But interest rates moved up anyway to reflect the
tightening, without any fundamental change. Basically, the Fed decreed a rate tightening and the market moved rates higher.
So they used some smoke and mirrors and decreed a rate hike but did nothing to move the market. So was there really a rate hike? Will it all settle out in a few weeks or a month or two and the rate drop back to what it was?
From the comments section:
Wow. This is above my pay grade.
Somebody care to link up some articles for those of us who haven't interned at Goldman Sachs for several years, to explain some background on what and how and why the Fed would need to/have to, drain 'liquidity' and what that means, in layman's terms?
Whatever it is, I get the drift that it's not good and the casino rigging is still in full effect.
Answer:
Because the FED cannot just "say" for something to be so, they have to actually "do" something physically (or on a computer screen) in order to move the market. Just as they were flooding the market with liquidity as they were lowering the rates, now they have to drain the liquidity as they do the reverse. www.zerohedge.com/news/2015-12-16/fed-reveals-rate-hike-plumbing-...
Somebody care to link up some articles for those of us who haven't interned at Goldman Sachs for several years, to explain some background on what and how and why the Fed would need to/have to, drain 'liquidity' and what that means, in layman's terms?
Whatever it is, I get the drift that it's not good and the casino rigging is still in full effect.
Answer:
Because the FED cannot just "say" for something to be so, they have to actually "do" something physically (or on a computer screen) in order to move the market. Just as they were flooding the market with liquidity as they were lowering the rates, now they have to drain the liquidity as they do the reverse. www.zerohedge.com/news/2015-12-16/fed-reveals-rate-hike-plumbing-...