Liquidity 02 incl QE, Twist, LTRO, APP etc (Jun 14 - Dec 25)

[winston]

QE unwind may be more disruptive than you think

“We act like we know exactly how it’s going to happen and we don’t.”

Central banks would like to provide certainty but “you cannot make things certain that are uncertain”

Source: Bloomberg

http://thecrux.com/jp-morgan-ceo-qe-unw ... you-think/

[winston]

The Fed’s New Plan Could Kill the Market as Soon as September

By Shah Gilani

Starting in September, they are going to let the balance sheet run off, let bonds mature, and not replace them. They will stop buying bonds altogether.

No one knows how the markets will react when the largest buyer of bonds on the planet (except for the Bank of Japan, the Japanese central bank) stops being a support for the markets.

It will result in a whopping $600 billion in securities the “free market” will have to absorb over 2019 and 2020. That’s equivalent to doubling the federal budget deficit.

Source: Wall Street Insight

http://wallstreetinsightsandindictments ... september/

[winston]

The chill in global markets is coming, so there’s no point dithering over the hard news

The world’s major central banks must show strong leadership and firm resolve to return global interest rates to pre-2008 crisis levels.

In the long run, interest rates and bond yields are heading higher, borrowing costs are set to surge and economic and financial market confidence will feel the chill. There is no excuse for delay.

Source: SCMP

http://www.scmp.com/business/global-eco ... -dithering

[behappyalways]

beware-rising-yields-reverse-qe
https://www.theedgesingapore.com/invest ... reverse-qe

[winston]

Four rates hikes from the Fed have done nothing to derail the path of stocks

That's only because major central banks in Europe and Japan have been continuing to pump liquidity into the global financial system through their QE programs.

The chatter will heat up about when rates in Europe and elsewhere will go up and QE will end.

But it's been the continued QE programs in Europe and Japan that have helped maintain the demand and stability in global asset prices, which have enabled the Fed to go on this course.

Source: Forbes

[winston]

This is why the bull market can keep running for years even if investors dump stocks

By Tomi Kilgore

Public pensions are flooding the credit market

Public pension funds keep flooding the credit markets with cash at a record pace, and companies keep using that money to buy back their stock

Reynolds said he believes the credit boom could continue for at least three years, and maybe even five.

Pension funds have been gobbling up higher-yield corporate debt and credit instruments.

Assuming the pace of flows remains the same, the puts high-yield issuance on track to exceed $1.8 trillion and leveraged loan issuance to top $1.6 trillion.

Source: Market Watch

http://www.marketwatch.com/story/this-i ... yptr=yahoo

[winston]

By next October the Fed will be draining $50 billion in cash from the market

That will force the buyers of new Treasury debt to liquidate something at the margin.

It could be either other Treasury paper, or stocks or both. This will only add to the supply pressure.

As stock and bond prices fall, margin calls will follow.

That will both destroy cash as it is used to retire the margin loans, and it will also add to supply pressure.

Source: Sure Money

[winston]

The Tiny Little Straw That Could Break The Stock Market's Back This Month

by Lee Adler

At the end of October the ECB announced that it would cut QE to €30 billion a month in January 2018. That's a 50% cut.

This comes at the same time as the Fed is gradually ratcheting up its cuts to the size of its balance sheet to $20 billion per month in January, increasing to $50 billion in October.

There would also be the revenue reductions that will result from the Trump tax cuts.

The total increase in deposits since the inception of NIRP/QE is now €967 billion. That is shocking considering that the ECB has pumped €2.5 trillion into the banks over that time.

Source: Sure Money

[winston]

$97 billion in Treasuries on the Fed's balance sheet will mature in the first quarter. The Fed will tell the Treasury to repay $36 billion of that.

[winston]

The stock market faces a massive headwind in 2018: a lack of new money

By Thomas H. Kee Jr.

Higher interest rates and the end of central bank stimulus will stall the market’s advance this year

Source: Market Watch

https://www.marketwatch.com/story/the-s ... yptr=yahoo