Looking at the data and you would conclude that we are having a major financial crisis, yet bank stocks have stabilized as measured by well known indices. The total assets of the Fed through several asset and lending programs have increased by close to $400 billion. This offsets almost 5 months of QT in less than a month.
There has not been a deep policy discussion although the bank crisis has been front and center in the news. The balance sheet increase may have topped out, but it far from clear that the crisis is over. The liquidity has done much to avert and pain in the stock market. For example, the SPY and QQQ are both higher for the month based better liquidity and only a 25 bps increase from the FOMC.
When will this liquidity be offset or will the Fed balance sheet just move from Treasuries to other assets from bank lending program. The price of credit is rising but the balance sheet is growing does this make sense? It may of there is a liquidity crisis, yet are we having a liquidity crisis or is this just the process associated with the Great Bond Repricing?
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