Tuesday, June 16, 2009 2:54:05 PM
Karl Denninger
"In light of what I said before about drains of liquidity....
The salmon-colored day is the one to pay attention to.
It is always dangerous to assume that an expiring block of paper will not be rolled. It usually is. But - if it is not, in this case, roughly $100 billion in cash will come out of the "sloshing cash" in the banking system.
Of late it has been unusual for there to be visible OMO. Note that the table's first three columns are zeros - this is the result of The Fed's "unusual" policies, and is why my usual FedWatch has produced no information via this route for months, unlike the September 24th Ticker.
(TIOs can usually be ignored as they rarely have any impact on the overall condition of system liquidity.)
But the TAF maturation, if it does not roll, is a big deal.
What's T+3? Monday/Tuesday after options expiration, a nasty time for a liquidity drain to show up. If that drain does happen on Thursday you can expect to see it in the market some time within the next week, probably Monday or Tuesday, and it won't be pretty.
File this one in the "teach a man to fish" department; you can find this data, any time you'd like it, at http://www.gmtfo.com/reporeader/OMOps.aspx
Now you know how to read one of the tools that I use to watch Ben and his Merry Men - the tool that, in fact, caught him in September of 2008.
UPDATE 9:04 AM: The Fed has just announced an intent to award $48B in TAF paper, implying that about half of the $100 billion will roll and the rest drain. Again you cannot be sure until the day passes, and sometimes until the next day, but this is what it looks like."
"In light of what I said before about drains of liquidity....
The salmon-colored day is the one to pay attention to.
It is always dangerous to assume that an expiring block of paper will not be rolled. It usually is. But - if it is not, in this case, roughly $100 billion in cash will come out of the "sloshing cash" in the banking system.
Of late it has been unusual for there to be visible OMO. Note that the table's first three columns are zeros - this is the result of The Fed's "unusual" policies, and is why my usual FedWatch has produced no information via this route for months, unlike the September 24th Ticker.
(TIOs can usually be ignored as they rarely have any impact on the overall condition of system liquidity.)
But the TAF maturation, if it does not roll, is a big deal.
What's T+3? Monday/Tuesday after options expiration, a nasty time for a liquidity drain to show up. If that drain does happen on Thursday you can expect to see it in the market some time within the next week, probably Monday or Tuesday, and it won't be pretty.
File this one in the "teach a man to fish" department; you can find this data, any time you'd like it, at http://www.gmtfo.com/reporeader/OMOps.aspx
Now you know how to read one of the tools that I use to watch Ben and his Merry Men - the tool that, in fact, caught him in September of 2008.
UPDATE 9:04 AM: The Fed has just announced an intent to award $48B in TAF paper, implying that about half of the $100 billion will roll and the rest drain. Again you cannot be sure until the day passes, and sometimes until the next day, but this is what it looks like."
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