Money Market Redux

October 6th, 2008 12:08 pm | by John Jansen |

The money markets have frozen solid again. My favorite correspondent on that market reports that participants are following the advice of Polonius and are refraining from borrowing or lending. The Federal Reserve announcement earlier today of a gigantic increase in the size of the TAF program has not broken the logjam or sweetened the mood.The gentleman with whom I speak on this topic suggests that if we have a few more days of this inactivity and illiquidity, then the direness of the situation will leave the Fed will it will be force to guarantee Libor deposits and commercial paper.

He also remarks that we are at the point of self fulfilling prophecy. On that point he references the S and P downgrade of Royal Bank Scotland this morning.

Check out this Bloomberg story which explores the topic in some detail

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  1. 8 Responses to “Money Market Redux”

  2. By lcs on Oct 6, 2008 | Reply

    “will leave the Fed will it will be force to ”

    Tell me what voice recognition software you use so I can short the stock.

  3. By John Jansen on Oct 6, 2008 | Reply

    I post and approve every sensible comment. I apologize for printing that one. I was on the phone when I sent it and missed the errors.

  4. By David on Oct 6, 2008 | Reply

    Any idea what is happening in the brokered CD markets? There are some banks for example Puerto Rican ones that are completely dependent on brokered CDs and Repos. I wonder how they are coping with liquidity. Do you know what rate banks are paying to repo agency MBSs, say 1-year term?

  5. By Nutjob on Oct 6, 2008 | Reply

    Does this mean it is a good time to put your money into a money market account? Shouldn’t the yields be higher than normal (assuming any lending is getting done)?

  6. By Andre on Oct 6, 2008 | Reply

    I imagine brokers aren’t having any trouble selling CDs to retail customers. The FDIC monoline wrap brings them up to AAA, and the yields are way above treasuries.

  7. By Jay on Oct 6, 2008 | Reply

    So how far is the issuance data going to fall? Doesn’t look like it is off much except for A2P2 nonfinancial paper. And the entire reason we have recessions is to rid us of the wasteful investment in A2P2 rated companies…

    http://www.federalreserve.gov/releases/cp/volumestats.htm

  8. By George on Apr 3, 2009 | Reply

    Well said, finally a good report on this stuff

  9. By Milano Homes on Sep 12, 2009 | Reply

    I was hoping I could ask you a rhetorical question about yourself, would that be ok? Its always good to share a great post.

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