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Reverserepo

Increasing The DXY Profit Target to $154 From $103The DXY after catching a rally off a 4-Hour Bullish Butterfly, has reached my price target of $103, and if it gets above that zone, then I think the DXY will have plenty of room to make multi-decade highs due to The High Interest Rates, Tightening Credit Conditions, and The Deflation that is now being priced into the US Bond Market. If things go as expected beyond the $103 zone, we will likely have entered into a Harmonic Wave Structure that should take us up to the Macro 0.886 Fibonacci Retrace which sits all the way up at $154 The RSI and PPO are both sitting at the mid point which is an area where it can often go just to reset before making higher highs in price.
TVC:DXYLong
by RizeSenpai
Yields Prepped to Spike Higher after a Confirmed TLT BreakdownThe TLT has broken down an Ascending Broadening Wedge and given us one Bearish Confirmation back test; now we are looking for a second lower high within the range of the breakdown to truly get convicted on the move. However, for the time being, I do think this chart should be watched, as I have a suspicion that a lot of the shorter- and midterm bond yields are going to spike higher along with the US Dollar for reasons I already explained in this post here:
NASDAQ:TLTShort
by RizeSenpai
2
The Overnight Reverse Repo Facility Looks to be Breaking DownMoney that is being parked at the Feds Reverse Repo Facility due to attractively high interest rates the fed has set for money parked at the facility has been on a steady decline since late 2022 and we have now confirmed a lower high and are looking to break down below a Bearish Dragon trend line that could be the initial trigger that gets it started to going down all the way to an 88.6% retrace or lower even. One can only speculate that the money exiting this facility will lead to more trading of short term debt on the open market, which could eventually lead to yields coming down overall and for all of this excess liquidity to chase Equities instead as the value of the US Dollar declines due to the shock of all this newly added supply of liquid cash to the open market thereby causing a loosening of market conditions.
FRED:RRPONTSYDLong
by RizeSenpai
Great Trades are Rarely Crowded: Long TLT and Short Twitter IQEveryone is a good trader in a bull market, but in a bear market, these good traders are reduced to hopium-fueled twitter analysts watching core CPI and interest rates. The former and latter data points serve nothing more as useless, out-of-context generalities for the single-celled Wall Street Bet retail enjoyer. But recent activity across the pond has sparked interest in the bond. These traders are now converting en-masse to self-proclaimed bond market experts with the thesis: "The bond market is broken" Except, the bond market is not broken. It is operating as intended, although two lines on a chart may disagree with anyone unfortunate enough to buy at the start of the year. Why is retail sentiment like this? The simple answer is that the fed is late, but a more-elaborate explanation follows: Bond yields rise because bond prices fall. It is the acquisition of a bond at a specific market price that determines that bond's yield, as a function of the difference between that bonds underlying rate (which is fixed) and the resale price. When interest rates rise, bond prices fall because newer bonds spawn with the higher base rate. This makes prior bonds, which have a lower fixed rate, less valuable because they output less extra cheddar. People then resell these bonds for a lower price and the yield rises according to market forces (the fed does not directly control this). Shorter duration treasuries follow interests rates very closely, whereas longer dated treasuries are difficult to influence by rate hikes. Either way these are secondary or tertiary market effects. This phenomenon is what results in an inverted yield curve: you can be paid more money to lend money for a shorter duration than a longer one. But why would something so illogical even happen? The answer is because the treasury market is not just any pig, it's a truffle-sniffing pig. For every brain cell in the equity or corporate credit market, the treasury market has a thousand-fold more. With these one-thousand brain cells, this pig (specifically the longer-dated pig) is rewarded by looking further ahead into the future. What does this pig see when they look that far ahead? An recession that will obliterate the equity market like Exodia. The long dated treasuries have started to price in a recession (very slowly) by pricing in rate cuts. This is why stocks and bonds are still correlated, but the correlation has started showing signs of weakness. The longer tail of the curve is smarter and refuses to sell these bonds like a fire sale. Recessions imply a fed pause and eventual rate cut, so no more high-interest treasuries. This makes bonds desirable, and this process is only starting now. I can already feel the credit market enjoyers seething and muttering: SLR relief expired! Reverse Repo! Basil Tea! No, none of these buzzwords matter. It's true that the pandemic has modified the initial conditions of the bond market. The TLT suffered immensely as the federal reserve promised to not raise rates through forward guidance, broke those promises (as is should have), and also allowed SLR Relief exemptions to expire. This made bonds less sexy and glamorous for banks like JP Morgan because the expiry affected treasury exemptions: banks didn't need to hold additional collateral to slurp bond yields, and now they again do. It's much easier now to park money with the fed overnight and get a little more back. The RRP is a much better facility than treasuries as a result, so bond indexes have dropped even harder. SLR relief is a cherry on top, but this truffle has always tasted good without it. It's absence, and whether it is reinstated or not, should not be a determining factor in the recovery of bond prices, because: No market has currently priced in a recession, and interest rate expectations demonstrate that without a chart, but when that happens, the bond market will get top billing. Bonds will decouple from stocks and TLT will rise from the ashes like a phoenix in the next quarters, incinerating twitter and reddit soys drawing lines on a chart and shorting the index. Nobody saw it coming, they will say, but good trades are never crowded. Smart money extracts the deep value from TLT in the pre-recessionary market by going long (DCA or otherwise). Degenerate smart money is gambling with TLT long calls. Whereas most of the market is still buying stocks, crypto, and chanting that the markets are broken and the fed will come roaring in. These pigs won't find any truffles in this market. Interest rate expectations are unrealistic and the fed will have to pause sometime early 2023. The recession will destroy demand, taking growth, inflation, and equity market with it, rising bond prices and dropping bond yields. The stock market will crash (I don't consider this current price action a crash yet) and continue burning even as the fed pauses, and dip buyers will be buying a dip that keeps on dipping while you're selling your new truffles on ebay because you lost your job due to mass layoffs across the entire economy.
NASDAQ:TLTLong
by coinhoIio
10
Master of MarketsIn 2008 the U.S. central bank purchased  $1.25 trillion in mortgage-backed securities $200 billion in agency debt $300 billion in long-term Treasury securities 2008 was named QE1 and would continue for the next 6 years before the FED paused and eventually began to tighten. During times of QE, banks, companies, markets all perform great. There is plenty of liquidity to operate, margin is cheap. When the fed tightens, markets get volatile. Margin becomes expensive. Most companies will survive this volatility. They just pass the cost on to the consumer. This creates inflation. Sticky inflation. Fed has to tighten more to fight inflation. At this point it’s all they can do. But they risk crashing the markets. The fed controls just how much air is let out and how fast. That’s why you saw Jay Powell start with easing, into light QT and now in September the amounts they will be selling are very likely to put more down pressure on the markets. Just realize the FED can manage the market pressure, it’s the unexpected events during times of low liquidity and high volatility that concerns me. See the effects of Net liquidity on VIX over the past 15 years. Never reaching above 30 except during extreme events like the flash crash and china crash.. You can see we’re in a time of extreme volatility as clusters of volatility reaching over 30 4 times since Nov 2021. What is Net liquidity? Net liquidity is a formula I found on Fintwit that is supposed to predict the markets movements 2 weeks in advance. I don’t know if I believe that, but I did some Covariance analysis and there are certainly times during QE with high bullish correlation and QT there is high bearish correlations. To determine Net Liquidity you need to take The total assets of the Federal Reserve Balance sheet at 8.8 Trillion. Subtract The Treasury General Account at 617 Billion Then Subtract the 2.1T Overnight Reverse Repo You get 5.9 Trillion in Net Liquidity. Changes in the level of Net Liquidity (step up or step down) are claimed to predict the S&P 500 direction 2 weeks in advance. The claim is that of a 95% correlation since the transitory quantitive easing and reverse repo were implemented. I was curious to see if the claims were true. More on that tomorrow.
FRED:RESPPANWW
by SPYvsGME
7
Reverse Repurchase FacilityReverse Repurchases are a clear indication of excess liquidity in the Banking / Financial System. Money Center Banks have monies in excess after meeting obligations to the following: Liabilities Investments Lending An increase in the Reverse Repurchase activity will decrease the money supply. Reverse Repurchases mean that commercial banks are provided more incentives to park their funds with the Central Bank - decreasing the supply of money in the market. RRA's soak up excess Liquidity. As we can see they have broken Trends should be expected as CASH is within Overnight Reverse Repo Facilities @ $500Billion assist in providing support for overnight interest rates by acting as an alternative investment for a broad base of money market investors when rates fall below the interest on reserve balances. This is facility is not for public consumption, but Primary Broker / Dealers and Money Center Banks and Financial Institutions.
FRED:RRPONTSYD
by HK_L61
6
Reverse Repurchase Agreements expand 60% in 1 MonthDuress is everywhere. There is no escape, while the demand for Collateral increases the Rate of Demanded Collateral continues to Rise in Yield. Interesting Times indeed. For those trading "Conventional Paradigms" ... Please check your Six. The Federal Reserve is Supplying said Collateral from its ever-expanding Balance Sheet. At a large profit no less. We simply follow the leaders and OBEY. No real need to complicate matters or Howl at the Moon, as it frankly changes nothing. Trade it until the Lights go out.
FRED:RRPONTSYD
by HK_L61
M2 Money StockWe are witnessing a Crisis on par with LTCM, similar to the Russian Bond collapse. The Reverse Repo pool can be used in Net Effect to raise Rates. "Net" as it has another insidious component to it - Money Markets will again come under duress as the DX moves below Par at 100 Basis. Money Market Funds are seeing large inflows as Primary Institutions are telling Corporate Depositors to stop placing Liabilities on their Balance Sheets (Deposits are a Liability) - Interest Rates are relatively low for Money Market Accounts. We are watching a liquidity crisis begin to unfold. Wells Fargo cutting off personal loans - banks will be in trouble beginning in August. Loans are how Banks profit. The moratorium of eviction and mortgage defaults is lifted on July 31st. Defaults on loans are assured. Wells Fargo calling in all personal loans now in order to buffer the approaching defaults. When cash in Banks is reduced - the ability for Banks to weather a series of defaults is impaired - the impairment only serves accelerates the liquidity crisis merely weeks away.
FRED:M2REALShort
by HK_L61
3