Nice entry here to piggyback off this reversal. Buy the dip has been the trade. Well, there you have it everyone: a dip!
But there's a massive risk, of course....
The fed is closing most of its Covid crisis emergency facilities!!
FT, "Federal Reserve to close most Covid crisis emergency facilities", MARCH 8 2021
And there's still much uncertainty about SLR forbearance, which if cancelled, could add trillions back to SLR calculations.
โThe biggest forbearance measure was a move by the Fed in May to exclude treasury bonds and central bank deposits from the leverage exposure measure. That wiped $2 trillion off the SLR denominator, including $619 billion at JP Morgan alone."
"Just one of the regulatory changes implemented by the fed in the response to the economic shutdowns would have reduced the denominator (total assets) for calculating the SLR by $3 trillion for the 6 largest banks (regulatory balance sheets)..."
"...without three critical forbearance measures, some banks such as Citigroup or Goldman Sachs would have been just 30 basis points away from the minimum, which would prompted the Fed to restrict their trading and lending activity.โ
--Risky Finance, November 2020
Mnuchin also surprised markets back on November.19th when he requested that all unused feds offered by the treasury be re-appropriated, something that many market participants did not see coming.
โWith respect to the facilities that used CARES Act funding (PMCCF, SMCCF, MLF, MSLP, and TALF), I was personally involved in drafting the relevant part of the legislation and believe the Congressional intent as outlined in Section 4029 was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020. As such, I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds,โ said Secretary Steven T. Mnuchin.
Might update later..And just an idea of course! Invest @ your own discretion!
