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December 8, 2023 | Premium Service | It is more than a little surprising to see how few Fed watchers appreciate that the Street’s rotation out of Reverse Repurchase Agreements (RRPs) and into T-bills essentially provided the catalyst for the November rally – and the cash to fund the ¾ of a point decline in yields in the Treasury market. As we were sitting in the trading room this AM, the jobs number came out and the 10-year Treasury moved from 4.17% to 4.25% in less than a minute.
In this issue of The Institutional Risk Analyst, we take stock of the world of fixed income and credit as the year ends. As in December of 2018, the Street has essentially closed its books for the year. Large banks led by JPMorgan (JPM) have in so many words told the Street “no thanks” to new exposures, meaning that we may see more trouble in Repo land before the New Year. Look at the upward spikes in the Fed funds rate over the past two weeks.