BlackMask Breaking News

Some big banks are cutting it close on a key regulatory measure, which could limit their ability to lend if year-end markets get rocky

https://youtu.be/4NbhBrvuXaI

Don’t rule out another bumpy New Year’s Eve in the funding markets. The lack of cash circulating in short-term money markets has pushed up the effective fed funds rate, the actual level at which banks lend to each other overnight. As a result, Hills says the CME’s tracker of rate decision probabilities may be reflecting the odds for the effective fed funds rate to remain elevated due to this week’s funding squeeze, rather than expectations for the fed funds target range going forward. The effective fed funds rate, the actual level at which banks lend overnight, jumped above the interest rate on reserves that bank keep in excess of their reserve requirements  Usually, this is seen as a temporary state of affairs because banks have no incentive to borrow from another bank when it could simply withdraw funds on deposit at the Fed, but the persistence of the fed funds rate above the IOER has raised questions whether the central bank is losing its grip over its benchmark interest rate.

Market participants have pointed to the sharp jump in the repurchase rate, or repo rate.  This key interest rate represents the amount that banks, dealers and hedge funds are charged for borrowing funds for a short period of time, in return for collateral such as Treasurys. Investors tend to be nervous about a climb in repo rates as they’re usually associated with banking crises and credit crunches. Repo rates spiked back in the 2008 financial crisis when banks were unwilling to lend to each other amid questions about their solvency.

WASHINGTON — President Donald Trump said Monday that he would impose tariffs on steel and aluminum from Brazil and Argentina, a move that would shatter previous agreements struck with those countries and widen a global trade war. Trump, in a message on Twitter, accused Brazil and Argentina of manipulating their currencies and hurting American farmers. “Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.” The Trump administration never imposed tariffs on Brazilian and Argentine metals, though it did force them to limit shipments to the United States under a quota system last year. The United States initially exempted Brazil, Argentina and other countries from the president’s sweeping metal tariffs in March 2018, with the United States saying it would continue negotiations with those countries to improve their trade terms. In May 2018, the United States announced that it had reached an agreement with the countries that would cap their metal shipments at a specific volume each year. It is unclear what prompted Trump to reverse those agreements. But last week the Brazilian currency, the real, fell to a record low against the dollar after the country’s economic minister signaled that he was not concerned about exchange-rate fluctuations.

Argentina’s peso has weakened with the country in the midst of an economic crisis.

Both economists and government officials have rejected the idea that Brazil and Argentina are manipulating their currencies. But those currency movements have made Brazilian and Argentine goods cheaper to purchase abroad, a dynamic that is particularly important for the agricultural sector and the U.S.-China trade war. As of Monday morning, neither the Office of the U.S. Trade Representative nor the Commerce Department had issued the formal notices that would put tariffs on Brazil and Argentina into effect. If they are imposed, the tariffs stand to do considerable damage to South America’s two biggest economies at a time when Argentina is in recession and Brazil confronts high unemployment and anemic growth. The announcement appeared to take the Brazilian and Argentine governments by surprise. “This was completely unexpected,” said Dante Sica, Argentina’s minister of production. “I was in Washington last week, and I talked to a lot of people, and there was no sign whatsoever that there would be any kind of change.” The Brazil Steel Institute, which represents the interest of steel exporters, said in a statement that it found the new tariffs “perplexing” and warned that it would harm companies in both countries.

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The only option is a full reserve bank that does not borrow money and does not lend money..

BAGHDAD (Bloomberg) – Iraq said that OPEC and its allies will consider deeper production cuts, though the comments come after the coalition has widely signaled reluctance to take such action. The reduction could be about 400,000 barrels a day, Iraq’s oil minister Thamir Ghadhban told reporters in Baghdad on Sunday, adding that Iraq complied with its commitment to lowering output in November. “This figure has been discussed and reached between OPEC ministers as a result of careful studies.” “There are viewpoints for OPEC+ to do further cuts, but not as big as 1.2 million barrels a day,” Ghadhban said. “Such cuts will lead to market stability, maintain shipments to consumers.” Contrary to Ghadhban’s comments, the Organization of Petroleum Exporting Countries and its allies have sent signals that they’ll stick with existing output cuts at their meeting this week. Even if the group doesn’t need to go beyond its existing curbs, supply and demand data suggest it will at least need to prolong the agreement past its current end-March expiry. In recent weeks, OPEC’s Secretary-General Mohammad Barkindo has publicly expressed optimism on the oil market, talking of “brighter spots for the 2020 outlook” and arguing that any weakness early in the year will be fleeting.Crude prices have remained around $60 a barrel for most of this year, despite supply disruptions such as the crippling attacks on Saudi Arabia’s energy infrastructure in September and Russia’s contaminated crude crisis. Banks have warned that oil could slump below $50 a barrel without deeper production cutbacks. Ghadhban’s comments are likely to be treated with skepticism by analysts, as the country’s has largely flouted its own agreed cutbacks and increased production. Even though the minister publicly pledged at an OPEC gathering in September that Iraq would finally honor its commitments, its performance barely improved. Just one out of 35 analysts and traders in a global survey by Bloomberg expect OPEC+ will agree a further reduction when they meet. Most of them see the 24-nation coalition — which cut output by 1.2 million barrels a day this year to prevent a glut — deciding to prolong their existing supply limits until the middle of 2020. Russia, one of the main architects of the deal, has consistently failed to hold up its end of the bargain: November may be the eighth month this year of the country’s non-compliance. Russian Energy Minister Alexander Novak said on Friday that it makes sense to decide on whether to extend or deepen cuts within the OPEC+ deal closer to its expiry in end-March.