Yellen’s “big change of face”? Only on Tuesday he stressed not to worry about liquidity, but on Wednesday he warned that US bonds could collapse as a result.
Financial Associated Press, October 13 (Xiaoxiang publisher) In her latest speech on Wednesday, local time, US Treasury Secretary Janet Yellen mentioned concern that US Treasury transactions could collapse due to lack of liquidity. The US Treasury Department, under her leadership, is currently working to support this key market.
“We are concerned that the (treasury bill) market lacks sufficient liquidity,” Yellen said in response to questions following remarks in Washington on Wednesday.
He noted that the balance sheet capacity of market makers trading in US Treasuries has not increased much, while the overall supply of US Treasuries has increased.
An industry statistic shows that the U.S. national debt has increased by about $ 7 trillion since the end of 2019. But large financial institutions are less willing to act as market makers due to the so-called Supplemental Leverage Ratio (SLR), which requires capital to be invested in these assets and reserves.
Yellen noted that the Fed now has a long-term repo structure that provides liquidity support to the US Treasury market, which “could help.”
He also said the 30-member panel came up with some “good ideas” about reforms that would help strengthen markets, including a possible expansion of central clearing. Founded in 1978, the 30-member group is an international non-profit organization made up of central bank governors of certain countries and celebrities in the international financial field.
Yellen’s “big face change” before and after 24 hours
It is worth mentioning that, although viewed in isolation, Yellen’s overnight warning of a possible US Treasury crisis due to lack of liquidity has not attracted much criticism. But if you put together Yellen’s latest remarks from Wednesday and those of the day before, obviously there is no shortage of “self-harm”.
Zero Hedge, a well-known financial blogging site, said unceremoniously that Yellen appeared to be suffering from “amnesia”. Zero Hedge put Yellen’s observations together into two speeches in just 24 hours, and the extent of her face change is clear at a glance:
At 4:23 pm Eastern Time on Tuesday, Yellen said, “I am not worried about the liquidity of the market;
At 4:38 pm EST on Wednesday, Yellen said: “I am concerned that the national debt will lose sufficient liquidity;
As reported yesterday, Yellen noted in an interview Tuesday in Washington on the sidelines of the annual IMF and World Bank meetings that he has not yet seen any signs of financial instability in US financial markets.
In this regard, Zero Hedge said that as far as Yellen’s speech is concerned, the answer is actually very simple: a sector measure of the liquidity situation of the US Treasury market, which is currently at the height of the crisis since the blockade of the new one. corona epidemic. Most stressful state ever!
Remember, the last time Treasury liquidity was this negative, the Fed provided $ 1 trillion a day in overnight loans to big banks and launched a $ 120 billion monthly bond purchase policy to avoid a catastrophic short-term. rush on the dollar.
And this time, what can Yellen and Fed Powell do?
