The Fed relied on JP Morgan to lend out cash into the repo market. But that was before the too-big-to-fail giant made a pivot out of cash into securities.
There has been a lot written about September’s turmoil in the dollar repo market. And I mean a lot. On 17 September, the secured overnight financing rate (SOFR), which had hitherto closely tracked the Federal Funds rate, suddenly rocketed up to 10%. For a brief moment, US dollar repo enjoyed the same overnight funding cost as Brazil.
At this moment, banks were not doing their customary job of lending out the cash that the Federal Reserve had provided (via reserve balances). They had stopped purchasing treasury bonds and other securities from counterparties, which they would resell a short time later at a slightly lower price. The Fed had to step in and start lending instead, providing up to $75 billion each day.
Only a couple of weeks after that, JP Morgan was in the frame. Analysts had noted a big decline in the bank’s cash and reserve balance at the end of 2018, and Risky Finance data confirms this. Between June 2018 and June 2019, JP Morgan’s cash and reserve balance fell by $138 billion, a decline of more than a third. By contrast, cash and reserve balances for the other five largest US banks barely fell at all during this period, as the Risky Finance banking tool shows.
JP Morgan’s pivot was described in February by the bank’s then-CFO as a “yield-enhancing opportunity to redeploy cash” on the grounds that money market rates were higher than the interest rate on excess reserves (IOER) paid on balances at the Fed. The bank used some of the cash to buy securities, adding $50 billion of treasury bonds and $30 billion of agency mortgage-backed securities in the 12 months up to June. With bond yields falling during this period, it was a good move from a shareholder perspective to make the switch, and helped boost the bank’s interest income.
As the Bank for International Settlements noted in its December 2019 quarterly report, the reduction in cash by “top four banks” (read JP Morgan) coincided with a structural change in the repo market – instead of using repo as a funding source as they had done in the past, the largest US banksJP Morgan instead became a net provider of funding. We see this in the chart of net repo assets versus liabilities of the banks over time.
While the BIS took care to anonymise the names of the largest banks in its study, we can be less circumspect. According to Risky Finance data, JP Morgan accounted for 41% of all repo lending by the six biggest US banks at the end of 2016. By June 2019, this had increased to 46%, or $465 billion of repo loans. In effect, JP Morgan was the lender-of-last-resort to the repo market.
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[…] market which has soared on the back of the Fed's QE4 which was launched to "fix" the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] on the right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for the […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case for […]
[…] right foot, with JPMorgan – which as a reminder is the bank that started QE4 in October by triggering the repo market crisis in September – reporting quarterly earnings that as has been traditionally the case […]
[…] liquidity response to the JPMorgan-precipitated repo-market crisis (it's not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] response to the JPMorgan-precipitated repo-market crisis (it’s not just our view that Jamie Dimon caused the repo crisis), which triggered not only the first Fed use of repos since the financial crisis, but also $60 […]
[…] shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] the sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] sudden, JPMorgan-mediated liquidity shortage at the “top 4” commercial banks which prevented them from lending into the repo market)… – read […]
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[…] shortage at the “top 4” commercial banks which prevented them from lending into the repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
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[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] precipitate the repocalypse (and it’s not just us who make this claim, but other more “reputable” websites and news sources have since joined our clarion call), but with its actions it also […]
[…] surge in order to 10% a function of provide (or lack thereof), with banking institutions – mainly JPMorgan – tugging liquidity from the repo market leading to a panic scramble for any pregressive […]
[…] only was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] only was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] only was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] only was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] only was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] was the overnight repo surge to 10% a function of supply (or lack thereof), with banks – primarily JPMorgan – pulling liquidity from the repo market causing a panic scramble for any incremental dollar […]
[…] Morgan’s decision to switch from cash to securities a year ago is starting to look well timed. It might have upended the repo market, but it has already turbocharged the bank’s capital ratio as US treasury yields plunged. Bank of […]
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[…] – which just a few months earlier received a repo and “NOT QE” bailout for breaking the repo market – unexpectedly said it wanted to use the discount window again in hopes of breaching the […]
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[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] – we said that in addition to the implicit bailout of JPM (which we described here first, and subsequently others), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in […]
[…] other bubble in financial market is the Fed’s bailouts from money printing to the repo market, the banks, the hedge funds, etc. As the Fed’s Balance Sheet and total US’ Debt increase enormously from its […]
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[…] crossing back above the $4 trillion mark back in October 2019 in the aftermath of the JPMorgan repo bailout, also known as “No QE”, the Fed’s balance sheet is nearly double that amount a […]
[…] crossing back above the $4 trillion mark back in October 2019 in the aftermath of the JPMorgan repo bailout, also known as “No QE”, the Fed’s balance sheet is nearly double that amount a […]
[…] convince the market that his panicked effort to inject reserves into banks (such as JPMorgan which single-handedly triggered the repo crisis) so that trillions in levered hedge fund pair trades did not collapse on themselves once their repo […]
[…] soared on the back of the Fed’s QE4 which was launched to “fix” the repo market after JPMorgan broke it). Active mutual funds as well as retail investors have raised exposure following the strong market […]
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