call the repo man

January 7, 2020

–Once again, overnight moves on Monday morning were faded with stocks grinding back to end positive on the day (and higher yet this morning).  Gold was able to hang on to gains, with GCG0 closing +16.4 at 1568.80.  The Suleimani situation is ‘contained’.  Rate futures were quiet.  Ten year yield rose 2.3 bps to end at 1.811%.   5/30 edged up 1.2 bp to 67.5 with auctions beginning today, starting with $38b 3 year notes.  This week’s auctions of 3, 10, and 30 year paper raising nearly $33b in new money according to TBAC. 

–Econ data in the US includes Trade expected -43.7b, Durables expected -2.0% and ISM Services expected 54.5 from 53.9.  Japan’s Service ISM released this morning fell to a contractionary 49.4 from 50.3 last.  

–Grant’s daily missive (ADG) featured a note on the US auto industry.  “According to data from FRB of NY, the percentage of auto loans considered seriously delinquent (i.e. 90 days past due) stood at 4.71% in Q3, up from 4.27% a year ago and the highest reading since 2011.”  Total auto loans outstanding are $1.32T, and 31.5% of new loans are 7 years in length, up from 10% a decade ago.  This, with an apr on newly financed vehicles at 5.4% in December.  Better call the repo man. 

 –Speaking of which, former NY FRB head William Dudley wrote an op-ed endorsing the idea of creating a standing repo facility, “open to a broad set of counterparties confined to Treasury and agency mortgage-backed securities collateral.  Such a facility would effectively cap repo rates.”  Can we slightly broaden the acceptable collateral to securitized auto loans?  Because…that’d help. 

Posted on January 7, 2020 at 5:06 am by alexmanzara · Permalink
In: Eurodollar Options

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