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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Paul Kern who wrote (85714)8/30/2007 11:36:51 AM
From: russwinter  Read Replies (2) of 110194
 
The Fed has built up the TOMO account to $33 billion outstanding. But look closely at today’s activity: there were submissions for 73.4 billion in MBS and 26.5 billion in agencies.
ny.frb.org

So institutions are trying to use the Fed funds source for borrowings. However, the Fed accommodated for only $10 billion and AT 5.225 TO 5.44%. Is that loose? Hardly, in fact it sort of signals no rate cut may be in the cards.

We will get discount window action this afternoon.

from Dennis Gartman:

Of the greatest concern to us, however, shall be the roll-over of asset backed commercial paper at the month’s end tomorrow. If there is a place in the capital markets where a very real leak can spring it is here.

As an old friend at one of the most important investment banks in the world wrote to tell us yesterday that the Asset Backed Commercial Paper is almost to the point of being basically defunct and this is very timely as tomorrow will be the 30th of the month and twice the paper that the market has been able to roll is due. There is a high chance it may not get rolled. This is essentially telling us that banks do not have faith in each others’ collateral. This is no small market and to me no small issue for if banks don’t trust each others collateral, who does?

The ABCP market currently stands at $1.1 trn but is coming down rapidly as more and more paper fails to roll and gets thrown back on the books of banks who then have to “average down on a bad position” by funding the position with good capital.
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