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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (47898)	12/21/2005 2:43:08 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 110194

AEI economist argues that Fed may have to tighten much more than most expect. Unusually objective analysis from this neo-con bastion. aei.org

To: russwinter who wrote (47898)	12/21/2005 3:17:59 PM
From: ahhaha	Respond to of 110194

I've followed TOMO operations for years, and don't recall seeing a balance ($45 billion) this high since 9/11. The economy keeps get stronger so you should expect that transactional balances support must be larger. This is augmented around this time of the year due to large demand for currency and credit for shopping. Nothing usual about this blast at all. I suspect it will disappear by week's end? Check the maturity, 1 day on $12B and 2 days on $6B. It's out by Friday. The SOMO account monetization actually seems fairly restrained, nothing since 11/18. They were running at about $4B/mo since April probably associated with a slowing in M2/MZM and then for hurricane related needs. If they back off for several months, we're back to the slightly deflationary, transaction and currency demand support only approach, that has been their hallmark for several years. There's another factor developing: weakening in C&I loan demand growth. It implies the US economy is slowing, and that FED may be sufficiently tight. I think so. We do have a prime at 7.25 and a discount rate at 5.25. C&I is still paltry enough so there's no need to pull down window reserves, but who would want to at those prices? 7.25 prime. That's mighty high in this low yield world. Of course, who borrows at prime? Of course, who can?