{"id":48532,"date":"2019-09-18T09:30:46","date_gmt":"2019-09-18T14:30:46","guid":{"rendered":"https:\/\/olduvai.ca\/?p=48532"},"modified":"2019-09-18T09:30:52","modified_gmt":"2019-09-18T14:30:52","slug":"nomura-exposes-the-feds-imminent-mega-shift-beware-quad-witch-untethered-markets","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=48532","title":{"rendered":"Nomura Exposes The Fed’s Imminent “Mega-Shift” – Beware Quad Witch & “Untethered” Markets"},"content":{"rendered":"\n

Nomura Exposes The Fed’s Imminent “Mega-Shift” – Beware Quad Witch & “Untethered” Markets<\/a><\/h3>\n\n\n\n

“This is a big deal,” <\/strong>warns Nomura’s Charlie McElligott – a man not known for hyperbole – as he reflects on the sudden, dramatic changes occurring in the very deepest levels of plumbing of the world’s supposed most-liquid markets.<\/p>\n\n\n\n

Another massively over-subscribed repo liquidity injection this morning<\/a>, coupled with The Fed’s dramatic loss of control of rates<\/a> suggest what McElligott calls a “potential mega-shift” in policy from The Fed.<\/strong><\/p>\n\n\n\n

\"\"\/
Source: Bloomberg<\/em><\/figcaption><\/figure>\n\n\n\n

Nomura Chief Economist Lew Alexander shifted his call for today\u2019s FOMC meeting to include:<\/p>\n\n\n\n

An announcement that the Fed will resume the expansion of the balance sheet again in coming weeks<\/strong> (in addition to a 25bps cut and likely announcement of ongoing \u201cas needed\u201d repo transactions in order to maintain short-term interest rates within a range that is consistent with the target range for funds rate\u2014however, we still do NOT anticipate an imminent announcement of a \u201cStanding Repo Facility\u201d nor another lowering of IOER relative to the top of the FF target range today\u2026while we also expect the dots to show no further rate cuts at this juncture, despite our \u201chouse\u201d call for one more cut in either Oct or Dec)<\/p><\/blockquote>\n\n\n\n

McElligott’s Bottom line<\/strong>: <\/p>\n\n\n\n

Due to the acute nature of the $funding stress dynamic in recent days, I believe the delta of a Fed \u201cbalance sheet expansion\u201d headline today (one which would begin imminently) is significantly underpriced in the market and risks catching investors \u201coff guard\u201d<\/strong>.<\/p><\/blockquote>\n\n\n\n

\u00a0The market\u2019s \u201cmuscle memory\u201d in the post-GFC period has condition\u00a0many participants into believing that \u201cbalance sheet expansion = QE\u201d and risks a \u201cBULLISH risk-asset sentiment shock\u201d<\/strong>\u00a0(FWIW, \u201cBS expansion = QE\u201d is NOT actually the case per se, as what we think the Fed plans to do is much more \u201cQE-Lite\u201d in order to offset the Reserve depletion dynamic\u2014NOT inject incremental liquidity \u201cabove and beyond\u201d to actually \u201cpump up\u201d Reserves).<\/p>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Nomura Exposes The Fed’s Imminent “Mega-Shift” – Beware Quad Witch & “Untethered” Markets “This is a big deal,” warns Nomura’s Charlie McElligott – a man not known for hyperbole – as he reflects on the sudden, dramatic changes occurring in the very deepest levels of plumbing of the world’s supposed most-liquid markets. Another massively over-subscribed repo […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[22310,27196,8470,3650,4318],"class_list":["post-48532","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charlie-mcelligott","tag-financial-liquidity","tag-nomura","tag-us-federal-reserve","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48532","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48532"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48532\/revisions"}],"predecessor-version":[{"id":48533,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48532\/revisions\/48533"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48532"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48532"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48532"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}