RRP
May 25, 2021
–Usage of the Fed’s RRP facility hit a whopping $395 billion as attached chart shows. It’s hard not to conclude something is ‘wrong’ when we see this sort of outlier regarding EXCESSS excess reserves. New historic low yesterday in 3-month libor at 14.088 bps. This morning China yuan is at a new high vs USD around 6.40. Yesterday Brainard said inflation expectations are “extremely” well-anchored (as dollars continue to flood into the system, thereby raising every price). DXY is 89.60 this morning, testing the year’s low.
–Today’s news includes New Home Sales expected 950k, Consumer Confidence and the auction of 2-year notes with when-issued yielding about 15.7 bps, just over 1.5 bps above 3m libor. Curve flattened somewhat yesterday with tens down 2.2 bps to 1.606%. The thirty year bond fell 3 bps to 2.301%.
