Hedged.Biz

  • Disclaimer
  • About Us
  • Articles
  • Home
  • Articles
  • Fear Not QE Tapering
June 19, 2025

Fear Not QE Tapering

Fear Not QE Tapering

by Burnham Banks / Tuesday, 10 September 2013 | 12:25 am / Published in Articles
image_pdfimage_print

Do not fear QE tapering. Its a good thing.

1. Its a sign of strength, that the economy is able to tolerate tighter monetary conditions.

2. US treasury issuance is falling as a result of improving economic growth and thus tax receipts. If the Fed maintains its purchases as a proportion of issuance, it would have to slow its rate of purchases.

3. By operating QE, the Fed is removing from the market the most ubiquitous, important, and highest quality collateral used in repo agreements. The Fed does not rehpothecate its assets on a large scale ongoing basis, although it has been contemplating a reverse repo facility in its last FOMC meeting. QE therefore reduces the liquidity in the collateralized lending market. Given that LIBOR markets have thinned, since 2008 and then the LIBOR scandal, the repo market is extremely important to global credit and liquidity. QE tapering is positive for repo liquidity. Because collateralized lending, particularly on such short tenures has a highly advantageous risk weighted treatment under Basel 3 capital rules, it is an important source of credit in the current environment.

Ten Seconds Into The Future

“Hello. I’m Burnham Banks and I studied economics in the late 80s and early 90s. I’m still studying economics today and am still no wiser. This blog is a journal, a record of my thoughts and experiences. If we are destined to repeat our mistakes, we should at least repeat them faithfully. If not, then perhaps the past is a mischievous guide and we should try something new.”

Meta

  • Entries RSS

Featured Posts

  • Ten Seconds Into The Future 2025 06

  • Long short, hedging and market neutrality under unruly markets

  • Ten Seconds Never Felt So Long. 2025 Trade War.

  • Tariff Wars. The Best Response to Tariffs is to Cut One’s Own.

  • 2025 Geo Macro Scenario A

  • Fiction. Foundation CG. 2025 02

  • Thoughts from the Bar Stool. 2025 02

  • Trump. Vichy. Lebensraum.

  • FICTION. Ten Seconds Into The Future 2025

  • A Few Thoughts about AI

  • Ten Seconds into 2025. This is Thin…

  • Efficiency X Robustness and Other Tradeoffs

  • The Longevity Imperative

  • China Reflation Policy 2024

  • Three Big Themes, Investable or Not.

  • Fiction. Free Energy. Expropriation risk. Governance.

  • Fiction?: Matter and Interactions.

  • Blended Finance 1.0.1

  • Ten Second Into The Future 2024

  • Blended Finance 1.1

  • Environmental and Social Imperatives

  • Environment and Social Impact. Public Goods. Private Capital?

  • FICTION. Males are Alien Viruses. XY and XX.

  • Impact Investing 0.5

  • Ten Seconds Into The Future. 2023 Outlook.

Categories

  • Articles

Archives

  • RSS FEED

Copyright 2018 © Hedged.Biz All rights reserved

TOP