Jay Kahn

Economist covering repo, Treasuries, money markets—markets that work quietly but fail loudly. Views my own.

[Jay Kahn @jstatistic]

Why is it hard to pin down the "right" size for a central bank's balance sheet?

Our note breaks down the tradeoffs involved. 👇

[Jay Kahn @jstatistic]

Our latest FEDS Note offers a new lens for focusing on the tradeoffs involved in setting the size of central bank balance sheets:

The central bank balance-sheet trilemma

[Jay Kahn @jstatistic]

Reserves aren't the only thing moving money market spreads. To understand recent moves it helps to account for changes in demand — specifically from hedge funds. https://t.co/bt38QBAsj1

[Jay Kahn @jstatistic]

Link here: https://t.co/bt38QBAsj1

[Jay Kahn @jstatistic]

Net repo borrowing by hedge funds has hit 1.8T, much of it associated with the basis trade.

This has drawn attention for financial stability reasons.

But has this expansion in hedge fund Treasury trades affected monetary policy implementation?

New note w/ Matt McCormick.

[Jay Kahn @jstatistic]

BNY has a new piece organizing the balance sheet debate around the trilemma framework from my FEDS Note with Burcu: small balance sheet, limited operations, low money market volatility—pick two.

BNY piece: https://t.co/NVywW4Hzdj

Original FEDS Note: https://t.co/F8KQWxd0Ew

[Jay Kahn @jstatistic]

@aRishisays @EtraAlex @WinMonroe Fed in the past has done repo OMOs at market rates TBF, though that's not what the SRP is

[Jay Kahn @jstatistic]

The Treasury Borrowing Advisory Committee this week debated whether Treasury should invest excess TGA cash in the repo market.

Doing so could dampen the impact of TGA swings on repo conditions, something I track daily here: https://t.co/wsJ46GwPBM

[Jay Kahn @jstatistic]

@EtraAlex @WinMonroe (for instance TGA is already just the Treasury holding cash backed by UST in at the Fed)

[Jay Kahn @jstatistic]

@EtraAlex @WinMonroe

[Jay Kahn @jstatistic]

@AahanPrometheus Lowering funding volatility reduces the risk of the trade (e.g. https://t.co/At0eyRJZhV
). But there's debate about how much that vol matters (see https://t.co/9BP8qIj5U1).

[Jay Kahn @jstatistic]

@DavidBeckworth It's interesting to me because it *could* reduce an obstacle with going back to the TT&L system (e.g. https://t.co/Vh2BgImFMO) which is that huge swings in deposits are a pain for banks to manage.

Maybe it would be easier for the repo desk?

[Jay Kahn @jstatistic]

The sensitivity is highly responsive to reserve conditions which has made it very useful in recent years.

[Jay Kahn @jstatistic]

@AahanPrometheus @VARshad_ @dampedspring @conksresearch Here is the closest thing we show which uses matched maturity bills for the cost of funds. This gets tenor right but misses the spread charged to HFs.

Other people use overnight HF repo rates and miss on tenor, or use interdealer rates and miss on both.

[Jay Kahn @jstatistic]

@AahanPrometheus @VARshad_ @dampedspring @conksresearch The big missing variable here is funding costs. There is no reliable series for hedge fund term repo costs (even in the transaction data available to people like me!).

[Jay Kahn @jstatistic]

Further options from Lorie Logan and Sam Schulhofer-Wohl:

https://t.co/lyksq5CvD0

[Jay Kahn @jstatistic]

First slide of Darrell Duffie's new paper out on payments and the Fed's balance sheet he's presenting at the BPEA conference this afternoon:

[Jay Kahn @jstatistic]

Full BoE feedback statement here: https://t.co/Y7CmmlS0kn

[Jay Kahn @jstatistic]

This from the feedback to the BoE discussion paper on gilt repo contrasts with some of their research but is very much consistent with our proportionate margining note: https://t.co/DilBEtubyd

[Itai Sher @itaisher]

If your take is that what distinguishes your group from others is that your group is better, that should trigger some self reflection.

[Jay Kahn @jstatistic]

And on the same day, with accompanying paper:

https://t.co/WDfgvPSgAI

[Federal Reserve @federalreserve]

Speech by Governor Miran on prospects for shrinking the Fed’s balance sheet @EconClubofMiami: https://t.co/1pFmJde7Sk

Watch live: https://t.co/jwromy0K2y

Learn more about Governor Miran: https://t.co/e2PfCOyRwd

[Jay Kahn @jstatistic]

First slide of Darrell Duffie's new paper out on payments and the Fed's balance sheet he's presenting at the BPEA conference this afternoon:

[Jay Kahn @jstatistic]

Paper, slides and livestream are here: https://t.co/SdIcSm92Mg