Overnight Repo Market Shutting Down(?)

[Dietrich]

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/general%20colalteral%208.1.png

[Dietrich]

Pay attention folks. The overnight rate is up 35% so far today, and rising...

[Ross]

Do they fear a downgrade of US Treasuries overnight ?

I can understand participants not wanting to
be part of long term repurchase agreements but overnight ? WTF !

Can borrowers refuse to repurchase the security ??

Perhaps it is other forms of liquid security not US Treasuries they
are concerned about ?????

[Dietrich]

Do they fear a downgrade of US Treasuries overnight ?

That, or just a collapse in their value. Recall, the collateral for the repo is a treasury and has to have value at least equal to the size of the overnight loans.

[Ross]

I assume borrowers are obligated to repurchase ?

If so the implication is that lenders fear borrowers will be UNABLE to
repurchase so they are charging a premium for risk .

[Dietrich]

I assume borrowers are obligated to repurchase ?

Yes. It looks like this:

1) 6pm Monday: Bank A gives a $1million Treasury to Bank B, in exchange for $1million cash.
2) 8am Tuesday: Bank A gives bank B $1million plus interest for the Treasuries.


If treasuries collapse in value, then Bank A should default on Bank B at 7:59am, tomorrow.
Since Bank B knows this, Bank B should refuse to engage in the transaction at all (or demand a huge interest rate).

[Kassy]

A market message to the politicians?

[Dietrich]

And note: there are no amateurs or small players in the Repo market. Whatever signals are sent from there, are sent 100% from sophisticated bond dealers, unlike the stock market which is buffeted by the dumb decisions of every tom-dick-and harold.

[Ross]

are sent 100% from sophisticated bond dealers
Frankly I do not have great confidence in young people playing
with other peoples money especially where office politics
and their own self interest are probably significant factors .


I believe the accepted explanation for Repo market trauma
is "The difficulty in valuing assets offered as collateral" .

[Dietrich]

Fair enough. Not sure I'd disagree with you, Ross.

[Potemkin]

"Rollover"

http://www.imdb.com/title/tt0083006/

Roll over Beethoven, 30 November 2010
7/10
Author: sol from Brooklyn NY USA

*** This review may contain spoilers ***

***SPOILERS*** Corporate crime and manipulation of stocks bonds and currencies is the shocking story of the movie "Rollover" that's much more like what's happening today in 2010 that back in 1981 when the film as released.

In it we have a number of shadowy figures in the US and overseas who are trying to cover their behinds by siphoning off the cash accounts of the financially strapped Borough Savings Bank in order to convert their ill gotten gains into billions in gold bullion. It's when the banks CEO Charlie Winter, Garrison Lane, was found murdered in his office in the World Trade Center that it became very apparent that his murder had something to do with the banks cash flow troubles! That in the fact that Charlie uncovered in an account, #21214, that was secretly funneling millions of dollars out of it every month!

With the late Charlie Winters' wife Lee, Jane Fonda, becoming the banks new president she tries to save it from going under by brokering a half billion deal a deal for a petrochemical plant in Spain with the bank getting a 1% finders fee on it. That's just enough to pay off its shareholders next dividend in order to keep it was going bankrupt. As all this is happening 1st New York Bank President Maxwell Emery, Hume Cronyn, who's a silent partner in the distressed Borough Savings Bank hires financial whiz kid Hub Smih, played by a super clean shaven Kris Kristofferson, to get to the bottom of the Borough Bank's problems. That's before the final bell, on Wall Street, rings and it collapses like a house of cards!

***SPOILERS*** What Smith soon discovers is that it's non other then the man who hired him Maxwell Emery himself who's behind Borough Savings Bank's impending collapses. In Emery using account #21214 to secretly shift the banks money into it he's been bleeding the bank white and at the same timer waiting for the right moment for him as his Saudi Arabian banking partners to pull out all the money in that bank as well as some 1,200 to 1,500 other banks all across the US and Europe! That would end up making the dollar as well as any other national paper currency as worthless as the paper its printed on! As for Lee Winters, who had discovered the truth about her husbands murder, her trying to blackmail Emery and his Saudi partners in crime in having them agree on a sweetheart deal with her, to keep Lee and the Borough Bank from going bankrupt, has them put her on the hit list, like her late husband Charlie, for immediate termination!

A bit over the top at the time of its release "Rollover" is in fact a forerunner to movies like "Wall Street" in how those who control power ruthlessly use it to keep them in control. Smith is soon confronted with the truth, a possible collapse of world currencies, and is together with Lee Winters totally helpless to do anything about it.

***MORE SPOILERS*** As the Saudis go into panic mode in being caught with their pants down start to pull their money out of US and European banks the entire world economy goes straight to hell together with them and the person they put their trust in to keep their grandiose plan secret Maxwell Emery! As for Hub Smith and Lee Winters they like everyone else will have to start from ground zero in getting back on their feet financially after all the dust, in food monetary riots and runs on banks,clears!

[Malcolm]

I cant remember if "Bush" redifined the meaning of the word............ 'TRUST"