In order for the Fed to intervene in the panic, there needs to be a systematic failure of financial institutions
So far, the areas where damage has been accumulated are stocks and foreign exchange, so the liquidity problem in the bond market has begun to break out or the load on short-term financing capacity has not increased significantly
Unless the financing burden on financial institutions and the stress on the bond market rise to dangerous levels, the U.S. central bank may be burdened with an emergency meeting to respond as actively as it did during the COVID-19 pandemic. (The money crunch was so severe that short-term overnight borrowing was almost impossible. Short-term bond liquidity has also dissipated.)
Previously, Japan has set its direction like mixing cold water and hot water when implementing economic policies (such as increasing the range of YCC band fluctuations but continuing to buy bonds or ETFs)
Recently, the market was surprised to turn off the hot water and only pour in the cold water, such as showing a willingness to actively intervene in the foreign exchange market, suspending the ycc, and raising policy interest rates
If the market stress caused by this knocks down a U.S. financial institution or puts a strain on the housing market, the U.S. central bank can take action in earnest
Since U.S. financial institutions do not leverage financing with stocks, and the U.S. bond yield has fallen due to the liquidation of Encarry, wouldn’t it be hard to say that U.S. financial institutions’ stress has risen sharply right now..
Of course, the situation changes so quickly that it wouldn’t be surprising to hear that it’s broken in one place when you wake up, or that the aftermath of the N-Carry liquidation shocked the housing market
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