Welcome to TBL Weekly #67—the free weekly newsletter that keeps you in the know across bitcoin, rates, risk, and macro. Grab a coffee, and let’s dive in. River is the Bitcoin exchange of choice for the long-term investor. Securely buy Bitcoin at the
Thanks, Joe. To finish off on this thought, are you saying that banks drawing from the RRP need the cash to shore up their solvency and is therefore a signal banks are less likely to buy the newly issued Treasuries that Yellen is hawking?
Not really, banks are leaving the RRP and rotating into bills. Once the RRP is fully drained, bill yields will rise until a marginal buyer is found, and the marginal buyer will sell stocks, corporate bonds, and even bitcoin to buy them. That was what I meant in the paragraph you're referencing — hope that clears it up. Great questions.
Basic question here. How does the continued reduction of available cash in the Fed’s RRP make it more difficult for Yellen’s Treasury to continue spending?
I tried to ChatGPT my way to answer and got spun in circles. 😔
Good question! It's not that it makes it more difficult for Yellen to find buyers for US Treasuries, but that the money to buy them will have to come from other assets (stocks, corporate bonds, bitcoin, etc.)
Right now, capital is just shifting away from the RRP (an overnight risk-free facility) to the marginally higher yielding UST bills (a short-term risk-free interest-bearing asset) — once there's no more money to shift from the RRP and into UST bills, the money to buy bills will come from elsewhere, to the detriment of those other assets' prices!
Thanks, Joe. To finish off on this thought, are you saying that banks drawing from the RRP need the cash to shore up their solvency and is therefore a signal banks are less likely to buy the newly issued Treasuries that Yellen is hawking?
Not really, banks are leaving the RRP and rotating into bills. Once the RRP is fully drained, bill yields will rise until a marginal buyer is found, and the marginal buyer will sell stocks, corporate bonds, and even bitcoin to buy them. That was what I meant in the paragraph you're referencing — hope that clears it up. Great questions.
Basic question here. How does the continued reduction of available cash in the Fed’s RRP make it more difficult for Yellen’s Treasury to continue spending?
I tried to ChatGPT my way to answer and got spun in circles. 😔
Good question! It's not that it makes it more difficult for Yellen to find buyers for US Treasuries, but that the money to buy them will have to come from other assets (stocks, corporate bonds, bitcoin, etc.)
Right now, capital is just shifting away from the RRP (an overnight risk-free facility) to the marginally higher yielding UST bills (a short-term risk-free interest-bearing asset) — once there's no more money to shift from the RRP and into UST bills, the money to buy bills will come from elsewhere, to the detriment of those other assets' prices!
Hope this helps sir.
Appreciate the engagement and lightning fast replies here btw. Continue to enjoy my paid subscription and content from you and Nik!
*is therefore a signal that those banks are unlikely