ONRRP and TGA are both “autonomous” liquidity drains. Moving from one to other is liquidity neutral. If you’re referring to the Fed “deferred asset “ it’s a mild offsetting stimulative to the bigger QT contraction.
Wow thank you so much for your reply. Apologies I was not clear, I mean the interest payment of $275bn per year on ONRRP and Reserve essentially reduces the Fed's withdrawal of liquidity of $95bn QT by approx. $26bn per month, if the interest payment is not staying with the reserve or ONRRP with Fed, so a positive on risk asset. I am a credit analyst. I struggle to understand why spreads of corporate bond are so tight and lack of volatility, while interest coverage, default rate, recovery rate all decline. For equity, inflation may help but certainly not corporate bonds.
For payment to money-market funds, yes, that passes to end investors so I think you are right and you make a good point. In the case of banks I see IOR payments as an essential mitigant to losses from inverted yield curve. Reading between the lines, that seems to be the context of some of Jamie Dimon's comments over the last few years, and the composition of JPM's balance sheet. But for the industry as a whole IOR is a mitigant rather than a total offset.
That's ongoing stealth QE as well? No wonder the risk assets are still strong.
ONRRP and TGA are both “autonomous” liquidity drains. Moving from one to other is liquidity neutral. If you’re referring to the Fed “deferred asset “ it’s a mild offsetting stimulative to the bigger QT contraction.
Wow thank you so much for your reply. Apologies I was not clear, I mean the interest payment of $275bn per year on ONRRP and Reserve essentially reduces the Fed's withdrawal of liquidity of $95bn QT by approx. $26bn per month, if the interest payment is not staying with the reserve or ONRRP with Fed, so a positive on risk asset. I am a credit analyst. I struggle to understand why spreads of corporate bond are so tight and lack of volatility, while interest coverage, default rate, recovery rate all decline. For equity, inflation may help but certainly not corporate bonds.
For payment to money-market funds, yes, that passes to end investors so I think you are right and you make a good point. In the case of banks I see IOR payments as an essential mitigant to losses from inverted yield curve. Reading between the lines, that seems to be the context of some of Jamie Dimon's comments over the last few years, and the composition of JPM's balance sheet. But for the industry as a whole IOR is a mitigant rather than a total offset.