source: US Treasury
This is important because:
- Short-term T-bills compete with the RRP (reverse repo) for investment from money markets. All else equal, an increase in bill issuance equals a drain of the RRP. Thus, the net reduction in bills next quarter means the RRP won’t be drained as fast, as, all else equal, $245 billion in maturing bills should find it’s way back into the RRP.
- In January, Dallas Fed President Lorie Logan was out suggesting the Fed should “slow asset runoff as reverse repo dwindles.” If the reverse repo dwindles more slowly due to a net reduction in bills, this could imply that the Fed can wait longer to begin tapering Quantitative Tightening.
A delay in the slowing of QT relative to market expectations would be a medium-term headwind for assets.
Banking Woes Re-Emerge As New York Community Bancorp Stumbles
New York Community Bancorp unexpectedly reported a net loss of $250 million and cut its dividend in response to $185 million in charge-offs stemming from two real-estate loans on Wednesday morning, January 31.
The news sent the stock tumbling 38% to the exact lows it reached last March during the regional bank panic, reigniting investor fears over the stability of the regional banking system. The KRE regional bank ETF traded down 6%.
NYCB bought the failed Signature Bank out of receivership from the FDIC last March. Their troubles come just as the Bank Term Funding Program is set to expire on March 11.
Bitcoin rallied and bond yields fell sharply in immediate reaction to the print, clouding the reaction to the Treasury’s QRA, as markets perhaps anticipated renewed troubles in the banking sector would lead to further liquidity measures from the Fed.
As a reminder, bitcoin rallied sharply in reaction to the creation of the BTFP last March.
Fed Holds Rates Steady
The first FOMC meeting of the new year came and went without significant changes in monetary policy.
Markets we’re not expecting any changes this meeting, but rather looking for clues as to whether or not the Fed would begin their rate cutting cycle at the March meeting, pricing in just shy of a 50% chance of a cut in March heading into Wednesday’s meeting.
Fed Chair Jerome Powell, however, threw some cold water on that belief.
“I don’t think it’s likely that the committee will reach a level of confidence (that inflation has come down enough) by the time of the March meeting” Powell said during the Q&A portion of his press conference today.
Stocks were down and yields were flat in the wake of the decision, while bitcoin gave back the rally it had off the NYCB print.
Podcasts of the Week
The Last Trade E035: The Bitcoin Heritage Blueprint with Matt McClintock
In this episode of The Last Trade, we spoke with Matt McClintock, the founder of Bespoke Group, to discuss the importance of legacy and estate planning within the context of bitcoin wealth. We explore the intricacies of properly securing one’s wealth & propagating it across multiple generations to build a lasting legacy. We also introduce our new offering, Onramp Heritage.
Final Settlement E002: Energy-Backed Money with Max Webster
In the second episode of Final Settlement, hosted by Brian Cubellis and Michael Tanguma, we’re joined by Max Webster, founder of Hivemind Ventures. This episode dives deep into the technological underpinnings of bitcoin, exploring the implications of energy-backed money, bitcoin’s layers, Nostr, Lightning, rebuilding web architecture, & more.
Closing Note
Onramp provides bitcoin investment solutions built on top of multi-institution custody. To learn more about our products for individuals and institutions, schedule a consultation to chat with us about your situation and needs.
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Until next week,
Zack Morris
