JP Morgan, Bank of America, and Goldman Sachs all say Fed funding issues remain.

Bloomberg reports JPMorgan Warns U.S. Money-Market Stress to Get Much Worse.

JPMorgan Chase & Co. says the money-market stress that sent short-term borrowing rates surging last month is likely to get much worse despite the Federal Reserve’s attempts to inject billions of dollars into the financial system.

JPMorgan says it’s not convinced the Fed has resolved the issues in the funding markets, according to a note from analysts led by Joshua Younger in New York. Funding pressures resurfaced last week even after primary dealers, firms approved to trade directly with the Fed, took all of the available overnight liquidity from the central bank and sold it as many T-bills as possible.

“Given the benefits of our newfound perspective, we recommend viewing these moves as highlighting the limitations of the Fed’s chosen solution to their operational issues,” the analysts wrote. “With year-end coming up, this is all likely to get much worse, in our view, before it gets better.”

JPMorgan’s note follows similar warnings from Bank of America Merrill Lynch and Goldman Sachs Group Inc., who have also attributed September’s funding stresses to factors including post-financial crisis bank regulation. Even after the Fed’s latest moves to ease the log-jam in funding markets, “intermediation bottlenecks remain,” Goldman Sachs said.

Not QE Revisited Again

Overnight rates spiked to 10% in September prompting the Fed to claim the spike was due to end of quarter funding issues.

At the time the Fed stated a "Need to Resume Organic Balance Sheet Growth".

One to three billion would be "organic".

On October 4, I noted At Least $250 Billion In Short-Term Repos Through Oct 17.

On October 8, Federal Reserve Chairman Jerome Powell said the Fed Will Increase Supply of Bank Reserves, but it's not QE.

Amusingly the Fed said these emergency operations were neither QE nor monetary policy.

I wondered how the heck can operations designed to control interest rates not be monetary policy.

More Wonders

Apparently, I am not the only one wondering.

JP Morgan, Bank of America, and Goldman Sachs are all questioning the Fed.

Meanwhile the Fed is doing $60 billion a month in emergency repos to control rates yet a "big squeeze" happened again.

"Overnight" Operations Oct 17

Fed Injects $104.2BN Via Overnight, Term Repos One Day After Start Of "Not A QE"

— Ben Rickert (@Ben__Rickert) October 17, 2019

If the Fed keeps repeating "overnight" operations (and they are) it's not "overnight".

Federal Reserve Holdings of U.S. Treasury's & repos are up $232B over the past 50 days; QE1 expanded the Fed's balance sheet $296B over 5 months. Professor Bernanke argued QE was not "monetization" since it was only a temporary asset purchase. pic.twitter.com/3Qca6J3cJd

— Garic Moran (@GaricMoran) October 18, 2019

Pain Killers

RT DiMartinoBooth RT Schuldensuehner: It looks like the money market needs a painkiller on a regular basis: Banks borrowed from the Fed in overnight and term repos since liquidity intervention started in Sep. pic.twitter.com/blPXRzH0M4

— The Long Game (@7LongGame) October 19, 2019

#Fed Injects $104.2BN Via Overnight, the #repo rate was still abnormally above #fedfunds as repo market remains broken and #banks refuse to lend to each other https://t.co/YcMMd8mE4C

— Clive Dunn (@cliveldunn) October 17, 2019

Through November 4

The Fed says it will continue overnight repos of at least $75 billion through November 4 - https://t.co/OltqWitUMZ

— Express Services Company, Inc. (@ExpressServic16) October 22, 2019

Then till when?

Pertinent Question

"then begs the question: just why are banks so scared of lending money to each other - now that JPM's previously discussed reticence is also spreading to smaller banks - & choose to park their money with the Fed instead? What do they know that we don't."https://t.co/AmM7oxpY64

— Halcyon harbingr (@Halcyonharbingr) October 17, 2019

Not in Control

If you think the Fed is in control, think again.