Markets Weekly December 30, 2023

Hello my friends, today is December 30th and this is Markets Weekly. This week was a pretty quiet weekend market, but there are still some interesting things happening. On Friday, year-end date, we saw the RFP participation spike to over a trillion dollars. If you were looking at repo rates on that day, you also notice that repo rates were elevated as well. But taking a step back, we'll see that this happens on every year-end date and sometimes on quarter ends and month ends as well. Let me explain to you why this happens and why it's nothing to worry about.

大家好，今天是12月30日，这里是市场周报。本周市场相当平静，但还是发生了一些有趣的事情。在周五，年底时，我们看到回购协议市场的参与金额激增至一万亿美元以上。如果你观察当天的回购利率，你会发现回购利率也相对较高。但回顾一下整个情景，你会发现每年年底以及有时季度末和月底都会发生这种情况。接下来，我将解释为什么会发生这种情况，以及为什么无需担心。

Secondly, I want to take a step back and see how markets have performed over the past two months. I think what we'll see is that markets have basically just been one big trade. And like all trades, nothing goes in a straight line. Now might be a time to be a bit more cautious.

其次，我想回顾一下过去两个月市场的表现。我认为我们会发现市场基本上只是一次大的交易而已。而且，就像所有的交易一样，没有什么是一帆风顺的。现在或许是更加谨慎一点的时候了。

And lastly, let's take a look at the latest inflation numbers and see that it looks like the Fed is basically right on target, but let's also talk about the prospect of inflation re-accelerating later next year.

最后，让我们来看一下最新的通胀数据，可以看出美联储基本上做得很准确，但也让我们谈谈明年下半年通胀重新加速的可能性。

Okay, starting with the reverse repo facility. So on Friday, year-end date, we saw RFP take up spike to over a trillion dollars. But if you look at a historical graph of our P participation, you also notice that it basically spikes every year-end date and sometimes on quarter ends. And if you go back a few years, you also notice that it spikes on month ends as well. So why does this happen?

好的，首先从逆回购设施开始讲。所以在年末这一天，我们看到招投标回报交易升至一万亿美元以上。但是如果你查看我们的招投标参与历史图表，你也会注意到它基本上每年的年末日期以及有时候在季度末也会出现猛增。而且如果你回顾几年前的情况，你还会发现它也会在月末出现激增。那么为什么会发生这种情况呢？

Well, at a high level, this is just balance sheet window dressing. So banks at period end dates like month ends or quarter ends and year ends, sometimes adjust their balance sheet to make it look better to regulators and to investors. And that adjustment has real consequences to markets because at a high level, balance sheet is basically the availability of financing. So when the banks have a lot of balance sheet capacity, that means they have a lot of capacity to provide financing. And when they shrink their balance sheets, that also impacts the availability of financing as well.

嗯，在较高的层面上，这只是一种资产负债表的“窗口装饰”。所以银行在期末日期，比如月末、季末和年末，有时会调整他们的资产负债表，以便在监管机构和投资者眼中看起来更好。而这种调整对市场有着真正的影响，因为在较高层面上，资产负债表基本上代表着融资的可用性。所以当银行拥有大量的资产负债表容量时，这意味着他们有很多提供融资的能力。而当他们缩减资产负债表时，也会影响到融资的可用性。

Well, actually, bank balance sheet constraints are such an important part to understanding markets. I have a separate free online course on my website on the topic and I'll leave a link in the description below.

实际上，银行资产负债表的限制是理解市场的重要组成部分。我在我的网站上有一个独立的免费在线课程，该课程涉及此主题，并在下方的描述中留有链接。

So let's walk through an example. Let's say that you're a hedge fund and you want to borrow a billion dollars to make an investment. So you borrow a billion dollars from a bank. On the bank's balance sheet, it records a billion dollar asset loan to hedge fund. That's all great. But the thing is a bank's balance sheet is limited in its capacity. It can't provide infinite amounts of financing. The exact limits on a bank's balance sheet is going to differ from bank to bank, but it's largely going to be influenced by regulation. So during the great financial crisis, okay, before the great financial crisis, banks had very limit on their balance sheet capacity. And so they basically made a ton of loans. And then when the loans did not turn out well, the banks went bust and we got a huge financial crisis.

那么让我们通过一个例子来解释。假设你是一个对冲基金，想要借一百亿美元进行投资。于是你从一家银行借了十亿美元。在银行的资产负债表上，记录了一笔对冲基金借贷一百亿美元的资产负债。一切看起来都很好。但是问题是，银行的资产负债表容量是有限的，它无法提供无限量的融资。具体的限制因银行而异，但在很大程度上会受到监管的影响。所以在大规模金融危机之前，银行的资产负债表容量非常有限。因此，它们基本上进行了大量的贷款。然后当贷款没有预期好的回报时，银行破产，我们就遭遇了一次巨大的金融危机。

So after 2008, regulators put a whole bunch of rules on banks that really constrained their balance sheet size. It becomes more costly for them to expand their balance sheet. There's a whole lot of rules on this. So it's the constraints are really going to differ from bank to bank. But however, the way that these constraints, these regulatory constraints are calculated really depends on jurisdiction and it depends on the rule.

所以，在2008年之后，监管机构对银行制定了一系列限制其资产负债表规模的规定。对银行来说，扩大资产负债表的成本变得更高。在这方面有很多规定，这些限制对每个银行可能会有所不同。然而，这些监管限制的计算方式实际上取决于司法管辖区和具体规定。

For example, in some countries, these constraints are calculated based on what the bank has on their balance sheet at the end of the month. In other other jurisdictions, it's calculated differently. And for some rules, they're actually calculated exactly on what the banks have on their balance sheet at the end of the year. So among all the calculations dates, the year-end date is going to be the one that banks care most about. One, of course, basically everyone is going to have to be calculating a lot of ratios based upon their year-end date. And also what's on their balance sheet on your end is also what shows up on their annual report, which the shareholders look at. So the year-end date is a very important date for banks. So they want to be able to. Usually what happens is that they'll shrink their balance sheet a bit so they don't look as leveraged as they otherwise are. So on this date then, banks have less capacity to provide financing. So this actually is actually really interesting because if you look at nearly on the repo market, again, this affects bank balance constraints affect all markets. But since we're talking about the RP, we're talking nearly about the repo market. So that means that on year-end date, banks have less capacity to provide repo lending.

例如，在一些国家，这些限制是根据银行在月底资产负债表上的情况进行计算的。在其他司法管辖区，计算方法可能不同。而对于某些规定，实际上是根据银行在年底资产负债表上的情况进行精确计算的。所以在所有的计算日期中，年底日期是银行最关心的日期。当然，基本上每个人都必须根据他们的年底日期计算很多比率。而且年底时的资产负债表也是出现在他们的年度报告中，股东们会关注这一点。所以年底日期对于银行来说非常重要。因此，他们希望能够做到这一点。通常情况下，他们会缩小资产负债表，这样看起来杠杆作用就不那么大。所以在这个日期上，银行提供融资的能力就较少。这实际上非常有意思，因为如果你看一下回购市场，银行的资产限制影响着所有市场。但由于我们在谈论回购市场，所以这意味着在年底日期，银行提供回购借款的能力较少。

Now let's take a step back. Now usually when the bank is providing repo lending, where is it getting the money? What it's usually doing is it's borrowing from a money market fund and then taking that money and relending it to a hedge fund. So when the banks are doing this, it's called matchbook repo trade. They're borrowing from someone and they're lending to someone else. It's a pure intermediation trade. So in this context, balance sheet you can think of as the size of a pipe. Money is basically flowing through a bank's balance sheet to get to someone else.

现在让我们退后一步。通常，当银行提供回购贷款时，它从哪里得到资金？它通常是从货币市场基金借钱，然后将这笔资金再贷款给对冲基金。所以当银行这样做时，它被称为matchbook回购交易。它们从某人那里借钱，再借给另一个人。这是一种纯粹的中介交易。因此，在这种情况下，资产负债表可以被视为一个管道的大小。资金基本上通过银行的资产负债表流向其他人。

Now when the bank's balance sheet is being constrained, let's say on your end date for reporting reasons, then that pipe narrows. And logically it has two consequences. Now the people who are lending money to the bank, well, they're not going to be lending as much because the bank doesn't want to borrow as much. So those guys who are lending money to a bank, they got to do something else with their money.

当银行的资产负债表受限时，比如出于报告原因而限制你的截止日期，那么贷款管道就会变窄。从逻辑上讲，这将产生两个后果。现在借钱给银行的人，他们不会借出那么多钱，因为银行不想借入那么多。因此，那些借钱给银行的人必须用自己的钱做其他事情。

Now the second consequence of course is has to do with the people who are borrowing money from the bank. Well the bank is not lending them as much money as it was before. So those guys they're going to go and find money elsewhere. And this actually perfectly explains what happens to the repo market on year end date. So the bank's string their balance sheet less intermediation. So the money market funds who are lending to the banks, well, they're not lending as much. So what do they do with their money? They go and they place it in the reverse repo facility. And so we see our P participation spike on your end dates. And so those hedge fund guys who are borrowing from banks, well, they're not able to source as much financing as they used to. Say they go to borrow from somewhere else, maybe from smaller banks who are not as regulatory constraint, but in any case, the total amount of financing available to the hedge fund community is less than before. And then supply and demand less money available for lending means higher interest rates. So you see repo rate spike on these period end dates. And that's that's all that happens on these special reporting periods. Now what we'll see after the passing of your end date is that this will quickly revert. And so our participation will come down and repo rates will come down as well. Now in the past, we've also seen these constraints show up on month end dates. But again, it really depends on a lot of moving parts and the regulatory changes that have been occurring as well. So this is really something that everyone expects and it doesn't really mean anything at all. But it is an interesting thing that shows you how market structure impacts market pricing.

当然，第二个后果涉及到从银行借钱的人。银行现在借给他们的钱没有以前多了，所以这些人将去别处找钱。这实际上完美地解释了年末再购市场发生的情况。银行减少了资产负债表中的中介贷款。而这些借给银行的货币市场基金也没有借出很多钱。那么他们会怎么处理这笔钱呢？他们会将其放入逆回购工具。因此，我们会在年末时看到再购市场参与度的飙升。于是那些从银行借钱的对冲基金人士就无法获得以前那么多的融资了。或许他们会去找其他地方借钱，比如那些受到监管限制较少的小银行，但不管怎样，对冲基金界可获得的融资总额少于以前。而供需关系中贷款资金减少意味着利率上升。因此，在这些期末日期出现的再购利率飙升。这就是这些特殊报告期内发生的一切。那么在年末过后，我们会看到这种局面很快会恢复。这样，我们的参与度就会降低，再购利率也会下降。过去，我们也看到这些限制也出现在月末日期。但是，这确实取决于很多变动的因素，以及正在发生的监管变化。所以这真的是每个人都期望的情况，实际上并没有什么特别的意义。不过这确实是一个有趣的事情，它向我们展示了市场结构如何影响市场定价。

Okay, the second thing I want to talk about is just what's been happening in markets over the past two months. Now let's take a step back and look at interest rates. So we can see for the past two months, the 10 year yield has declined precipitously. Now it seems like the catalyst for that decline was the quarterly refunding announcement where the treasury seems to suggest that they're going to be issuing more bills and fewer coupons than expected and that spurred a rally in the US treasury market. And of course, in the weeks following, we had Fed officials who began to signal that maybe, maybe they might be thinking about pivoting. And so that poured more gasoline on the fire and so rates went down even more.

好的，我想要谈论的第二件事是过去两个月市场上发生的事情。现在我们退后一步，看一下利率。所以我们可以看到，在过去的两个月里，10年期美国国债收益率急剧下降。现在似乎导致这一下跌的催化剂是季度性退款公告，财政部似乎暗示他们会发行更多短期债券而减少预期的长期债券，这引发了美国国债市场的反弹。当然，在随后的几周，我们有美联储官员开始暗示可能会考虑转向政策。这更加助长了整个情况，并导致利率进一步下降。

So over the past two months, we've saw the steady decline in the 10 year treasury yield to levels that were prevailing. Well, actually, if you look, look back, it looks like we are where we started a year ago. And interest rates, of course, are tremendously important in determining asset prices.

在过去的两个月里，我们看到了10年期国债收益率稳定下降至相对较低的水平。实际上，如果你回顾过去，会发现我们现在所处的位置和一年前相差无几。当然，利率在确定资产价格方面非常重要。

Let's look at another chart here. This is a chart of the US dollar index. And just as interest rates have been declining, the dollar has been selling off makes perfect sense, right? As interest rates decline, the dollar is not offering as a compelling yield as it used to. So perhaps people don't want to hold as many dollars compared to other currencies as they used to. And of course, a dollar selling off interest rates declining that eases financial conditions. And we saw we see equity markets, the S&P 500, basically going up like a rocket ship over the past two months. Again, a lot of things happening in the markets, many moving parts, but at a high level, this seems to be like the one big trade that has been driving everything.

让我们看看另一个图表。这是美元指数的图表。随着利率的下降，美元一直在出售，这是很合理的，对吗？随着利率下降，美元的收益并不像以前那样具有吸引力。因此，人们可能不再像过去那样持有那么多美元，转而选择其他货币。当然，美元的抛售与利率下降相互影响，这缓解了金融条件。我们可以看到，过去两个月里，股市（标准普尔500指数）一直如火箭般飙升。市场中发生了很多事情，各种因素相互作用，但从高层次来看，这似乎是推动一切的一个重要交易。

Now, though, now, if that's the case, though, we also got to think, well, our rates can going to continue to decline. Well, I think that's getting a bit difficult to say because right now, if you look at markets, it seems like they're pricing in six interest rate cuts next year. You know, that's pretty aggressive. Maybe they're right. Maybe they're not. But at a high level, you know, when we look back historically, nothing goes up in a straight line. So when we see these tremendous moves moves in market prices that go in straight lines, we got to be a bit cautious. Doesn't mean it's not going to continue, but it does mean that sometimes usually what we see is some digestion, either sideways or a counter trend rally. So when I look at this, it seems like it's time to be a bit more cautious.

现在，不过，现在，如果是这样的话，我们也要考虑，我们的利率可能会继续下降。嗯，我认为这有点难说，因为现在，如果你看市场，似乎它们正在定价明年会有六次降息。你知道，那相当激进。也许他们是对的，也许他们不是。但从高层次的角度来看，你知道，当我们回顾历史时，没有哪个市场是一条直线上升的。所以当我们看到市场价格出现这些巨大的波动时，我们必须要有点谨慎。这并不意味着它不会继续，但它确实意味着通常我们会看到一些消化，要么是横向盘整，要么是反向反弹。所以当我看到这个情况时，似乎是时候要更加谨慎了。

Again, it doesn't mean that the rally is over. And as all you guys know, I'm very bullish on the S&P 500 going forward. So, but when we have these tremendous moves in markets, it just seems wise to be a bit more cautious.

再次强调，这并不意味着行情结束了。正如你们都知道的那样，我对标普500指数未来持非常看涨的态度。但是，在市场上出现如此剧烈的波动时，更加谨慎一些似乎是明智的选择。

And okay, the last thing that I want to talk about is inflation. So when we look at the most recent inflation data, we'll see something that's pretty interesting. So on a year over year basis, obviously inflation is still above target. But when we look at inflation for the past three months, for the past six months, what we see is that inflation that is looking at those numbers basically already on target.

好的，我想谈的最后一件事是通货膨胀。当我们查看最新的通货膨胀数据时，我们会发现一些相当有趣的情况。很明显，从年度角度来看，通胀仍然高于目标。但当我们观察过去三个月和过去六个月的通胀情况时，我们会发现通胀已经接近目标水平。

Now, does that mean the Fed's mission is accomplished? And so all these rate cuts being priced into the market, is that the right policy choice? Well, before we go there, I think it's helpful to look at a chart of inflation in the 1970s and 80s, which was the last inflationary period that we had. So as we can see, inflation went up and then it declined significantly. And then it re-accelerated. So there's always that prospect. And I'm sure when inflation went down at that time, everyone was thinking that the inflationary spike was over and mission was accomplished. So we got to be careful when we look at this. And it's helpful to think about just why inflation declined to understand whether or not it will potentially re-accelerate again later next year.

现在，这是否意味着美联储的使命已经完成了？那么市场上这些降息是否是正确的政策选择呢？在此之前，我认为看一下上世纪70年代和80年代的通胀图表会有所帮助，那是我们上次经历的通胀时期。正如我们所看到的，通胀率先上升然后显着下降，然后再次加速上升。因此总是会存在这种可能性。我相信当时通胀率下降时，每个人都认为通胀高峰已经过去，使命已经完成。所以我们要谨慎对待这个问题。同时，我们可以思考一下通胀为何下降，以了解明年年初是否可能再次加速上升。

So there's a lot of theories going on as to why inflation declined. And I'm sure the Fed will be eager to take credit. But when you look at it, it doesn't really seem like the Fed's interest rate policy had a big impact on decline inflation. Now the Fed was thinking that they would hike interest rates, cause a recession by slowing down interest rate sensitive sectors. And we saw some of that, but at the same time, we saw GDP growth continue to be strong, home prices continue to increase, stock market continue to soar. So it's hard to attribute a lot of this this inflation to what the Fed has been doing. A lot of it actually seems to be improvements in the supply chain that, again, inflation just supply and demand. And when you have increased supply, then prices come down. And so a lot of it doesn't seem to have much to do with what the Fed's Fed did in their interest rate policy. And that again leads to the next question.

因此，目前有很多关于通胀下降的理论。我确信美联储将急于把功劳归于自己。但是当你仔细观察时，似乎美联储的利率政策对通胀下降并没有产生很大影响。现在，美联储认为他们将提高利率，通过减缓利率影响敏感的行业来引发衰退。我们确实看到了其中的一些影响，但同时，GDP增长仍然强劲，房价继续上涨，股市继续飙升。因此，很难将这种通胀归因于美联储的行动。实际上，很大一部分原因似乎是供应链的改善，通胀只是供求关系。当供应增加时，价格就会下降。因此，很多情况似乎与美联储的利率政策无关。这再次引出了下一个问题。

Now then, if interest rates are declining and a lot of the disinflation was not due to the Fed's interest rate policy, does that mean that inflation could re-accelerate? And that's an interesting question that I talk about in my blog post this week, where I think that, yeah, I think that inflation has a good chance to re-accelerating again, later in the year.

那么，如果利率下降和许多通缩并非因为美联储的利率政策，这是否意味着通胀可能会重新加速？这是我在本周博客文章中谈论的一个有趣问题，我认为，是的，我认为通胀有很大机会在年底再次加速。

So before we go and we jump into soft landing territory and so forth, we got to think a little bit about where initial conditions are in the markets. Over the past couple months, we've had a significant easing in financial conditions. And at the same time, the underlying fundamentals of the economy seem pretty good. So there's a good chance that as interest rates decline, financial conditions ease, that we could see a real re-acceleration in inflation later on in the year.

在我们进入软着陆领域之前，我们需要略微思考一下市场的初始条件。在过去几个月里，金融条件已经得到了显著缓和。与此同时，经济的基本面似乎相当良好。所以，随着利率的下降和金融条件的缓解，我们有很大的可能在今年晚些时候看到通胀再次加速。

Now this is happening during an election year and at a time when I think many people are expressing a lot of concern over the objectivity of the Fed. So how the Fed will react, that's going to be in part a political question and I think it's not going to be strictly based upon what we see in the economy. Now I think it's really interesting to note that former president of the New York Fed, President Bill Dudley, who at the time when he was at the Fed, it was one of the top three most important people in the Fed, actually wrote in a 2019 column in Bloomberg saying that it might make sense for the Fed to influence the election through monetary policy because he really did not like one of the presidential candidates. And I don't know if there are other people on the Fed who feel the same way today. And so going forward I think Fed policy is going to be a bit more difficult to predict because there's going to be more of a political dimension. It's not strictly going to be about economics and so forth.

现在这件事正在选举年发生，在这个时候，我认为很多人对美联储的客观性表示了很多担忧。因此，美联储将如何做出反应，这在一定程度上将是一个政治问题，我认为它不仅仅是基于我们在经济方面看到的情况。现在我认为有趣的是，前纽约联邦储备银行行长比尔·达德利在他担任联储时，他是联储中最重要的三个人之一，在2019年的一篇彭博社专栏文章中写道，美联储通过货币政策来影响选举可能是合理的，因为他非常不喜欢其中一名总统候选人。我不知道现在是否还有其他美联储的成员有同样的想法。所以从现在开始，我认为美联储的政策将更加难以预测，因为将会增加政治因素。它不仅仅关乎经济等等。

So going forward I think next year is going to be an interesting year. I don't think that we have fully achieved the return to the inflation target and I think there's really really big risks that we could see inflation re-accelerate.

所以，我认为明年将是一个有趣的一年。我认为我们还没有完全实现通胀目标的回归，并且我认为存在非常非常大的风险，我们可能会看到通胀再次加速。

Okay, so that's why I prepared for today. If you're interested in my thoughts, check out my blog, FedGuy.com.

好的，所以这就是为什么我为今天做了准备。如果你对我的想法感兴趣，可以查看我的博客FedGuy.com。

If you're interested in learning more about markets, check out my online courses, centralbankin101.com and have a happy new year and I'll talk to you guys next week.

如果您对学习更多关于市场方面的知识感兴趣，请查看我在centralbankin101.com上提供的在线课程。祝福大家新年快乐，下周再和大家交流。