Making Sense

Data released on  reserves held by depository institutions that were borrowed from the Federal Reserve through the Discount Window (DW), Paycheck Protection Program (PPP) Liquidity Facility (PPPLF), Bank Term Funding Program (BTFP) announced on Mar 12 and other lending facilities show a sharp surge in use of Federal Reserve Facilities. To put things in perspective, the Primary credit discount window as on 8th March was availed to the extent of USD 4.6 bn which surged to USD 153 bn post the SVB Crisis. If you look at the chart number 1 below, on the left hand side of the chart , you would observe the peak usage before the collapse of SVB Bank to the tune of USD 111 bn as on Oct 29, 2008.  The PPPLF is a covid era measure with nothing home to write about. The BTFP facility which became operational on 13th March 2023 saw usage to the tune of USD 12 bn  (Chart 2) . Other credit extensions rose from zero as on 08th March 2023 to USD 143 bn in the aftermath of the crisis  ...

India CPI inflation for the month of February came in at 6.44% , marginally lower than 6.52% recorded in the month of January and above my estimates of 6.00% - 6.20%.  Let's quickly crunch the data: Mom headline CPI rose 0.21% . Only F&B (w. 45.86%) recorded negative momentum in prices but the rest of the basket saw mom rises. Housing (w. 10%) was up 0.80% mom; pan, tobacco and intoxicants plus clothing and footwear plus miscellaneous (w. 37% ) was up 0.40%, while food and beverages was down a marginal 0.06% (w. 46%). While declines were recorded in most of the F&B sub components, cereals, milk, spices, prepared mails recorded a rise.  Core CPI continues to be elevated at 6.10%. RBI projects Q4 FY 23 inflation at 5.70%. The Jan and Feb outturn at 6.52% and 6.44% was higher. My own estimates for March 23 inflation are at 5.62% which if the data comes in line will take the quarterly average at 6.16% above RBI's Estimates.  Market is pricing in another 25 bps of rate...

US Treasury, Federal Reserve and FDIC in a joint statement announced decisive steps to protect depositor's money. 1. Depositors will have access to all their money starting Monday, March 13. 2. FDIC will complete the resolution of SVB Bank and any losses associated with the resolution will NOT be borne by the tax payer. However, Shareholders and Unsecured Debt holders will not be protected. 3. A similar resolution was announced for Signature Bank (assets of $ 110 bn) which closed on Sunday. 4. A separate additional funding facility was made available - " Bank Term Funding Program (BTFP)" - to eligible depository institutions to help banks to meet the funding needs of all their depositors.  The facility will offer loans of upto 1Y pledging US Treasuries, Agency Debt, MBS and other qualifying assets. These assets will be valued at par. 5. Treasury made available $ 25 bn from the Exchange Stabilization fund as a backstop to BTFP.  The risk sentiment recovered with S&P fu...