Central banks, regulators and fiscal authorities, and what their decisions do to the price of capital.
Q and A
Six questions about the September 10 decision, answered with the arithmetic rather than the adjectives. The whole argument turns on $38bn a month and who has to buy it instead.
Semi-liquid funds have gathered 148bn euros from private wealth channels in four years on monthly dealing terms. Redemption requests hit 3.1 per cent of net assets in August, and the quarterly limit is 5.
Marketable Treasury debt has grown 71 per cent since 2019 while primary dealer capacity to hold it has grown 24 per cent. The mismatch shows up as wider bid offer on the days it matters most.
Three of the twelve voters objected to sending all reinvestment into bills rather than to holding the policy rate. That split is about who bears duration risk, and it does not resolve until the December review.
Policymakers stopped shrinking the portfolio on Wednesday and will direct maturing proceeds to Treasury bills. The signal reads as neutral on the policy rate and distinctly negative for duration.
A backstop that lends cash against Treasury collateral at a fixed rate should cap the secured funding rate. In late August it did not, and the reasons say more about the plumbing than about the level of reserves.
A draft standard from the International Private Credit Valuation Council would require funds to publish mark dispersion against a common template. Managers who value the same loan differently will have to explain the gap.
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