The move in Fed Funds is leading to a Dollar breakout and renewed EM stress
Is the Fed Fund move that is driving all this just a temporary April 15th tax related issue, or is something more going on with FHLB's?
Prism's model selects the structure to position for further Dollar liquidity stress
A funny *micro* thing happened on March 19th that is now leading to some interesting macro moves:
As you can see, Fed funds moving above IOER has been an anomaly through the hiking cycle as IOER acts as a ceiling to Fed Funds by design. So what is going on? The most common explanation is the April 15th tax deadline. You have seen money market funds sold, bank reserves dwindle which is indicative of folks tapping funds to pay their tax liabilities.
If that is right, I have two questions:
Why didn't this happen on April 15th any other year – it didn't
Why did it happen this year