Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Interest rate spreads alone are not reliable indicators of when the level of reserves in the banking system are too low to the point when it may cause money market rates to jump like in late 2019, New York Fed President John Williams said in a blog post along with coauthors, instead highlighting the need to estimate changing demand sensitivity from banks for reserves.
Noting that the demand for reserves is highly nonlinear and has shifted due to regulation, supervision, and internal risk-management frameworks, Williams and coauthors Gara Afonso and Gabriele La Spada offer a method to measure the slope of the demand curve daily to assess when bank system reserves may be too low, indicating that current reserve levels remain ample. (See: MNI: Fed To Press Ahead With QT Amid Liquidity Concerns)
The Liberty Street Economics blog points out that reserves have ranged from 8% to 19% of bank assets from 2010 to 2022 and sits just over 14% today. And while interest rate sensitivity has changed over time it not near levels seen when money market rates spike in 2019.
Source: New York Fed
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.