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Donald J. Trump Truth Social Post 09:06 AM EST 01.12.26

Congratulations to DINA POWELL MCCORMICK, WHO HAS JUST BEEN NAMED THE NEW PRESIDENT OF META. A great choice by Mark Z!!! She is a fantastic, and very talented, person, who served the Trump Administration with strength and distinction! President DJT

ugly after hours

are $orcl earnings really reversing the entire move we saw today from a dovish Powell

the call was bad, really bad

but it shouldn’t be reversing one of the most dovish FOMC’s we’ve had all year

10-year is also down…credit market isn’t screaming here

🤔🤔

Source: amit

Here's what's going on with the Fed and Wall Street right now and it's kinda wild when you understand the full picture (save this).

The Fed created something called the Standing Repo Facility (SRF) back in 2021 as basically an emergency lending window for banks and dealers. Think of it like this, banks need cash overnight to keep operations running smoothly. Normally they borrow from each other in what's called the repo market but when that market gets tight when money becomes scarce and expensive, the Fed steps in and says we'll lend you cash at a fixed rate.

Right now that rate is sitting at around 4.00%. One of the main reasons why the Fed does this is to stabilize short term interest rates. By offering cash at 4.00%, the Fed creates a hard ceiling on repo rates. If the market ever tries to spike higher, banks can simply borrow from the SRF instead forcing rates back down and keeping the financial plumbing from blowing out.

Here's the proble, almost nobody's using it, even though they arguably should be. Over the past couple months, we've been seeing repo rates spike above what the Fed is offering through the SRF. That happens when the market gets tight and dealers are willing to pay more than the Fed's rate to access private funding. You'd think banks would immediately jump on the Fed's cheaper option, right? Wrong. Last week, Fed President John Williams called in the primary dealers basically the big Wall Street trading houses to a meeting and urged them to use the facility more. Their response? A polite but firm rejection.​

The reason is simple but tells you something important about how Wall Street actually operates, stigma. Borrowing directly from the Federal Reserve is seen as a sign of trouble.If a major dealer suddenly starts regularly tapping the Fed's emergency window, market participants interpret that as this bank is in financial distress. It's like if you suddenly started asking your parents for regular money sure it's available, but everyone notices and forms an opinion.​

But here's where it gets more interesting. Back in November, banks actually did borrow a record $50.35 billion from the SRF in a single day, the highest since 2021. That happened because the liquidity pressure got real enough that the stigma concern started becoming secondary to actually getting cash. The Fed has been draining liquidity from the system through quantitative tightening (basically shrinking its balance sheet) and meanwhile the Treasury has been issuing massive amounts of new debt competing for the same cash. Money got tight.​

Now we're at a point where repo rates are regularly trading above the Fed's offered rate but dealers still won't use the facility in size because they're worried about market perception. What this actually means is that Fed is essentially standing there with an offer that makes economic sens, but dealers are choosing to pay more money to preserve their reputation. It's a classic example of how markets aren't purely rational psychology and perception matter just as much as price.

This is a warning sign for year end liquidity. We're heading into one of the tightest times of year for cash in the financial system month end and quarter end settlements create massive temporary demand for cash. If dealers won't tap the Fed's facility and the market doesn't have enough private liquidity to go around, you could see some real dysfunction. The Fed had that closed door meeting with the dealers partly to figure out how bad this could get and to basically explain that yes using the SRF is totally normal and they shouldn't be embarrassed.​

Keep an eye on SOFR (the overnight secured financing rate) and tri party repo rates as we get closer to month end. If those spike materially above the Fed's target range and stay there, it tells you the Fed is losing rate control, which becomes a problem not just for the Fed's credibility but for the actual functioning of these critical markets. However with all of this, I do believe SRF is actually working as designed, it's preventing rates from spiking catastrophically even though dealers aren't using it optimally and these spikes in rates will eventually stabilize.

Source: StockMarket.News

The 10-year Treasury yield jumped 9 basis points to around 4.08%, its sharpest move in weeks, after the Fed’s meeting and it all came down to Jerome Powell throwing cold water on the market’s December rate cut hopes.

Here’s what happened in simple terms. The Fed cut rates by 25 basis points, bringing the federal funds rate to 3.75% - 4%, and confirmed plans to end quantitative tightening in December. That was expected. Traders had already priced it in. What wasn’t expected was Powell’s tone right after.

During the press conference, Powell said a December rate cut is “far from a foregone conclusion”, and noted there were “strongly differing views” among Fed officials. Translation: the Fed isn’t sure whether it wants to keep cutting or hold steady. That sent bond yields higher because investors suddenly realized the “easy money” path might not last.

When rate cuts get delayed, bond prices fall and yields rise, especially on long-term bonds like the 10-year Treasury. That’s exactly what happened today. The 10-year yield moved from around 3.98% to 4.08%, while the 2-year also climbed roughly 8 basis points. The yield curve steepened slightly signaling that the market expects short-term rates to come down slowly but long-term inflation to stick around.

Powell mentioned that inflation is still “somewhat elevated” at around 3%, and hinted it could stay that way. He also said there are “two-sided risks” meaning the Fed is now balancing between keeping jobs strong and preventing inflation from heating back up. With unemployment at 4.3%, Powell made it clear the economy isn’t in danger yet.

Another factor: the government shutdown has delayed key data releases like jobs and inflation reports. Powell said the Fed will have to “collect every scrap of data we can find” until normal reporting resumes. That uncertainty makes policymakers less likely to commit to more cuts right now.

Source: StockMarket.News

Fed reserves just slipped under $3 trillion again, sitting at $2.933 trillion for the week ending October 22, down another $59 billion.

That’s the second week in a row below the $3T mark, and the decline is accelerating. Earlier this month, we had eight straight weeks of bleeding reserves before a small pause, but now the slide’s picking up speed and this latest drop is bigger than the typical $20–45 billion moves we were seeing before.

So what’s going on? The U.S. Treasury has been rebuilding its cash pile back to over $800 billion since the debt ceiling was lifted in July. To do that, they’ve been flooding the market with short-term Treasury bills. But every time the Treasury issues new bills and collects money, that cash leaves the banking system moving from private bank deposits to the Treasury’s account at the Fed. When those settlements hit, banks and dealers have to deliver cash, which directly drains reserves.

Here’s where it gets messy: the Overnight Reverse Repo Facility (RRP) once a $2.5 trillion cushion for liquidity swings is basically empty now, sitting around just a few billions. Back when QT and Treasury issuance were draining cash, the RRP absorbed the shock. Now that buffer’s gone, so every dollar drained hits the banks directly.

You can already see this tension spilling into money markets. On October 15, repo rates spiked to 4.36%, which is unusually high for a normal day. Banks have started tapping the Fed’s Standing Repo Facility (SRF), an emergency backstop we haven’t seen used this heavily since the COVID liquidity crunch. SOFR spreads are widening, the effective fed funds rate is inching higher, and funding costs are tightening across the board.

That’s why everyone’s watching next week’s FOMC meeting (Oct 28–29). JPMorgan and Bank of America both expect the Fed to end QT soon. Powell hinted as much in his October 14 speech saying we’re “approaching ample reserves” and acknowledging that repo rates are getting firm. The Fed’s playbook is clear: stop QT before another funding crisis hits, like in September 2019 when repo rates exploded to 10%.

If the Fed does announce an end to QT, liquidity should loosen quickly. Treasury yields would likely fall, risk assets would rally, and money market stress would ease. But until then, we’re in a fragile stretch. More Treasury settlements are coming, month end pressures are near, and reserves are skating dangerously low.

Source: StockMarket.News

Historically, shutdowns have not been the market killer many fear. The last 6 shutdowns all saw the S&P 500 rise from start to finish. Even the 35-day freeze in 2018–19 saw the index surge nearly 10%.

Yes, Powell’s dovish pivot helped then but the bigger takeaway is clear: markets shrugged off the shutdown and rallied. Why? Because markets hate uncertainty, but they also know every shutdown will eventually be resolved.

Stocks are always priced forward, discounting today’s drama in anticipation of tomorrow’s solution.That’s why shutdowns tend to create more noise than real damage.

The real risk this time isn’t the shutdown itself, it’s the delay of key economic data like the jobs report. Without that data, investors are flying blind on the Fed’s most-watched indicators.

Source: StockMarket.News