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Bloomberg reports JPMorgan Warns U.S. Money-Market Stress to Get Much Worse.

JPMorgan Chase & Co. says the money-market stress that sent short-term borrowing rates surging last month is likely to get much worse despite the Federal Reserve’s attempts to inject billions of dollars into the financial system.

JPMorgan says it’s not convinced the Fed has resolved the issues in the funding markets, according to a note from analysts led by Joshua Younger in New York. Funding pressures resurfaced last week even after primary dealers, firms approved to trade directly with the Fed, took all of the available overnight liquidity from the central bank and sold it as many T-bills as possible.

“Given the benefits of our newfound perspective, we recommend viewing these moves as highlighting the limitations of the Fed’s chosen solution to their operational issues,” the analysts wrote. “With year-end coming up, this is all likely to get much worse, in our view, before it gets better.”

JPMorgan’s note follows similar warnings from Bank of America Merrill Lynch and Goldman Sachs Group Inc., who have also attributed September’s funding stresses to factors including post-financial crisis bank regulation. Even after the Fed’s latest moves to ease the log-jam in funding markets, “intermediation bottlenecks remain,” Goldman Sachs said.

Not QE Revisited Again

Overnight rates spiked to 10% in September prompting the Fed to claim the spike was due to end of quarter funding issues.

At the time the Fed stated a "Need to Resume Organic Balance Sheet Growth".

One to three billion would be "organic".

On October 4, I noted At Least $250 Billion In Short-Term Repos Through Oct 17.

On October 8, Federal Reserve Chairman Jerome Powell said the Fed Will Increase Supply of Bank Reserves, but it's not QE.

Amusingly the Fed said these emergency operations were neither QE nor monetary policy.

I wondered how the heck can operations designed to control interest rates not be monetary policy.

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More Wonders

Apparently, I am not the only one wondering.

JP Morgan, Bank of America, and Goldman Sachs are all questioning the Fed.

Meanwhile the Fed is doing $60 billion a month in emergency repos to control rates yet a "big squeeze" happened again.

"Overnight" Operations Oct 17

If the Fed keeps repeating "overnight" operations (and they are) it's not "overnight".

Pain Killers

Through November 4

Then till when?

Pertinent Question

Not in Control

If you think the Fed is in control, think again.

Mike "Mish" Shedlock