LIQUIDITY WATCH. THE DISCOUNT WINDOW RE-OPENS. TOO LITTLE, TOO LATE?
. Federal Reserve: "Factors Affecting Reserve Balances", December 12

- Fed's Treasuries holdings: $782.4bn (-$8.1bn)
- Other central banks' Treasuries holdings: $1,228.6bn (+$2.9bn) (*)
- Other central banks' agency securities: $811.7 (+$0.7bn) (*)
- Global Dollar Liquidity Measure: $2,822.7bn (-$4.6bn)

(*) Off-balance-sheet items
agustin_mackinlay@yahoo.com
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For the first time since mid-September, banks are borrowing at the discount window. The weekly Fed balance sheet registers a $2.7bn increase in "primary credit", a sure sign that the discount window has indeed re-opened. But is it not a case of "too little, too late?" Overall, the stock of Treasury holdings at the central bank shows a sharp $8.1bn decline, a reflection (IMHO) of the bizarre shape of the yield curve, with the Fed funds rate target still above the ten-year note yield. The annual rate of growth of the Global Dollar Liquidity measure takes another hit: at 12.4%, the situation still qualifies as a "funding liquidity boom". But if current trends persist, it will not be long before we see sub-10% growth rates. This may be the message sent by a slightly stronger dollar, although some commodities markets —especially in the grains complex— are still "dancin' in liquidity".