Jay Kahn

1.9K posts

Jay Kahn

@jstatistic

Economist covering repo, Treasuries, money markets: markets that work quietly but fail loudly. Views my own.

Washington, DC Katılım Ekim 2014

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Jay Kahn@jstatistic·15 Oca

Why is it hard to pin down the "right" size for a central bank's balance sheet? Our note breaks down the tradeoffs involved. 👇

Jay Kahn@jstatistic

Our latest FEDS Note offers a new lens for focusing on the tradeoffs involved in setting the size of central bank balance sheets: The central bank balance-sheet trilemma

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Jay Kahn@jstatistic·15h

Maybe my favorite slide of the deck: in order to prevent wider plumbing problems from a ransomware attack at ICBC, BNY employees had to run over a physical USB stick to grab settlement details. Illustrates how operational risk often means falling back on timely human intervention.

Jay Kahn@jstatistic

Thankful to present at the Future of Market Liquidity and Functioning Workshop, on a panel with Dallas Fed President Logan, SOMA Manager Roberto Perli, and DRW's Don Wilson. I shared thoughts on how digital innovation and operational risk in the repo market, slides below.

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Jay Kahn@jstatistic·4d

Here's a link to the slides: j-kahn.com/files/digital_…

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Jay Kahn@jstatistic·6 Tem

@Atomic_GSol @aRishisays @EtraAlex @federalreserve @FedResearch @dismaleconomist @stwill1 There is truly no good data on this yet, and even the better data that is coming on repo will not definitively answer this. As Brandon said we're all sizing up the elephant.

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Brandon Weber@Atomic_GSol·6 Tem

@aRishisays @EtraAlex @federalreserve @FedResearch @jstatistic @dismaleconomist @stwill1 I actually haven’t entered that question in ChatGPT yet. But yes, we are all on the same team.

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Alex Etra@EtraAlex·5 Tem

Nice #FedNote from @federalreserve @FedResearch using more granular data than us plebes in the public get. While less much less precise this Z.1 based data provides a longer term perspective. Cc @jstatistic @dismaleconomist @aRishisays @stwill1

FedResearch@FedResearch

New #FEDSNote: Decomposing Hedge Funds' U.S. Treasury Exposures Large hedge funds' Treasury exposures have doubled to $4.0 trillion (2023-Sept 2025) on a gross basis and their Treasury securities holdings are now 8.5% of outstanding Treasuries (1/3). federalreserve.gov/econres/notes/…

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Jay Kahn@jstatistic·7 Haz

@mean_field_zane @TheEconomist x.com/jstatistic/sta…

Jay Kahn@jstatistic

Let’s walk through the new Brookings paper on the basis trade and especially their proposal that, in stress, the Fed should take over basis trade positions. I'll link to related work (including ours) in a QT.

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𝔐𝔽𝓩@mean_field_zane·7 Haz

@jstatistic @TheEconomist Have you read Anil Kashyap’s paper on this?

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Jay Kahn@jstatistic·7 Haz

.@TheEconomist did it again! Guys, read up on the issue before you write a "Special Report."

Jay Kahn@jstatistic

Contra @TheEconomist, contracturally most Treasury repo haircuts for hedge funds are zero. When you do see negative haircuts, it's usually hedge funds lending to dealers—not the other way around.

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Jay Kahn@jstatistic·7 Haz

If you actually want to understand haircuts, go here: x.com/jstatistic/sta…

Jay Kahn@jstatistic

Recently, there’s been growing concern about low or zero haircuts in repo markets. @dismalscience and I argue that safety and liquidity can both be enhanced by setting repo margins that are 𝘱𝘳𝘰𝘱𝘰𝘳𝘵𝘪𝘰𝘯𝘢𝘵𝘦 to each counterparty’s actual risk. Thread (and link) below:

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Jay Kahn@jstatistic·1 Haz

Reserves aren't the only thing moving money market spreads. To understand recent moves it helps to account for changes in demand — specifically from hedge funds. dallasfed.org/research/econo…

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Jay Kahn@jstatistic·28 May

Link here: dallasfed.org/research/econo…

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Jay Kahn@jstatistic·28 May

Net repo borrowing by hedge funds has hit 1.8T, much of it associated with the basis trade. This has drawn attention for financial stability reasons. But has this expansion in hedge fund Treasury trades affected monetary policy implementation? New note w/ Matt McCormick.

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Jay Kahn@jstatistic·8 May

BNY has a new piece organizing the balance sheet debate around the trilemma framework from my FEDS Note with Burcu: small balance sheet, limited operations, low money market volatility—pick two. BNY piece: bny.com/corporate/glob… Original FEDS Note: federalreserve.gov/econres/notes/…

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Jay Kahn@jstatistic·7 May

@aRishisays @EtraAlex @WinMonroe Fed in the past has done repo OMOs at market rates TBF, though that's not what the SRP is

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Rishi Mishra@aRishisays·7 May

@EtraAlex @jstatistic @WinMonroe Treasury can lend directly in repo. Fed can’t lend via SRP unless Dealers demand! Also, the rate.

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Jay Kahn@jstatistic·7 May

The Treasury Borrowing Advisory Committee this week debated whether Treasury should invest excess TGA cash in the repo market. Doing so could dampen the impact of TGA swings on repo conditions, something I track daily here: j-kahn.com/repoelasticity/

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Jay Kahn@jstatistic·7 May

@EtraAlex @WinMonroe (for instance TGA is already just the Treasury holding cash backed by UST in at the Fed)

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Jay Kahn@jstatistic·7 May

@EtraAlex @WinMonroe

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Jay Kahn@jstatistic·7 May

@AahanPrometheus Lowering funding volatility reduces the risk of the trade (e.g. papers.ssrn.com/sol3/papers.cf… ). But there's debate about how much that vol matters (see dallasfed.org/research/econo…).

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@aahan_prometheus@AahanPrometheus·7 May

@jstatistic How does this impact the basis trade?

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Jay Kahn@jstatistic·7 May

@DavidBeckworth It's interesting to me because it *could* reduce an obstacle with going back to the TT&L system (e.g. federalreserve.gov/econres/feds/a…) which is that huge swings in deposits are a pain for banks to manage. Maybe it would be easier for the repo desk?

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David Beckworth@DavidBeckworth·7 May

@jstatistic So is this a sign of things to come? Or just talk at this point?

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Jay Kahn@jstatistic·7 May

The sensitivity is highly responsive to reserve conditions which has made it very useful in recent years.

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Jay Kahn@jstatistic·28 Nis

@AahanPrometheus @VARshad_ @dampedspring @conksresearch Here is the closest thing we show which uses matched maturity bills for the cost of funds. This gets tenor right but misses the spread charged to HFs. Other people use overnight HF repo rates and miss on tenor, or use interdealer rates and miss on both.

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Jay Kahn@jstatistic·28 Nis

@AahanPrometheus @VARshad_ @dampedspring @conksresearch The big missing variable here is funding costs. There is no reliable series for hedge fund term repo costs (even in the transaction data available to people like me!).

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@aahan_prometheus@AahanPrometheus·27 Nis

Q for those in the know: 1. How *good* is the basis trade (sharpe?) 2. What kind of vol are people running it at? cc: @dampedspring @conksresearch help me get answers plz

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Keşfet

@Atomic_GSol @aRishisays @EtraAlex @federalreserve @FedResearch @dismaleconomist @stwill1 @mean_field_zane