Analysts said one reason for the jump in repo volume was the surge in so-called basis trades, a trading strategy which takes advantage of the difference in price between cash Treasuries and futures. These are financed in the repo market and their size has exploded with record bets against Treasury futures amassed by leveraged funds.     -Reuters, “Surging US repo activity likely exacerbating funding pressure”, 10/11/24 KASHKARI: IF US DEBT CONTINUES TO CLIMB, NEUTRAL RATE WILL CLIMB    

Today’s employment report confirms suspicions that we are in a high neutral rate environment where responsible monetary policy requires caution in rate cutting. With the benefit of hindsight, the 50-basis point cut in September was a mistake, though not one of great consequence.     -Former Treasury Secretary Larry Summers, via X, 10/4/24 David Roche, founder and strategist at Quantum Strategy, said the nonfarm payroll figures made the Fed’s “jumbo interest rate cut look silly, populist and panicky.”    

If China or the US do anything to drive or attract Chinese capital out of the US, for any reason, the [dynamics shown] above strongly suggest that the reaction will be a significant increase in the Fed’s balance sheet or some other form of USD liquidity loosening.  What could drive the Chinese capital out of the US, touching off a response from the Fed and/or Treasury that amounts to a significant injection of USD liquidity