Engineer (mortgage tech), attorney (non-practicing). My long form articles available at https://teapaw.org/t.co/ZAtMTAIVI6.
Joined June 2022
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Why is $RKT good at refinance?
One key reason is they manufacture 30-40bps extra perceived refi incentive by financing discount points. More than most lenders and way more than depositories.
I do a detailed review of the refinance incentive on every owned GSE MSR in Rocket and Coopers book that are in MBS. Portfolio incentive broken out in .05 (6.00-6.05) increments in the latest at my stack. Link in first reply.
@Aureliusltd28 @fallacyalarm
E.g. FHLMC rate/term refis from fall 2024
The TGA funding buybacks is a nothingburger (ofc it does htf else is Treasury going to pay for them from)
That said, Id bet Treasury more than doubles buybacks in the 20-30y bucket based on recent operations in that bucket.
johncomiskey.substack.com/p/…
Mechanical Truth.
though with a nod to @profplum99 's proposal a few monhts ago for a cashless swap which would make alot of sense and not involve the TGA
how else would buybacks happen?
When the Treasury purchases anything (including old bonds it had previously issued), the TGA is debited.
It can have the TGA credited again by selling securities or collecting tax.
But all purchases are 'funded' by the TGA
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John Comiskey retweeted
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/
John Comiskey retweeted
Folks. This is David Cervantes. The real OG Pinebrook.
As you may have heard @EconstratPB has been hacked and I am not longer in control of the account. I will be here while that gets sorted out.
Pls RT and follow.
Pic of my 🚴♂️ and 🍔 as proof this is really me.
Correct framework to evaluate everything done by govt ranging from protection of private property rights to granting of purchasing power based on low income (welfare) to granting of more purchasing power based on owning assets (interest on Treasuries)
All policy choices
John Comiskey retweeted
It’s not radical.
It’s pretty obvious that wealth, poverty, recessions, depressions, inflation, deflation, and the life and death expectancies of certain groups are all…..
Policy choices.
Compare the lives of blacks in Louisiana with whites in California for proof.
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John Comiskey retweeted
The TGA closed on Monday with 1.038T dollars in it, due to the huge mid April tax receipt inflows. Per Treasury's risk policy it does not need to be this high (~513b for Monday but it fluctuates day to day as week ahead debt redemptions and week ahead net fiscal flow fluctuates). The cash mgmt buybacks (the 15b ones) are one of the tools Treasury uses to keep it from being even higher.
They literally fund the buybacks from the TGA though of course over time the net deficit spend must be funded by net new debt issuance (coupons and bills). Point is, the amount in the TGA fluctuates with tax receipts and spending needs. Treasury does what it must (outside of debt ceiling battles) to always keep the TGA above its risk policy level but only just over to the extent they can control it. They mostly do this by increasing or decreasing bill issuance rates, but they also use these cash mgmt buybacks. On the flip side. Treasury is likely imo in mid May to issue a 50b or so 2-3week cash mgmt bill to get over a high point in the required amount they need in the TGA in late May.
I have all of this (full issuance/maturities and every TGA category every day) modeled in detail with an accuracy that is well above what I thought would be possible when I started building the model 3 years ago.
E.g. a bit over 2 weeks ago I published these (the image) projections to my paid substack subscribers. Note that I projected a TGA close level of ~1.036T for 4/20. Only 2b off from actuals yesterday. Feel free to look back over the preceding days DTS and judge the models performance for yourself, its not always that close, but it does ok. Also note the Risk Policy Level in column L. Thats the min level Treasury needs the TGA to be at that day with it ideally just a little bit above it
Bottom line, there may well be things breaking in the financial universe, but these buybacks are absolutely not evidence of it.
John Comiskey retweeted
The Treasury bought back 15BN in bills, notes, and bonds maturing in less than a year. In order to fund that purchase they issued or will issue 15BN of Tbills of similar but different maturity to better align the timing of tax and spending flows with maturities. It's called cash management and has zero impact on anything at all relevant to markets whatsoever.
John Comiskey retweeted
Mechanically Treasury is paying for the buybacks with reserves currently in the TGA. How those reserves get replenished is fungible (deposits/tax receipts v. proceeds from net new issuance) over a given time period. Of course net new issuance does have to cover the broader cashflow deficit over the long run.
The cash mgmt buybacks are close to cash neutral since Treasury pays close to par on the close to maturity treasuries its buying back. Some of the liquidity operations on the 20-30yr buckets are not though /w Treasury soemtimes paying 70cents on the dollar for pandemic era bonds. Of course if Treasury replenishes the TGA reserves with new issuance that new issuance will be at higher rates so increases their interest outlays.
Treasury didnt do this to "improve liquidity". Rather Treasury did this to reduce the amount in the TGA in advance of the flood of tax receipts mid month that will spike the TGA (for a month or so) to levels well above where they need to be for risk policy purposes.
Treasury could either slam the brakes harder on bill issuance only to then have to slam the gas harder on bill issuance in May/July or they can smooth the issuance out some by doing these "cash management" buybacks around big tax receipt days.
To be sure, Treasury also does liquidity buybacks for more thinly traded off the run treasuries, but this buyback was cash management
Remarkable what happens when the nearly boundless FHA partial claims and loan modifications become bounded again. Cure rates should go up some though in the March data as the first trial payment plans start completing. Big question is how much.
On Wed/Fri of last week, Fed bought ~16.25b in treasury bills. Almost 14b of that 16.25 was in the bills maturing on 3/19/2026.
Why so concentrated on a specific date instead of spread out amongst 1-4m remaining maturity bills? Any ideas?
@Dcpcooks @dampedspring
Wed e.g.
John Comiskey retweeted
🚨Dramatic, you say?
Don't miss @Johncomiskey77 's latest...
And we won't say the obvious
Link in the reply
I had a great conversation with Todd Sachs (@todd_sachs) last week regarding what is happening with FHA loans now that the loss mit procedures have tightened and how it likely plays out from here.
We even got into discussing the TGA!
Give it a watch
youtube.com/watch?v=1HL3eP5H…
John Comiskey retweeted
TGA is so large because bills outstanding is so large.
Currently the US Treasury has roughly 6.4TN of bills outstanding. Bills require refinancing frequently. In fact every 5 days bills redemptions are 550BN on average over the last 6 months. The Treasury General Account is as large as it is because of this 5 day number. The logic is that in the event of a 5 day closure the TGA will be large enough to meet obligations of the government without issuance. BY FAR the biggest obligation over a 5 day period is paying off bills holders. By cutting the bills outstanding from 22% today to 15% the goverment could reduce the TGA by 175BN. Why would this be a good idea? Why have interest bearing bills outstanding to fund an account that is not interest bearing and is only as large as it is because of the the large bills outstanding.
BUT they wont reduce bills outstanding and prefer to have a large TGA to suppress long term interest rates.
The HHS - Medicare Prescription Drugs TGA category saw a 30.8b withdrawal on 10/31 (the Nov payment). Almost double the largest month in the last 3 years and almost triple last years Nov payment. Anyone have a good explanation as to why?
How much impact did the govt shutdown have on cashflow spending from the TGA?
My projection of TGA data suggests 20-25b
The image shows TGA categories where my TGA projection model overprojected withdrawals vs. realized withdrawals thru Oct 30. My projection algorithms did not take the shutdown into account at all.
The biggest impact:
Federal Salaries and Department of Defense (misc) both missed by 5b. I assume these are shutdown related though its possible the DoD is not.
There were definitely way more overprojections in October vs. underprojections (its normally pretty balanced) and many of the smaller agency spend categories probably have some shutdown component to them to. (e.g. DOJ, NASA, HHS Temp assistance to needy families)
Some in the list like HHS medicare prescrtipion drugs and medicare/medicaid are more likely just modelling misses rather than shutdown related.
Of course I could have underprojected some categories that "masked" reduced shutdown spend You will have to judge for yourself.
But my read of it is 20-25b a month though that may be 5-8b more in Nov if SNAP isnt funded.
Perhaps the TGA level is affecting "liquidity" and crypto. I really dont know.
I do know that I know the TGA level with reasonable accuracy months in advance.
The only modest number of paid subs (only 25/month 240/yr) to my stack says mkt doesnt think its all that impactful.
@BittelJulien and @RaoulGMI need to take a look at this as they believe this is affecting liquidity and crypto markets significantly