Trouble is brewing in the pipes that run beneath Wall Street. And once again, banks are calling Zoltan Pozsar.
Investors have started storing hundreds of billions of dollars at the Federal Reserve each night, and no one is quite sure what it means. For answers, many turn to the 42-year-old, Hungarian-born Credit Suisse analyst known for accurately predicting the movements of arcane markets like reverse repurchases with pronouncements including, “So the sterilization of reserves begins.”
Mr. Pozsar’s Global Money Dispatch, published at least twice a week, is the first read for traders, bankers and policy makers interested in the financial system’s inner workings, praised for its comprehensive view and cogent analysis. The latest hot topic: the near-trillion dollars piling up in a once-obscure and little-used Fed program known as the reverse repurchase facility.
The facility holds cash from money-market funds, government-sponsored companies and banks for short periods, paying interest the Fed recently raised to 0.05%. It also helps set a floor under short-term interest rates. Fed Chairman Jerome Powell has said the facility is working as designed, keeping the federal-funds rate within its range.
Mr. Pozsar, who worked at the New York Fed and U.S. Treasury before joining Credit Suisse in 2015, is among those eyeing the growing inflows with unease. To him, they signal a glut of cash. Financial firms are willing to take the Fed’s paltry interest because they are flooded with money from the central bank’s pandemic stimulus, which has driven rates so low that there are few other places to put it, he said.