201411.21
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Corporate Evidence For Liquidity Regime Change

Adding to the repo observations from this morning regarding illiquidity and more importantly gathering risk aversion, the behavior of corporate bonds and spreads matches that overall sketch very closely. The key point is how different the corporate bond space, like the UST curve, has behaved in 2014 in relation to 2013. In past periods just…

201411.21
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More Evidence For Liquidity Regime Change

There is so much depth that is missing from the ongoing discussion about the state of “markets” as the Federal Reserve purportedly moves toward “normalizing” its regime. That isn’t all that surprising given that most people still have never heard of these various moving parts, and certainly cannot easily grasp the concepts without some degree…

201411.20
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The Dead Parrot FOMC

As the FOMC gathered only a week after October’s unusual UST “experience”, they faced an oddly familiar problem. The entire focus, at least externally, has been on how to exit extraordinary “accommodation.” Yet there is clearly a market difference between 2013’s discussions in that direction and 2014’s. As noted previously, credit markets in 2014 seem…

201411.20
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Japan Trade Gets Better, Meaning Worse

The October trade deficit for Japan turned out to be the “best” month since June 2013. While commentary has been quick and sharp about an export-led recovery path, actual analysis of what is taking place would lead to the opposite conclusion. This is revealed by simple geography. A full part of the problem starts with…

201411.19
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Apartment Construction Downshifts Against Recovery Idea

The latest volatility in housing construction figures transferred to the single-family segment, as apartment construction has now entered full-scale languishing. In some respects that is contradictory to 2014’s view of a boom in rental properties, but I wonder if the lack of household formation is finally starting to catch up – rent or not. There…

201411.19
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Crude and Credit Warn Of The Elongated Cycle Double Peak

Next to Japan’s “unexpected” re-acquaintance with recession, the most serious indication of global economic distress has to be oil prices. And where commentary turned to “explaining” Japanese recession as related to a small attempt at fiscal discipline rather than the more debilitating flirtation with intentional debasement, convention surrounding the precipitous plunge in crude is desperately…

201411.18
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Those Who Forget the Past Are Doomed to Economics

Filing the following under general government “panic”, the Japanese government in the wake of a confirmed recession in 2014 (where only recovery was supposed to exist) is preparing more “stimulus.” Analysts welcomed the size of the new package, saying it will support the world’s third-largest economy at least partially when the tax hike kicks in….

201411.18
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Basic Interbank Math, Part 2

Part 1, with the introductory framework, is here. Prior to the crisis, the Basel rules “allowed” (if not downright encouraged since it was bankers that really wrote the rules through regulatory proxies) bank assets to be divided into “buckets” in order to calculate reserve ratios. The entire premise of reserve ratios, Tier 1 capital and…