201807.17
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Gold, Dollar, and Repo: Who Cares About Taper, or QE?

It’s funny how these things work. He didn’t actually say the word “taper”, at least not when the frenzy first started. The very idea of the “taper tantrum” was the media’s work, the easy slogan that could be used as shorthand for the conventional explanation. The economy was improving, everyone was told and easily believed,…

201807.11
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COT Blue: Reflation Doubts Accumulate

I doubt there will be an official report created and published surrounding the events of May 29. Unlike those on October 15, 2014, which did trigger a Treasury Department alphabet-soup-of-partners response, it wasn’t crashy enough this time around. The UST market experienced a true panic more than three and a half years ago, though one…

201807.05
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Talk About Binary; No In Between, Either Boom or Renewed Deflation

CNY has held up over the last few days after Chinese officials intervened. Central bank actions like these tend to work if only over the very shortest timeframes. The tentative calm there, however, hasn’t extended universally. Copper, for one, has fallen right out of its Reflation #3 range. Selling off solidly for almost a month…

201806.26
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The Money of Metals; More Gold Beyond Repo

In all honesty, I do mean to beat this one particular dead horse. In fact, I intend to pulverize it until there is nothing left but the smallest particulate matter. This is everything that is wrong with how things are right now. Either they are willing to put out what could only be legitimately classified…

201806.26
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The Money Of Metals; Or, Inferring Collateral Beyond Repo

It’s been a wild month for copper. June began normal enough for the metal, with the front month futures price (HG1) still ~$3.05 where it had traded since early March. Then, out of nowhere, the price surged. Starting June 4, in a matter of days HG1 was just less than $3.30. It was the highest…

201806.25
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The Remarkable And Lengthy Consistency of Repo

Before August 2007, US$ money markets operated efficiently and predictably. They behaved according to a rigid hierarchy, which is a good thing no matter how it may sound. This inflexibility in the context of funding markets was exactly what we would want. Arbitrage opportunity was responsible for enforcing the rules. One simple example was the…

201805.25
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This Is A Really Strange Development (UPDATED)

Last week, I reported on a sharp drop in repo fails for the week of May 9. The decline was so much that FRBNY indicated there were essentially no fails during those five trading sessions. It was way out of line with recent history and opened up little more than wild speculation as to what…

201805.22 12

Eurodollar University: Way Beyond Bank Reserves

The Crash of ’87 was a big deal, though not in the way most people remember. It was a stock market event, obviously, and those are the terms under which it has been understood. That’s not really its legacy, however, as the major shifts that began with Black Monday have had little and most often…

201805.18
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Chart of the Week; On the Contrary

It has been far more difficult to pick one Chart of the Week this week. There is so much going on right now, most of it revolving around the possible re-rising of the “dollar.” An unwelcome development, to be sure, but a potentially important one for the intermediate term direction of more than just EM…

201805.17 8

This Is A Really Strange Development

Observing the eurodollar system as I’ve done for so many years, you have to be prepared for curve balls thrown at you. Just when you think you’ve got it clocked (sometimes literally), something changes and it all gets tossed out the window. About a month ago, the Federal Reserve reported a sharp drop of UST’s…