In theory, it is always so simple. For China, it was intended that RRR cuts are stimulus. By allowing banks to use more of the reserves they’ve built up over the years it is meant to add to overall interbank liquidity. From there, banks flush with RMB supported by robust RMB money markets will lend and undertake more direct economic [...]
Since LIBOR is a hot topic again, though no 2a7 in sight, I thought I’d add one additional perspective that isn’t found in any other analysis. LIBOR is, of course, a money rate applied not to domestic funding but eurodollars on offer in London. The current criticism of the rate stems from the fact that there isn’t volume in unsecured [...]
Why would any central bank try to disguise the fact that it is being highly accommodative in its own money markets? That would be a strange place to start, made all the more so by the further observation the same central bank is perfectly happy if you thought it was doing the opposite. Cryptic introduction aside, it is obvious I [...]
With money market reform (2a7) more than a month in the rear view, LIBOR rates continue to rise regardless. Three-month LIBOR jumped to 91.622 bps Friday, up from 88.4 bps to begin the month of November. The 1-year maturity is now well over 160 bps, up more than 100 bps going back to November 2014. Since 2a7 is behind us, [...]
With 2a7 money market reform only a few weeks from its full implementation, there should be by now visible shifts in all the places where such reform will directly impact. Prominent among these money spaces is commercial paper, where the ranks of prime MMF’s that once lent in this market have been reduced in the shift toward government funds. As [...]
A eurodollar futures contract affords the buyer the opportunity to obtain a $1 million eurodollar deposit for a three-month term at the expiration and execution of the contract. The rate to be paid for that deposit is 100 points minus 3-month LIBOR for spot settlement on the 3rd Wednesday of the contract month. If 3-month LIBOR on June 20, 2018 [...]
Back in early July, Bloomberg published a rather curious article that sounded like it was written from within the People’s Bank of China - or any other global central bank for that matter. The most prominent correlation over the past year had been CNY and everything else; or, as I wrote earlier in the year, CNY down = bad. The [...]
The fact that we are still discussing illiquidity in “dollar” markets everywhere shows just how little has changed despite so much time and effort. It is August 9 again, the ninth anniversary of the day that changed everything. Even though it has been almost a decade, it’s as if “we” learned nothing from the experience. There are indications in 2016 [...]
Repo rates absolutely surged at month-end, LIBOR jumped a few more basis points and the eurodollar curve is bid almost everywhere in large chunks. Commodities continue to get smashed, especially crude oil, and currencies are devaluing in almost equally large portions. Even the treasury market is somewhat sporting the tell-tale collateral calls. In short, the “dollar” problems continue into this [...]
The “dollar” has ended the month much the way it started. Despite headlines suggesting the dollar is “down” today, it is very much proving to be disruptive across every proxy. Gold was down to $1,080 at the AM fix before rebounding. Commodities were sold broadly, with copper back near $2.359, down almost $0.02 at some parts of the futures curve; [...]
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