Along with the new Basel-y rules to be adopted for the banking system, there are other major changes that have remapped at least domestic finance since 2007. A big part of this pertains to the systemic liquidity capacity that I emphasize repeatedly, but in the sense that it is far more and different than just the “capital rules” that most [...]
It was a bit of a shock in June 2014 when the repo market experienced sudden and sharp disorder. The surge in fails seemingly did not fit the conditions as convention held them in the middle of last year when everything was supposedly running so smoothly. In the eight months since then, repo fails have not much calmed, which has [...]
As per usual, the latest FOMC statement conjured up a storm of befuddlement about any number of topics. Most of the concerns, should they even be categorized thusly, amount to debated levels of disingenuousness surrounding oil prices (only a month ago there was nothing “bad” about a 60% collapse in the world’s primary resource input). However, there were a few [...]
Though it is now more than four months into the past, the events of October 15 remain relevant and will likely stay that way for some time to come. The mainstream seems to have made peace with the idea of electronic trading in some primordial state in treasury markets, but to anyone with even a little knowledge of credit markets [...]
Oh Europe. I have a growing sense that US credit markets are repeating the leadup to last October 15, though there isn’t any obvious expression of any such illiquidity (at the moment). For one thing, the eurodollar curve has taken the FOMC’s bluffs in complete stride, in fact doing the exact opposite as you would expect of a very close [...]
The energy sector may account for a good proportion of risky credit, but that doesn’t necessarily mean that all negative price action in high yield and junk is entirely energy. While certain markets have regained comfort with the world’s various potentials, the outer echelons of US credit remain on alert. That is typically the pattern of an impending inflection in [...]
The complexity of balance sheet mechanics, as observed in the prior discussion, offers a greatly altered view of liquidity and the ancient concept of elasticity. These are not just theoretical assertions, as we have seen them in practice on more than one occasion. The behavior of “liquidity” starting in August 2007 was exactly along these lines, as faults in dealer [...]
The face of economics as it currently stands is the central bank. We have been programmed to simply infer that status in almost everything (good) that happens in the economy. In many ways, there are traces of that in the first concepts of central banking, even going back to the reformation in the latter half of the nineteenth century. For [...]
I have to thank my colleague Joe Calhoun for passing alone a very topical article written by Nassim Taleb and Gregory Treverton in Foreign Affairs. Taleb is, of course, well-known for his “black swan”, but it is really far more than that as it gets to the failure of modern economics as nothing more than a study of statistics. Conventional [...]
Commentary has not been able to ignore changes in the Fed’s balance sheet mechanics with all the potential systemic shifts occurring as QE ends and the FOMC contemplates going even further. As I said last week, the total balance of bank “reserves” declined but not due to anything other than an operational test of the Fed’s Term Deposit Facility (TDF). [...]
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