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A Derivatives Look At What Happened To ‘Reflation’

By |2017-10-18T16:14:18-04:00October 18th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The Office of the Comptroller of the Currency (OCC) reports that total gross notional derivatives contracts owned and outstanding by domestic banks rose for the second straight quarter. The OCC statistics are one quarter behind, meaning that though banks themselves are reporting Q3 numbers with earnings all figures shown here are from the official compilation for Q2. As such, the [...]

Why It Will Continue, Again Continued

By |2017-07-24T19:35:00-04:00July 24th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Part of “reflation” was always going to be banks making more money in money. These days that is called FICC – Fixed Income, Currency, Commodities. There’s a bunch of activities included in that mix, but it’s mostly derivative trading books forming the backbone of math-as-money money. The better the revenue conditions in FICC, the more likely banks are going to [...]

Inferring the Relative State of the ‘Dollar’ Shortage In Q1

By |2017-07-12T14:55:11-04:00July 12th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The OCC reports that total gross notional derivatives outstanding jumped by nearly 8% in Q1 2017 over Q4 2016. At $178 trillion, that is even more than the reported total for Q3 last year. The latest estimates largely confirm the idea that bank balance sheets were relatively more accommodative in 2017 than especially later 2016. Among the more buoyant categories [...]

Noose Or Ratchet

By |2017-05-03T18:12:58-04:00May 3rd, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Closing the book on Q4 2016 balance sheet capacity is to review essentially forex volumes. The eurodollar system over the last ten years has turned far more in this direction in addition to it becoming more Asian/Japanese. In fact, the two really go hand in hand given the native situation of Japanese banks. As expected, data compiled by the Office [...]

An Inside Basis For Unfortunate Continuity

By |2017-04-12T15:48:53-04:00April 12th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

Primary dealer holdings of UST securities have been on the rise again. This sort of warehouse activity is drastically misunderstood, exemplified best when last year around this time surging dealer inventory was blamed on those banks’ purported inability to sell off their holdings. It was an absolutely absurd idea for several reasons, but most prominently the overwhelming demand at the [...]

TIC Analysis of Selling

By |2017-03-24T16:38:30-04:00March 24th, 2017|Economy, Federal Reserve/Monetary Policy, Markets|

When the Treasury Department released its Treasury International Capital (TIC) data for December, what was a somewhat obscure report suddenly found mainstream attention. Private foreign investors had sold tens of billions in US securities primarily US Treasury bonds and notes which the media then made into some kind of warning to then-incoming President Trump. It was supposed to be a [...]

Changes In TIC

By |2017-02-16T17:31:25-05:00February 16th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

If there has been a lot different about the past few months, it was reflected in the TIC figures and then some. What is usually pretty easy to decipher, there were instead all sorts of shifts across the most important categories. For one, the foreign official sector was busy in December buying up UST’s and dollar assets just as the [...]

Eurodollar Decay, Specifically What’s Missing

By |2017-02-14T17:34:49-05:00February 14th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Economists have always fashioned themselves in the style of physicists. They endlessly scrawl incomprehensible equations on blackboards because it is the epitome of science, the allure of great intelligence seemingly to do great things. But where physicists have continued to describe and solve some of the world’s great mysteries, Economists only bungle. They described free trade from among the myriad [...]

Eurodollar Decay, What’s Missing?

By |2017-02-14T16:19:47-05:00February 14th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Earlier this week Bloomberg published an absurd story trying to claim that Donald Trump is being warned by foreign holders of US debt. Warned about what, the article didn’t say, so we can reasonably speculate (unlike the article) it was about politics. Bloomberg never did seem to report any such spreading alarm throughout the last Obama years even though selling [...]

Deeper Derivative Dive To Less ‘Dollar’

By |2016-12-29T13:13:06-05:00December 29th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The Office of the Comptroller of the Currency won’t release its collection of bank call reporting for Q3 2016 until January. There is a great deal about the aggregate US bank derivative book in that particular quarter that is of particular interest. Though we will have to wait for that update, there is still some value in reviewing parts of [...]

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