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Liquidity Risk Is Very Real And Really Not That Hard To Spot And Define

By |2016-08-23T18:46:00-04:00August 23rd, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Going back to Japan for a third time today (it is more than deserved), at least in the setup, the Financial Times on August 1 astutely picked up what the rest of the mainstream media missed about the last BoJ policy moves. They correctly judged the “dollar” intentions, but also that it wasn’t nearly enough, as I wrote earlier. However, nobody [...]

Clues to the Origins And Stubbornness of the ‘Rising Dollar’

By |2016-08-23T13:27:39-04:00August 23rd, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

On March 9, 2016, front month trading for Japanese government bond (JGB) futures was halted at 12:32 pm Tokyo time. Selling had become intense, tripping the Osaka Exchange’s dynamic circuit breaker. The total length of the halt was just 30 seconds, but fingers were already being pointed in the direction of the BoJ. More than four months later, on July [...]

Only Spreading Monetary ‘Tightness’

By |2016-07-08T18:38:58-04:00July 8th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 [...]

Comprehensive Doubts

By |2016-05-05T19:07:25-04:00May 5th, 2016|Commodities, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The underlying fundamentals of oil and energy remain highly negative. Oil prices have been supported by sentiment for some time now, but that hasn’t changed much from between under $30 to over $40 at the front end. In the latest weekly update from the US EIA, domestic oil production fell rather sharply in the last week of April. It was [...]

What UBS Tells Us About Credit Suisse, And What Both Suggest of Economics

By |2016-03-24T11:45:38-04:00March 24th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Credit Suisse released its annual report for 2015 today allowing us to update its progress through winding down its eurodollar activity exposures. As expected, the bank’s gross notional balance sheet offerings declined by quite a bit in Q4. Gross notional interest rate swaps fell by 15% from Q3 to just CHF 28.8 trillion, the largest quarterly decline (in percentage terms) [...]

Credit Suisse and Deutsche Bank Still At the Forefront (Just Where They Don’t Want To Be)

By |2016-03-23T12:49:49-04:00March 23rd, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

The pain of Credit Suisse and its holdover peers, such as Deutsche Bank, is incredibly easy to understand. There is no need for penetrating the depths of technical jargon in interest rate swaps, forward warehousing securities or even the whole varied business of investment banking. In its Q1 2014 quarterly report, Credit Suisse spells out everything you need(ed) to know: [...]

The Perils of Citi: The Last of the Eurodollars Part 2

By |2016-03-09T13:54:45-05:00March 9th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

Part 1 is here. Even if the eurodollar paradigm had started shifting long before the full panic, this is not to say that various individual firms have not tried to rekindle the former construction; in fact, I have paid particular attention to those who at various points attempted the recreation. Citigroup is one of those though it isn’t clear what [...]

The Perils of Citi: The Last of the Eurodollars Part 1

By |2016-03-09T13:55:45-05:00March 9th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

Proprietary trading has taken on connotations that are extreme for some good reason owing to the events of 2008. It was there, called “principal transactions” on some balance sheets, that claimed the majority of accounting losses that perpetuated internecine banking struggles from liquidity to revenue and earnings. As with most things, there was much more to it than that rough [...]

Futures Curve Now Suggests Far Less Recovery Than Early 2009

By |2016-02-08T18:56:25-05:00February 8th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

When the June 2018 eurodollar futures price touched above 98.50 on October 2, I thought that was an impressive bid suggesting just how much negativity had survived the August liquidations. It was interrupted by some backward optimism about China’s October Golden Week, but the eurodollar curve overall with the June 2018 maturity as a specific interaction point for monetary policy [...]

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