2018 or 2008? IOER, EFF and more Absurd Denial

Last week, it was overseas central bankers who stole the show. Many of them particularly in EM locations have had a really rough go of late, and a few in particular wanted the world to pay attention to dollars. Not any dollars, of course, as that would be far too easy. Rather, offshore “dollar” markets…


Is It Over?

The world is full of anomalies. It may seem like a paradox, but financial markets are particularly eventful places. Something happens, some people notice, and most often it goes…nowhere. It’s all the time and a constant part of analysis, trying to identify and separate what is truly contained. The global eurodollar monetary system grew so…


It’s The Track Record That Is Unaccounted-for Risk

No one seems able to account for the rise in LIBOR-OIS. I think it’s a vain effort, and focuses on the wrong segments, but nonetheless there is considerable uncertainty which always casts suspicions into the shadows. That is important.  A few weeks ago, all the big bank analysts were alight with their theories. They couldn’t…


The (Official) World Moves A Little Closer To The Eurodollar

The primary reason I focus so much on time is that I believe it is running out. No one possesses a crystal ball, least of all me, and while making such a statement might presume to be intensely negative (doom and gloom) it’s not always that way and it certainly doesn’t have to be. For…

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Completely Full of It

In June 2008, ICAP actually launched a US-based alternative to LIBOR. It ended up as nothing more than one very minor footnote lost in a sea of more pressing problems and events. Still, that they even tried is somewhat significant and relevant to today. Before the whole cheating scandal came out, there were questions surrounding…


What’s In A Spread? Euro$ Futures Have Been Anticipating LIBOR-OIS For Seven Months

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…


Systemic Blindness

MF Global failed on a trade that would have made it enormously profitable. AIG’s portfolios of “toxic waste” ended up making money – for the Federal Reserve. Bear Stearns and Lehman Brothers were ended like the others by liquidity, not losses. SemGroup was another firm that went into bankruptcy during that period, but one that…


Reflections On Recession Are A Very Real Affair

Where are we in history when the avowed Socialist (capital “S”) from Vermont is the only voice of reason for the Democratic Party in the aftermath of last week’s election? I don’t intend to make this some kind of political screed against one party or the other; I am on record numerous times claiming the…


Dead Money US$; The OIS Disappearance

In taking the lessons of OIS in 2007-08 to analysis, the immediate approach would be for skepticism about OIS in isolation right from the start. To that end, LIBOR-OIS suggests absolutely nothing out of the ordinary by itself. That is particularly odd since we know without any doubt that there have been severe liquidity problems…


Dead Money US$; The OIS Transformation

In looking last week at some stress mechanics of the interbank markets I intentionally left out one piece, the Overnight Index Swap. OIS is often viewed as another measure of liquidity risk, keyed off matched maturity LIBOR, to give us a sense of order and good function. There is an OIS rate for every major currency…