201709.18
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If They Wish To Replace LIBOR With Repo, They Should Already Start Thinking About Repo’s Replacement

Sometimes you just have to laugh. A lot has been made on the inside of LIBOR’s assumed demise. The suite of interest rates is not being discontinued really, merely relegated to the backbench. As usual, the rationale for doing so is perfectly sound: As noted by the Financial Stability Board’s Market Participants Group, there are…

201709.18
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It Was Collateral, Not That We Needed Any More Proof

Eleven days ago, we asked a question about Treasury bills and haircuts. Specifically, we wanted to know if the spike in the 4-week bill’s equivalent yield was enough to trigger haircut adjustments, and therefore disrupt the collateral chain downstream. Within two days of that move in bills, the GC market for UST 10s had gone…

201709.07
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Wherefore Art Thou Collateral?

The US Treasury as a result of the government’s bloated response to the Great “Recession” has been forced in notes and bonds to reopen their auctions each and every month. Before then, reopenings were less frequent. They weren’t infrequent, but the Treasury wasn’t just auctioning 10s every month. In 2007, for example, the Department conducted…

201708.29
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Moscow Rules (for ‘dollars’)

In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book…

201708.15
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Can’t Forget About Dealers

When the Federal Reserve was founded in 1913, there was no role for it in the marketing and selling of government debt. This wasn’t an oversight on the part of Congress. For more than two years before the Fed, the Treasury Department hadn’t issued any marketable instruments at all. In those days it just didn’t…

201708.11
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JPY Joins EDM; End of Week Chart Dump

Brexit, Trump’s election, even the Bank of Japan rumored to be thinking helicopter. Last year was the year of thinking differently and therein was hope. No matter how many times some markets and especially media blindly accepted the “stimulus” or “recovery” judgments of economists over the years, by 2016 and the near-recession globally that accompanied…

201708.04
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Almost Ten Years And Still Nits To Pick

The economy was sailing along into its Hollywood sunset in 2014 before it was rudely interrupted by the “rising dollar.” At first, the mainstream narrative was that a higher dollar exchange was a good thing, an indication that global markets were embracing the economic revival; or, if you didn’t quite want to get that optimistic,…

201708.04
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Looking For Inflation Inside the Multipliers

Almost exactly ten years later, central bankers believe they are so very close now to the end of the crisis. It doesn’t matter that they have made the same claim before, this time is different they say. Global growth is finally synchronized, and all the policy clocks can strike normal, or what passes for normal,…

201707.28
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Rough End of a Collateral Century

The entry of the United States into World War I placed a heavy financial burden on the government. The scale of such encumbrance was at the time almost unthinkable, and today is incomprehensible. Federal government expenditures in 1916 were all of $734 million, with $125 million financed by the new income tax authorized a few…

201707.25
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China’s Banks Deliver RMB In June

Updated statistics from the People’s Bank of China shed some light on changing money conditions in RMB. The Big 4 State-owned banks have been the primary liquidity conduit for all policies and activities going back to 2014. These institutions had been since the middle of 2016 increasingly squeezed as to excess funding available to be…