For years it was uncontested convention that the lower the rate the better. Stimulus was, after all, intended as a borrower boost. Make the cost of adding debt low and lower, then it was assumed borrowers would borrow more than they otherwise might have with recovery the promising result. Every time rates went lower, the common refrain of “stimulus” went [...]
So far the heavy buying after yesterday’s FOMC admission has held on the eurodollar curve. Most of the contracts along the curve have only given back a few bps after the 15-25 bps moves everywhere yesterday afternoon. The salient interpretation of trading along these lines is one of deep and abiding concerns over “dollar” liquidity and the economy. With the [...]
Most people have at least a passing familiarity with the basic concepts of finance. These are intuitive aspects that count almost like Platonic qualities of “truth”, existing as almost transcendent reality upon which human construction is based. In this particular case I am talking about money and time value. The reason a yield curve takes the shape that it does [...]
What should most troubling to investors of all stripes and locales is that what is going on in Europe is almost exactly the same as what is taking place in Japan. Despite nearly all outward appearances, Japan and Europe have far more in common than differences, at least where it counts. The Japanese have finally created the monster they sought, [...]
A basic building block of funding market dynamics is not only expected rate movements but the time value of money, i.e., the curve shape. Normally, you would expect a steeper yield curve to be consistent with stronger economic growth. In terms of dollar funding, you can package eurodollar trades (either bundles or packs of various “colors”) to buy short and [...]
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