On July 15, 2008, Federal Reserve Chairman Ben Bernanke sat in front of Congress for the second of his required Humphrey-Hawkins reports for that year. The original act meant for these to be more than bland economic obfuscation, where the original Full Employment and Balanced Growth Act of 1978 demanded monetary targets. The Fed stopped being able to produce them [...]
According to the US Treasury Department’s Treasury International Capital (TIC) report, foreign private holders of UST’s had been selling them steadily in the last quarter of last year. Estimates including those just released for December 2017 show a total net reduction of $24 billion. While that’s not a huge number, private overseas interests typically buy more than they sell in [...]
For me, the defining characteristic of the late nineties wasn’t the dot-coms. Most people were exposed to the NASDAQ because, frankly, at the time there was no getting away from it. It had seeped into everything, transforming from a financial niche bleeding eventually into the entire worldwide culture. We all remember the grocery clerks who became day traders. Behind all [...]
One final note for 2017 with regard to the long end of the Treasury curve. It may seem as if the interest rate fallacy would combine with specific bouts of illiquidity to create falling yields during them. That is not always the case, and, in fact, a lot of times the opposite does occur. Take October 15, 2014, for example. [...]
If you are an enterprising financial firm with spare cash toward the end of the business day, you have several options for it. Primary among them is the Fed’s Reverse Repo (RRP) desk which will pay you 50 bps interest with your cash secured by both the reputation of the Federal Reserve as well as UST collateral. Given that option, [...]
With money market reform (2a7) more than a month in the rear view, LIBOR rates continue to rise regardless. Three-month LIBOR jumped to 91.622 bps Friday, up from 88.4 bps to begin the month of November. The 1-year maturity is now well over 160 bps, up more than 100 bps going back to November 2014. Since 2a7 is behind us, [...]
It is quarter end, so illiquidity irregularity is to be expected except that it isn’t irregular really. Eurodollar futures have been heavily bid for three days in a row now, leaving four consecutive up days for the first time since the liquidations. And because I am a sucker for fractal behavior, repo markets proved that quarter end is still what [...]
While the stock market had one of its best months in years, it was, like the jobs report, uncorroborated by almost everything else. The junk bond bubble, in particular, stands in sharp and stark refutation of whatever stocks might be incorporating, especially if that might be based upon assumptions of Yellen’s re-found backbone. Do or do not, corporate junk remains [...]
When grounded in the framework of traditional banking, wholesale dynamics can be quite confusing to the point of being impenetrable. Nowhere is that more the case than the wholesale ideas of currency and what counts for establishing chains of traded liabilities. In the traditional banking/monetary framework, everything is reducible to money; all else are just derivative claims on it. The [...]
I had hoped that something would have happened by now and that April 15 would follow more closely the October 15 and January 15 events, if only for the sake of experimentation. We don’t really need any additional illiquidity and certainly nothing as globally severe as those, but with function the way it is and everything so stretched and imbalanced [...]
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