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wholesale funding

Basic Interbank Math, Part 2

By |2014-11-18T13:36:40-05:00November 18th, 2014|Economy, Federal Reserve/Monetary Policy, Markets|

Part 1, with the introductory framework, is here. Prior to the crisis, the Basel rules “allowed” (if not downright encouraged since it was bankers that really wrote the rules through regulatory proxies) bank assets to be divided into “buckets” in order to calculate reserve ratios. The entire premise of reserve ratios, Tier 1 capital and all that, was to measure [...]

UST Warning In Vivid Detail

By |2014-10-27T14:52:02-04:00October 27th, 2014|Bonds, Economy, Federal Reserve/Monetary Policy, Markets|

Almost two weeks after the event, there is still more than a little nervousness about what took place on October 15 in UST trading – and for very good reason. Up to that point, proclamations about systemic liquidity degradations were just theoretical to most people. The reason was, and continues to be, that nobody seems to care about disruptions in [...]

The Dollar Short, Golden Bell

By |2014-09-25T17:52:39-04:00September 25th, 2014|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The purpose of this exercise of examination of global funding mechanisms is to put together means for inference about the state of dollar funding as it relates to the systemic short (Part 1 here; Part 2 here). There is no direct path for observation; that is why nobody can figure out how big it is or how it has really [...]

The Dollar Short, What and Where Now?

By |2014-09-24T15:20:57-04:00September 24th, 2014|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The first part of this examination can be found here. At first, the rebound off the 2009 low looked as if there would be no lasting changes or damage to the eurodollar system, but subsequent events have shown that there is more than a little lingering dysfunction that does not sway or erase with central bank assurances (both psychological and [...]

The Dollar Short, Hopefully Not A Day Late

By |2014-09-24T15:21:39-04:00September 24th, 2014|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

I get so caught up in the minutiae of esoteric function or financial plumbing that it is worthwhile to take a step or two backward and review the financial system from a bit more afar. The repo market’s strain recently and even the idea of liquidity itself are actually features (or symptoms) of the “dollar.” The idea of “money supply” [...]

Searching For Fail, and Still Finding It

By |2014-08-20T17:09:39-04:00August 20th, 2014|Bonds, Economy, Federal Reserve/Monetary Policy, Markets|

While the credit markets were looking elsewhere these past few weeks, funding markets are again off their axis as repo fails spiked significantly one more time. The current level of fails is not quite that of June, but it is enough to engender some more pause about financial plumbing. For the most part, explanations have been offered on the supply [...]

Repo Markets Demand Taper Because of Taper

By |2014-02-12T18:46:59-05:00February 12th, 2014|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It is exceedingly difficult to interpret the data in any other manner. That is bolstered greatly by reality of the post-taper environment, where issuance has declined dramatically. Yet, it was the talk of taper originally that set that decline in motion, echoing the feedback effects of this “extraordinary” monetary intrusion. Since Bernanke’s QE3 promise back in September 2012, repo volumes [...]

Gold Backwardation and Desperate Liquidity

By |2013-07-09T09:51:25-04:00July 9th, 2013|Commodities, Currencies, Federal Reserve/Monetary Policy, Markets|

The key benchmark rates for gold as collateral in borrowing US dollars are the gold forward rates (GOFO). Like LIBOR, GOFO is a “fix”; a survey of LBMA “contributors” of the cost at which they proclaim to exchange gold for dollars. There is no transactional information which accompanies GOFO, so it is often misconstrued as a “market” rate. The appearance [...]

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