collateral

2018: The Collateral Case

By |2018-11-20T16:48:49+00:00November 20th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Last December, something clearly broke. The global basis had swept far under zero again, an ominous sign that eurodollar banks were having trouble creating, finding, and redistributing global funding. A cross currency basis swap is one way to do it, the negative basis indicating a desperate shortage of dollars offshore (eurodollars). The negative basis wasn’t [...]

Eurodollar Futures: Powell May Figure It Out Sooner, He Won’t Have Any Other Choice

By |2018-11-19T12:52:06+00:00November 19th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

For Janet Yellen, during her somewhat brief single term she never made the same kind of effort as Ben Bernanke had. Her immediate predecessor, Bernanke, wanted to make the Federal Reserve into what he saw as the 21st century central bank icon. Monetary policy wouldn’t operate on the basis of secrecy and ambiguity. Transparency became [...]

Contagion

By |2018-10-29T18:42:55+00:00October 29th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The word contagion is easy enough to understand. Whether the spread of disease or disaster, sometimes it is difficult if not impossible to contain. In financial terms, contagion is often thought of along the lines of 2011; Greece started it and it spread throughout the rest of Southern Europe. The euro was coming apart, and [...]

Three Stages of Gold

By |2018-10-23T16:53:25+00:00October 23rd, 2018|Commodities, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

For days after China shocked the world in August 2015, “devaluing” its currency seemingly out of nowhere, there was only confusion as to what had just happened. Going by nothing more than the mainstream media and economic narrative fed to it by central bankers and Economists (redundant), you wouldn’t have known anything was wrong at [...]

Eurodollar University Collateral; May 29 – We Know Who It Wasn’t

By |2018-09-24T17:16:11+00:00September 24th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

At one time, economics actually cared about eurodollars. Maybe it was because the thing was so new, it was a hot, sexy topic, the kind of strange and unusual deviation from the norm that can grasp someone’s attention and hold it. Perhaps it was the way in which it all began, an entire monetary system [...]

TIC For July 2018: June Was Even Bigger Than We Thought, Meaning May 29

By |2018-09-18T17:33:50+00:00September 18th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

You never quite know what you’re going to get with each monthly update. High frequency data tends to be noisy anyway, more so in the more exotic series. Following a month where something really changes, however, you aren’t quite sure if it will turn out to be nothing more than a phantom. Does last month’s [...]

One Fragile Year In Review: It Was A Warning

By |2018-09-05T17:46:54+00:00September 5th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

One year ago today, something broke. It wasn't a big thing, practically a footnote seemingly not worth mainstream attention. Out of nowhere, the 4-week T-bill yield spiked. On Friday, September 1, 2017, the equivalent interest rate for the instrument was steady at 96 bps. That was already a problem because the Federal Reserve’s RRP was [...]

The Conspicuous Consistency of Curves

By |2018-08-20T17:03:19+00:00August 20th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It’s not that curves are flattening. It’s where they are. There’s really no mystery surrounding any of this. The “conundrum” arrives only when starting from the orthodox perspective; the one derived from Economists even though they don’t understand the bond market in the slightest. Short-term rates tend to “obey” central bank signals because central banks [...]

TIC in June 2018: The Questionable Collateral Aftermath of May 29

By |2018-08-17T17:34:53+00:00August 17th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

There isn’t really any doubt what happened on May 29. It was a global collateral call. Bonds all over Earth were hugely bid, especially paper in Germany and America – the pristine of the pristine. This is pure liquidity risk, meaning that no matter your feelings on the long-term solvency of the US government (or [...]