Repo

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 [...]

The Long Shadows

By |2018-11-12T16:08:24+00:00November 12th, 2018|Bonds, Commodities, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The news was one of those instances when you could see they were trying a little too hard. It didn’t make any sense, not anyway in the context to which it was delivered. On September 21, unnamed German officials were supposedly championing a megamerger in the banking sector. The country’s two largest financial institutions might [...]

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 [...]

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 [...]

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 [...]

Anticipating How Welcome This Second Deluge Will Be

By |2018-08-28T16:36:39+00:00August 28th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Effective federal funds (EFF) was 1.92% again yesterday. That’s now eight in a row just 3 bps underneath the “technically adjusted” IOER. If indeed the FOMC has to make another one to this tortured tool we know already who will be blamed for it. The Treasury Department announced yesterday that it will be auctioning off [...]

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 [...]