No one seems able to account for the rise in LIBOR-OIS. I think it’s a vain effort, and focuses on the wrong segments, but nonetheless there is considerable uncertainty which always casts suspicions into the shadows. That is important. A few weeks ago, all the big bank analysts were alight with their theories. They couldn’t agree, as noted in this [...]
Since the announced conditional cut in China’s RRR won’t begin to show up in various figures (particularly for the MLF) until next month, the updated PBOC balance sheet for March 2018 is somewhat anti-climactic. Not only is it too early for what may follow given the policy shift, there are the usual if not more than usual Golden Week distortions [...]
On April 6, the Trump administration announced a new round of sanctions imposed upon certain Russian officials, persons, and businesses. Treasury Secretary Steve Mnuchin announced their purported purpose in a letter: “The Russian government operates for the disproportionate benefit of oligarchs and government elites.” Russia’s currency, the ruble (RUB), fell sharply after the announcement as well as over the days [...]
Before Mario Draghi took over the ECB, he was head of the Bank of Italy. In between, Draghi was also Chairman of something called the Financial Stability Forum (FSF). This latter organization was created in 1999 “to promote international financial stability through enhanced information exchange and international cooperation in financial supervision and surveillance.” Draghi was appointed to lead the effort [...]
The term itself gives it away. They called it quantitative easing for a specific reason. Both words mean to convey substantial concepts. The first part, quantitative, was used because it sounds deliberate, even scientific. It implies a program where great care and study was employed to come up with the exact right amount. It’s downright formulaic, where you intend that [...]
The current US Treasury yield curve in between the 5-year and 10-year maturities is today just 15 bps. It had dropped down to this level of flat about ten days ago. When it did, it had been the first time in almost eleven years. The last time the 5s10s was 15 bps? August 8, 2007. It’s hard not to notice [...]
The primary reason I focus so much on time is that I believe it is running out. No one possesses a crystal ball, least of all me, and while making such a statement might presume to be intensely negative (doom and gloom) it’s not always that way and it certainly doesn’t have to be. For all the innumerable frustrations, there [...]
Even after several years of them, monetary policymakers continued to tread carefully with large scale asset purchases (LSAP). Otherwise known as quantitative easing (QE), in the US they were first announced all the way back in the darkest days of global financial panic in 2008. Yet, in 2012 and 2013 concerns remained that they could prove too powerful. Then-Richmond Fed [...]
It’s worth revisiting the topic of the “rising dollar.” What determines its exchange value in the first place? Orthodox convention associates the general direction up or down with interest rate differentials, the infamous global carry trade. Not just any interest rate comps, either, but those of short-term money markets. Thus, if the Federal Reserve is “raising rates” as it has [...]
Thomas Hoenig was President of the Federal Reserve’s Kansas City branch for two decades. He left that post in 2011 to become Vice Chairman of the FDIC. Before that, Mr. Hoenig as a voting member of the FOMC in 2010 cast the lone dissenting vote in each of the eight policy meetings that year (meaning he was against QE2, too). [...]
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