Perhaps the hardest part of analyzing the eurodollar system is synchronizing all its various dimensions into a common perspective. Coming from the traditional standpoint that views all these various parts as if they are all separate, such a task is often quite difficult. For example, the repo market is almost always described from the cash perspective as if there only [...]
For quite some time now I have been writing (constantly) about “something” going in “dollar” markets and funding markets all over the world. Chinese markets related to “dollars” have been the most prominent in their disorder, but there is a degree of causation that runs from eurodollars to China and perhaps back again. In other words, Chinese illiquidity is not [...]
As if we needed more evidence, the Chinese liquidity system is stuck. As much as authorities in China might complain about the global credit-based reserve currency system, as PBOC Governor Zhou Xiaochuan put it in March 2009, and quietly seek out its replacement, they not only allowed it to happen they quite eagerly participated in it so long as it [...]
The economy of 2015 started out “unexpectedly” weak before succumbing to “global turmoil.” It was the events of last summer that began to sow serious doubts about not just the economic narrative seeking to dismiss weakness (“transitory”) but rather central banking and QE itself. The repeat in January/February further eroded mainstream credibility, particularly since only a few weeks before the [...]
The July update to the Treasury International Capital flows (TIC) was mostly the same as we have observed throughout this year. The private segment continues to buy on net while the official sector continues to sell on net. I think it fairly reasonable to conclude that the latter is purposefully designed so that the former can take place. In other [...]
If it was quiet late last week with China dark for its Mid-Autumn festival, the return from holiday shattered the calm and further amplified what is already a significant problem. The activity in CNH markets continues to astound, but I still think it is domestic liquidity that is more significant. Unsecured offshore (CNH) lending (HIBOR) has all but dried up [...]
If anyone might wonder why yesterday and today seem far less noteworthy and less perhaps dangerous, the Chinese are once again on holiday. The Mid-Autumn festival began yesterday and extends today. The last money market trading, then, was early Thursday morning with offshore CNH coming back down if only slightly. What commentary there is in relation to CNH continues to [...]
Treasury bill rates have been trading notably higher of late, with the 3-month bill equivalent yield as much as 37 bps this week. Though it was the highest rate since November 2008, a true reading of bill history shows that it is not a matter of Fedearl Reserve policy “normalization.” Trading in bills, especially the 3-month, makes indications of risk [...]
The US is not alone in its corporate profit slump. In China, profits at State-Owned Enterprises fell a further 6.5% year-over-year in the January to July period. Estimated to have been RMB 1.31 trillion (about $195 billion), SOE profits are being dragged down by those firms under control of the central government. Locally-administered SOE’s showed net income declining by only [...]
Chinese oil imports surged again in August to the equivalent of 7.77 million barrels per day (mbpd). That was significantly more than July’s pace of 7.35 mbpd, and up an astounding 1.5 mbpd from August 2015. It was the highest rate of oil imports since April. The demand for commodities hasn’t been limited to just crude oil, as coal imports [...]
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