As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 [...]
You’ll have to forgive the Chinese if they view “global turmoil” as something far more than an esoteric financial concept to be debated by irrelevant monetary committees. US imports from China fell 4.3% year-over-year in May 2016, the third consecutive contraction and seventh out of the last eight months. With February’s 16% gain more a calendar/holiday illusion, especially since it [...]
In a regime where math acts as money, there are a few major potential chokepoints where shifts in math can become systemically important difficulties. In 2008, the most visible example was in repo haircuts, but the most devastating to the financial system certainly fixed income (MBS, in particular) correlation. The system could not survive rising correlation because nobody was prepared [...]
It was a nice diversion while it lasted, I suppose. From the moment of the unfortunate murder of the British MP, funding markets, in particular, had been furiously “selling dollars” to get back some of the pound that was falling as Brexit had gained momentum. Media commentary talks about it as if that were the whole topic – it never [...]
This is all starting to look very familiar and predictably so: Especially this: It is utterly extraordinary that the June 2023 eurodollar futures contract closed trading at 98.00, much less than on February 11 and a collapse of more than 150 bps in anticipated 3M LIBOR seven years in the future just since last July. It is, again, entirely anticipated given the [...]
The Treasury International Capital (TIC) update for April showed a very large net decline in foreign (registered) holdings of US securities. The total net drop was $68.7 billion, the largest in one month since the severe “dollar warning” in June 2013. Though we have become accustomed to these kinds of results, the biggest factor in April 2016 was on the [...]
Last week, the National Bureau of Statistics in China released what seemed like import levels that suggested “stimulus” was finally paying off and the economy had struck bottom. Among these more glowing results was an absolute surge in the importation of oil, which was blindly parroted as if Chinese demand due to the expected economic revival were the cause. Instead, [...]
If there seems to be more safe haven demand of late, the increasing odds of British exit from the EU is being blamed. According to Yahoo!Finance, Goldman Sachs sees “kinks” in the option structure, an agglomeration of hedging demand that points to maturities around the UK referendum. The absence of any heavy hedging this week suggests that markets have no [...]
As always, there is the attempt to put a brave face on what is shaping up to be the worst year yet. China’s “big 3” economic data were all disappointing in the context of what the last “brave face” was supposed to suggest – where weakness at the start of the year was only due to “global turmoil” and would [...]
With stocks down for a second day, attention has been focused on the UK vote potentially in favor of leaving the EU. It seems like a naturally disruptive event, or at least in theory, an outcome that the mainstream globalist persuasion continues to emphasize. That is certainly one possible explanation, but a more likely scenario is one where CNY plays [...]
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