Last April, former Fed Chairman Ben Bernanke wrote a series of blog posts for Brookings that was intended to explain one of the biggest contradictions of his legacy. If quantitative easing had actually worked as he to this day suggests that it did, why wasn’t the bond market in clear agreement? In order to try to reconcile the huge discrepancy, [...]
Though I highly doubt he will admit it, he’s just not the type, even Ben Bernanke knows on some level that bond market is decidedly against him, or at least his legacy. Economists have a funny way of looking at bonds, decomposing interest rates into Fisherian strata. To monetary policy, interest rates break down into three parts: expected inflation over [...]
On August 30, the overnight SHIBOR rate jumped above 2.05% for the first time in more than a year. As the acronym indicates, SHIBOR is to Chinese RMB interbank liquidity as LIBOR is to eurodollars in London. In the summer of 2015, SHIBOR began rising steadily and often precipitously despite monetary policy “stimulus.” On June 27, 2015, the PBOC cut [...]
In 1991, economist Ronald H. Coase was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, colloquially referred to as the Nobel Prize in Economics. His lecture that December given while collecting it was notable in good part not just for his contributions but rather how he saw why such contributions were actually necessary. As he said [...]
A eurodollar futures contract affords the buyer the opportunity to obtain a $1 million eurodollar deposit for a three-month term at the expiration and execution of the contract. The rate to be paid for that deposit is 100 points minus 3-month LIBOR for spot settlement on the 3rd Wednesday of the contract month. If 3-month LIBOR on June 20, 2018 [...]
Jeffrey Snider: All Signs Point to Global Systemic Reset
The words of the day are apparently “sluggish” and “challenging.” Overnight both Target and Cisco, bellwethers in retail and tech, respectively, were both the subject of intense scrutiny. Target released earnings that “beat” while revenues and really same store comps were particularly weak. Year-over-year, sales declined 7.2% total (revenues from Q2 2015 include Target’s pharmacy business which was sold to [...]
On Wednesday, October 8, 2008, the FOMC voted for an emergency 50 bps cut in the federal funds rate, bringing it down to 1.50%. The day prior, the Fed announced that it would be buying short-term debt from businesses after suggesting the day before that it would fund up to $300 billion for “bad” assets. The Friday before that, Congress [...]
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 [...]
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