It took a little longer than I expected, but it finally happened. FRBNY reports this morning that as of yesterday afternoon the effective federal funds rate was 2.41%. You’ll note that IOER, the ceiling, is still set 10 bps under the target upper boundary of 2.50%. Some quick math, that means EFF was yesterday 1 bps above IOER. The joke [...]
During the first quarter of 2008, as Bear Stearns teetered on the edge of illiquidity, foreign holders of US$ financial assets contributed $9.3 trillion to US credit markets. According to the Fed’s Z1, the Financial Accounts of the United States, it tells us that’s the amount they held in possession from outside the American geographical boundary. Considering at the same [...]
More important than the US GDP number, more substantial than the February jobs report, what will linger for longer in the public consciousness is China’s trade data. It seems as if the big drop in exports has garnered the most immediate attention, I suspect that won’t be the case moving forward. There are more important trends being captured where the [...]
The obsession with inflation is grounded in historical fact. This is true both of our recent “conundrum” as well as broader circumstances surrounding slow burning structural changes. As to the former, last year the global economy was supposed to take off, concurrently signaled by accelerating inflation rates due to what are always claimed to be tight labor markets. The worldwide [...]
The TIC data for December 2018 starts out well enough, exactly the way it should. The headline says foreigners sold a record amount of US$ assets in that month. Anyone paying attention during it would be the opposite of shocked. Everyone sold anything they could in December. It follows from the idea of dollar shortage. However, then you start asking [...]
China’s yuan just isn’t a stable currency. I don’t mean its exchange value, either. CNY floats up and down on the whims of the eurodollar. The PBOC can and does limit the daily trading band, but often at tremendous cost (ticking clock). Therefore, the internal constraint governing this dynamic is a symptom of a world that isn’t going to accept [...]
TIC update for December 2018. Given what happened in that particular month, yeah, this seems about right: Here’s the same thing smoothed out on a 6-month basis. Plus an added reminder. Just to refresh: That’s a shame because TIC will tell you so much more about the global economy and the changes taking place within it than the Establishment Survey [...]
On Friday, the CFTC posted its COT data for the first week in 2019. For crude oil, capitulation. For US Treasury bond futures, capitulation. In the latter financial market, unsurprisingly the net market position utterly collapsed during December. From a relatively high (meaning market overall short) +58k contracts that last week in November when everyone piled into liquidity hedges, the [...]
Everyone hates LIBOR, until it does something interesting. It used to be the most boring interest rate in the world. When it was that, it was also the most important. Though it followed along federal funds this was only because of the arb between onshore (NYC) and offshore (mainly London, sometimes Caymans) conducted by banks between themselves and their subs [...]
As Argentina’s peso careened toward oblivion, the country’s government begged IMF officials for more money. The organization in June 2018 had already agreed to a bailout expected to total more than $50 billion over three years, the largest in the fund's history. But it wasn’t working, and as the currency crisis accelerated toward the end of August there was little [...]
Stay In Touch