Yesterday, I briefly surveyed the outward credit risk portion of the “dollar” financing process, so it makes sense to update interbank risk. As you might expect, given hints of redrawing liquidity and a “dollar” disruption, interbank rates jumped in the early part of June. Even the federal funds rate (effective) moved up to 14 bps, the highest fix since early [...]
In taking the lessons of OIS in 2007-08 to analysis, the immediate approach would be for skepticism about OIS in isolation right from the start. To that end, LIBOR-OIS suggests absolutely nothing out of the ordinary by itself. That is particularly odd since we know without any doubt that there have been severe liquidity problems at numerous points since QE3 [...]
In looking last week at some stress mechanics of the interbank markets I intentionally left out one piece, the Overnight Index Swap. OIS is often viewed as another measure of liquidity risk, keyed off matched maturity LIBOR, to give us a sense of order and good function. There is an OIS rate for every major currency regime, predicated and cued to [...]
There was no third consecutive quarterly liquidity event on April 15, but I think there was an observation of the same systemic crack that just didn’t, this time, go anywhere. I have been highlighting repo rates particularly during April where GC rates failed to reset as they had done after every other quarterly window dressing. This time was already notable [...]
Yesterday brought on an exposition on the death of currency, but it was only one dimension in that process. Owing to the orientation of monetary policy, especially under QE conditions, most attention is focused outward from short to long. The irreconcilably truth, as I put it, is that destroying time value amounts to depressing financial participation. Today we are very [...]
With the ECB set to plan on doing some QE, without much by way of reassurance that it can actually be accomplished, the central bank updated its modeled projections for QE’s success. That part was easy for them as they always assume at the outset that QE will do what they say QE does, though it is interesting just by [...]
The ECB’s experimentation with negative nominal interest rates is exactly that – an experiment whose range of conclusions spans the full spectrum of possibilities. I have absolutely no doubt at all that they have done enough regression calculations and monte carlo simulations to have estimated “central tendencies”, but at the same time I highly doubt recent developments fell within them. [...]
I don’t want to devolve into a Clintonian argument over the basic meanings of certain words, but that may be the best course in analyzing and discussing Europe’s circumstances in the very new age of negative interest rates. Reuters says there is “clear proof” that Draghi’s desperation and new bluff is “gaining traction.” An all-time low for euro zone money [...]
As per usual, gold prices followed forward rate movements. GOFO is again negative out to 2-months and is hinting negative for the 3-month rate. The 6-month forward rate is moving uite a bit lower, and even out to 1-year there has been a few bp drop in the rate. Bottom line: collateral issues abate; physical shortage reappears. In truth, the [...]
After the overdone debt ceiling/gov’t shutdown passed, gold was “released” from its interbank strangle and forward rates returned negative out to 3 months. The shortage was again prominent and gold prices began to adjust accordingly. They didn't get very far. Since November 1, right around the time dollar conditions began to tighten noticeably again, forward rates have been rising in [...]
Stay In Touch