Though I’d like to say it was because of some inside connection, or even clairvoyance, it was just random coincidence. I wrote on Monday of the updated sordid details behind SOFR’s unsuitability and largely the rejection of it in favor of keeping LIBOR (or maybe adopting something else). It’s not that the government’s handpicked replacement won’t work, it can’t work. [...]
To go back only to last November, lost amidst the elections and then understandably overwhelmed by vaccine euphoria, the SOFR saga took an expected turn. It was predictable especially given the realities of the situation behind this unforced string of errors. Central bankers and their Economists are, we’re constantly told, the best and brightest, these most capable of monetary stewards [...]
A momentous day, for sure, but one lost in what would turn out to be a seemingly endless sea of them. October 8, 2008, right in the thick of the world’s first global financial crisis (how could it have been global, surely not subprime mortgages?) the Federal Reserve took center stage; or tried to. Having bungled Lehman, botched AIG, and [...]
Quirks or kinks in the eurodollar futures curve are nothing new, materializing from time to time as much for technical reasons as anything else. Still, there are those instances – such as June 2018 – when these represent meaningful changes in outlook and condition. Back in the middle of that year, the sudden inversion in the curve along the 2020-21 [...]
The problem regulators have had with LIBOR has next to nothing to do with that whole scandal. Even the bankers who ended up going to jail did so based (largely) on misleading emails (just four, in one guy’s case). What constitutes a “representative” rate anyway? Your opinion might differ from mine or the other bank reps on the LIBOR panel, [...]
Eurodollar futures are derivative, cash-settled contracts linked to 3-month LIBOR (forget about SOFR and the official hatred of this offshore dollar rate regime). Though that rate acts independently especially at the worst times (thus, the hate), it is heavily influenced by the front-end monetary alternatives set by the Federal Reserve’s monetary policy (IOER, RRP). Because of this, LIBOR kind of [...]
Sometimes, the government will tell you a lot when it really doesn’t want to tell you anything. It’s not what they say, but what they don’t. In the case of the Treasury Department, there was a small, seemingly nondescript morsel buried down underneath the rest of its more immediately consequential next-quarter projections. While focused, quite rightly, on the scaling back [...]
There are times when regulators are the adults in the room, spanking the banking system full of little petulant children who absolutely do require some disciplining. Take away their prop trading abilities or change the weighted calculation for some asset class or other. Maybe even some liquidity rules. The banks will stomp their feet and pitch a fit, but the [...]
It was chaos. Rumors of not one but two large European banks being pushed to the brink. Money market funds worried about breaking the buck rapidly pulling cash out from under any global name. The FOMC debating what would’ve been a repo-like bailout, even though $1.6 trillion of bank reserves had been “added” to the system. What was most damaging [...]
It seemed like an odd, counterintuitive market reaction to what was total chaos. First the news of Lehman Brothers followed closely by AIG, panic gripped every corner of the global marketplace. Toward late September 2008, the stock market would meltdown (the main part of GFC1 that most people associate with the term) in a wave of liquidations due to a [...]
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