Repo rates absolutely surged at month-end, LIBOR jumped a few more basis points and the eurodollar curve is bid almost everywhere in large chunks. Commodities continue to get smashed, especially crude oil, and currencies are devaluing in almost equally large portions. Even the treasury market is somewhat sporting the tell-tale collateral calls. In short, the “dollar” problems continue into this [...]
The “dollar” problems continued this morning as several proxies continued toward new lows. Copper fell to as low as $2.342 (July contract still) while crude is down close to $47 in the front months. The back end of the WTI curve, perhaps more importantly with respect to growth and fundamentals tied to the “dollar”, fell to new lows. The Brazilian [...]
With Greece settled and China moving away, for now at least, from the edge, it appears as if the “dollar” has settled back from the collateral calls of last week. That would make July 15 as seemingly as much of a dud as April 15 was, both in sharp contrast to October 15 and then January 15. That does not [...]
While the outward-facing pieces of the eurodollar puzzle show a little bit of Greek reference, the inward parts seem much more defined by the systemic erosion in liquidity and capacity quite apart from all that. LIBOR and other money rates continue to rise, as do risk spreads. Since the QE system was laid out roughly on liquidity as function, the [...]
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 [...]
The main thing about “tail events” is how unconventional they can be, a tautology that somehow is necessary. When taking account of financial risks in 2015 it is almost convention that there are bubbles, with rather unnerving complacency about it all. That suggests in some ways the whole idea of bubbles has changed since the first one under eurodollars showed [...]
In the age of ZIRP it can be difficult to gain perspective especially about interest rate movements. Trying to analyze the ups and downs including any relevance or importance is clouded by the lack of historical clarity on that account. We really have no idea about the true significance of scales at and near the zero lower bound because this [...]
I feel almost obligated at this point to present UST volatility whenever referring to funding markets. Hopefully that “duty” will subside in the near term, but as I suggested yesterday this week is setting up to be much like last week. When I wrote that, however, I didn’t mean to propose a literal copy from week to week, but that [...]
In the space of a little more than 2 trading days, the US 10-year treasury went from just a tic or two above 2.10% in yield to a few tics above 2.30% in yield. The front end of that comparison was itself remarkable, as the open for trading Friday (payroll lunacy entailing) was down almost 9 bps in yield from [...]
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 [...]
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