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 [...]
Apparently the stasis that has infected credit markets has been visited upon gold prices. Going back to late March, gold has straddled the $1,300 level without straying too far on either side. As with other credit market prices, such stability is conspicuously different from what would be considered “normal” market behavior. Is it possible the two opposing forces affecting gold [...]
We have noted the negative forward rates for gold on several occasions, particularly as they relate to our thesis about gold being used in collateral funding arrangements. The negative forwards have persisted uninterrupted since July 8. That was true for tenors up to three months, with the six-month falling below zero on several occasions now. Six-month GOFO has now been [...]
The only story for gold is the persistence of negative forward rates out to three months. That has not changed for three full weeks, an unprecedented string. To some, this is confirmation that gold is in short supply, while many others have been trying to rationalize negative GOFO as an unimportant victim of circumstance. Again, it bears repeating that GOFO [...]
The physical markets for precious metals do operate under the philosophical framework of basic economics. The price of gold, for example, will move based on underlying demand and supply dynamics though it appears to have taken a break from that relationship recently. Unlike industrial commodities, however, gold still occupies monetary spheres, particularly interbank liquidity. That complicates the basic economics of [...]
By Jeffrey Snider, CIO, Atlantic Capital Management of Florida: In a world awash with digital fiat money, this constant need for liquidity measures is sometimes hard to reconcile with the sheer amount of digital monetary units created in the months since October 2008. But real liquidity is far more than quantity. When the banking world was in danger of falling [...]
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