Back in early July, Bloomberg published a rather curious article that sounded like it was written from within the People’s Bank of China - or any other global central bank for that matter. The most prominent correlation over the past year had been CNY and everything else; or, as I wrote earlier in the year, CNY down = bad. The [...]
In August 2014, Chinese industrial production was estimated to have slowed sharply from +9.0% that July to just 6.9%. Consensus at the time expected only a minor variation, an insignificant change to +8.8%. Chinese industrial statistics had suggested some minor (relatively speaking) weakness at the start of the year before rebounding throughout the spring in what is now, in the [...]
The inconsistency or unevenness of the economic data is a huge part of the problem. The world wants to move in nice, clean straight lines and nowhere is that more of an assumption than economics. There is some allowance for variation but that is always expected to be minimal. The past four years or so just haven’t seen much deference [...]
As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 [...]
In a regime where math acts as money, there are a few major potential chokepoints where shifts in math can become systemically important difficulties. In 2008, the most visible example was in repo haircuts, but the most devastating to the financial system certainly fixed income (MBS, in particular) correlation. The system could not survive rising correlation because nobody was prepared [...]
It was a nice diversion while it lasted, I suppose. From the moment of the unfortunate murder of the British MP, funding markets, in particular, had been furiously “selling dollars” to get back some of the pound that was falling as Brexit had gained momentum. Media commentary talks about it as if that were the whole topic – it never [...]
With the sudden interjection of uncertainty halting the surge in Brexit odds since the unfortunate attack on British MP Jo Cox last week, the financial world has benefitted from the pound’s resurrection. Sterling has had a very good couple of days in this reversal, especially today. As it rises it adds the same as we saw on the day of [...]
This is all starting to look very familiar and predictably so: Especially this: It is utterly extraordinary that the June 2023 eurodollar futures contract closed trading at 98.00, much less than on February 11 and a collapse of more than 150 bps in anticipated 3M LIBOR seven years in the future just since last July. It is, again, entirely anticipated given the [...]
The Treasury International Capital (TIC) update for April showed a very large net decline in foreign (registered) holdings of US securities. The total net drop was $68.7 billion, the largest in one month since the severe “dollar warning” in June 2013. Though we have become accustomed to these kinds of results, the biggest factor in April 2016 was on the [...]
Last week, the National Bureau of Statistics in China released what seemed like import levels that suggested “stimulus” was finally paying off and the economy had struck bottom. Among these more glowing results was an absolute surge in the importation of oil, which was blindly parroted as if Chinese demand due to the expected economic revival were the cause. Instead, [...]
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