On February 6, 2008, oil prices (WTI) dropped to $87.16, the lowest price since the prior October. Oil had been rising as the market misunderstood and dramatically mispriced what was going on; buying on the idea of monetary policy accommodation in growing intensity, while at the same time not factoring the hidden monetary destruction that was far greater. It was [...]
Last July, the US Treasury Department finally issued its official report detailing its account of what happened on October 15, 2014. The statement was co-authored by staff at the Board of Governors of the Federal Reserve System, FRBNY, the SEC, and CFTC, as if the government were going overboard trying to prove its word the end of the matter. As [...]
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 [...]
It might be expected that monetary policy would fail to achieve its goal in attempting to manage the economy when it cannot even meet its own basic technical requirements. The main lever of Fed policy continues to be the federal funds rate even though it is entirely irrelevant, and has been for a long time. There is much more to [...]
The real nature of liquidity is not what you see today but what we might find when the going gets tough. Though it is an intangible concept (not that that hasn’t kept economists from trying to quantify it), we can reasonably assume that if overall liquidity today appears impaired under relatively benign conditions, it will be significantly worse as malignancy [...]
With stocks down for a second day, attention has been focused on the UK vote potentially in favor of leaving the EU. It seems like a naturally disruptive event, or at least in theory, an outcome that the mainstream globalist persuasion continues to emphasize. That is certainly one possible explanation, but a more likely scenario is one where CNY plays [...]
In August 2013, the Treasury Department through its Treasury International Capital data (TIC) put a scale on that summer’s disruption. With a two month delay, the TIC figures gave us some insight as to why the fixed income/MBS selloff that summer was so violent; and further why it had so easily spread to currency markets. The destabilization of that event [...]
There isn’t a whole lot known about the Federal Reserve’s Foreign Reverse Repo accommodation, and I believe that is intentional. The rate which the Fed pays to “borrow cash” from foreign central banks and governments is unknown. What is known is just how much in total the Fed is “accommodating” foreign dollar business. This RRP, in sharp contrast to the [...]
Goldman Sachs did not disappoint. The bank’s earnings for Q1 were a disaster slightly worse than what was already anticipated as beyond bad. There was nothing that the firm did that it can say it did well, as Goldman’s CEO admitted there was weakness or “headwinds across virtually every one of our businesses.” For eurodollar or wholesale banks, that has [...]
It is quarter end, so illiquidity irregularity is to be expected except that it isn’t irregular really. Eurodollar futures have been heavily bid for three days in a row now, leaving four consecutive up days for the first time since the liquidations. And because I am a sucker for fractal behavior, repo markets proved that quarter end is still what [...]
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