The FOMC has been talking, so we hear, about changing “forward guidance” to indicate a potential rate hike sooner rather than later. They had already changed the basis of “forward guidance” back in September which largely negated what forward guidance actually meant. The concept is only pliable in the manner in which monetary theory has to follow “rational expectations.” Whenever [...]
The Federal Reserve is running another large-scale test on its Term Deposit Facility (TDF), the account by which it intends to establish a European-style floor to its also intended interest rate corridor. Judging by the fact that nobody has paid any attention to this test or the one that preceded it, except for those that were fooled into thinking the [...]
It was a bit of a shock in June 2014 when the repo market experienced sudden and sharp disorder. The surge in fails seemingly did not fit the conditions as convention held them in the middle of last year when everything was supposedly running so smoothly. In the eight months since then, repo fails have not much calmed, which has [...]
I’ve had my suspicions for some time that December saw a(n) (il)liquidity event throughout the “dollar” system. The problem with that supposition is the lack of corroborating price action in riskier markets where you would expect the most impact. That was the pattern revealed by the end of the last event on October 15, where risky credit, especially corporate junk [...]
Oh Europe. I have a growing sense that US credit markets are repeating the leadup to last October 15, though there isn’t any obvious expression of any such illiquidity (at the moment). For one thing, the eurodollar curve has taken the FOMC’s bluffs in complete stride, in fact doing the exact opposite as you would expect of a very close [...]
The main problem with looking at the financial world from a “dollar” funding perspective is that there really is no such monolithic existence. The funding conditions in Russia may be very different than those of Swiss banks; they also may be far too similar. Given the impossibility of direct observation, being left outside and searching for interior clues that bubble [...]
Whatever bearishness existed prior to December, credit markets clearly shifted beyond to a heightened state of concern. That was not lost on the FOMC internal discussion regardless of what they state publicly, as the action in credit has taken now to levels unmatched by anything seen in the past five years – and it’s not like the past five years [...]
There was a lot to talk about at the last FOMC meeting, where most are focused on “patience” and all that about rate hikes. Less discussed and analyzed, as these areas are often difficult to parse for outsiders, was the fact that the savior of rate “normalization” has been totally and completely put out to pasture. The reverse repo program [...]
While Abenomics continues to be classified as “pro-growth” rather than vilified for what it has done, that is as clear in the real economy as it is in the financial realm. Japanese experimentation with ZIRP has destroyed, effectively, any informational content from the JGB curve which contributes to continued resource waste. The Japanese just auctioned a 2-year note at a negative [...]
I have to thank my colleague Joe Calhoun for passing alone a very topical article written by Nassim Taleb and Gregory Treverton in Foreign Affairs. Taleb is, of course, well-known for his “black swan”, but it is really far more than that as it gets to the failure of modern economics as nothing more than a study of statistics. Conventional [...]
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