Tag Archive: Bonds

The Fallen Kings & The Bond Throne of Collateral

2020-04-24

by

2020-04-24

UST Yield Curve, 2017-2020
There is no schadenfreude at times like these, no time to dance on anyone’s grave. Victory laps are a luxury that only central bankers take – always prematurely. The world already coming apart because of GFC1, what comes next with GFC2 and then whatever follows it? Another “bond king” has thrown in the towel.

Read More »

The Greenspan Bell

2020-04-22

by

2020-04-22

Germany ZEW Financial Market Survey, 2006-2020
What set me off down the rabbit hole trying to chase modern money’s proliferation of products originally was the distinct lack of curiosity on the subject. This was the nineties, after all, where economic growth grew on trees. Reportedly. Why on Earth would anyone purposefully go looking for the tiniest cracks in the dam?

Read More »

The Global Engine Is Still Leaking

2020-04-16

by

2020-04-16

Federal Reserve: Liabilities & Capital, 1984-2019
An internal combustion engine that is leaking oil presents a difficult dilemma. In most cases, the leak itself is obscured if not completely hidden. You can only tell that there’s a problem because of secondary signs and observations.If you find dark stains underneath your car, for example, or if your engine smells of thick, bitter unpleasantness, you’d be wise to consider the possibility.

Read More »

Fragile, Not Fortified

2020-04-09

by

2020-04-09

Credit Spreads, 2017-2020
On Sunday, Argentina’s government announced it was postponing payment on any domestically-issued debt instruments denominated in foreign currencies. That means dollars, just not Eurobonds. At least not yet. In response, ratings agencies such as Fitch declared the maneuver a distressed debt exchange.In other words, technically a default.

Read More »

Banks Or (euro)Dollars? That Is The (only) Question

2020-04-03

by

2020-04-03

UST Yields & Money Alternates, 2007-2009
It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it was to be ignored as the Fed at that point was still forecasting inflation and rate hikes.

Read More »

(No) Dollars And (No) Sense: Eighty Argentinas

2020-03-31

by

2020-03-31

India Official Reserve Assets, 2016-2020
India like many emerging market countries around the world holds an enormous stockpile of foreign exchange reserves. According to the latest weekly calculation published by the Reserve Bank of India (RBI), the country’s central bank, that total was a bit less than half a trillion. While it sounds impressive, when the month began the balance was much closer to that mark.

Read More »

No Further Comment Necessary At This Point

2020-03-28

by

2020-03-28

Primary Dealer Repo Fails (UST), 2017-2020
I would write something snarky about bank reserves, but why bother at this point? It’s already been said. If Jay Powell doesn’t mention collateral, no one else does even though it’s the whole ballgame right now. Note: FRBNY’s updated figures shown below are for last week.

Read More »

Three Short Run Factors Don’t Make A Long Run Difference

2020-03-25

by

2020-03-25

US Treasury Curve, 2018-2020
There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed.

Read More »

Regime Change

2020-03-24

by

2020-03-24

Stocks took another beating last week as the scope of the coronavirus shutdown started to sink in. The S&P 500 was down 15% last week with most of that coming on Monday after the Fed’s emergency rate cuts. Our accounts performed much better than that, but were still down on the week as corporate and municipal bonds continued to get marked down.

Read More »

Stagnation Never Looked So Good: A Peak Ahead

2020-03-21

by

2020-03-21

Germany ZEW Financial Market Survey, 2006-2020
Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry.

Read More »

Is GFC2 Over?

2020-03-18

by

2020-03-18

TED Spread, 2018-2020
Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either.

Read More »

What Happens When Central Banks Buy Stocks (ETFs)? Well, We Already Know

2020-03-13

by

2020-03-13

Japan Machine Tool Orders, 2010-2020
Can we please dispense with all notions that monetary policy works? Specifically balance sheet expansion via any scale asset purchase programs. Nowhere has that been more apparent than Japan. Go back and reread all the promised benefits from BoJ’s Big Bang QQE that were confidently written in 2013. The biggest bazooka ever conceived has fallen short in every conceivable way.

Read More »

(Almost) Everything Sold Off Today

2020-03-12

by

2020-03-12

Eurodollar Futures Curve, 2018-2024
The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior.

Read More »

Low Rates As Chaos, Not ‘Stimulus’

2020-03-11

by

2020-03-11

UST Yield & Money Alternates, 2007-2009
Basic recession economics says that when you end up with too much of some commodity, too much inventory that you can’t otherwise sell, you have to cut the price in order to move it. Discounting is a feature of those times. What about a monetary panic? This might sound weird, but same thing.

Read More »

Is this the Beginning of a Recession?

2020-03-10

by

2020-03-10

As I sit here Monday evening with the Dow having closed down 2000 points and the 10-year Treasury yield around 0.5%, the title of this update seems utterly ridiculous. With the new coronavirus still spreading and a collapse in oil prices threatening the entire shale oil industry, recession is now the expected outcome. Most observers seem to question only the potential length and depth of the coming downturn.

Read More »

Like Repo, The Labor Lie

2020-03-08

by

2020-03-08

Federal Reserve Beige Book, 2010-2020
The Federal Reserve has been trying to propagate two big lies about the economy. Actually, it’s three but the third is really a combination of the first two. To start with, monetary authorities have been claiming that growing liquidity problems were the result of either “too many” Treasuries (haven’t heard that one in a while) or the combination of otherwise benign technical factors.

Read More »

Take Your Pick of PMI’s Today, But It’s Not Really An Either/Or

2020-03-06

by

2020-03-06

PMI's & GDP, 2012-2020
Take your pick, apparently. On the one hand, IHS Markit confirmed its flash estimate for the US economy during February. Late last month the group had reported a sobering guess for current conditions. According to its surveys of both manufacturers and service sector companies, the system stumbled badly last month, the composite PMI tumbling to 49.6 from 53.3 in January.

Read More »

The Greenspan Moon Cult

2020-03-05

by

2020-03-05

US Treasury Curve, 2007-2019
Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events.

Read More »

A Day For Rate Cuts

2020-03-04

by

2020-03-04

Total Credit Market, 1980-2015
Well, that wasn’t he had in mind. The whole point of a rate cut, any rate cut let alone an emergency fifty, is to signal especially the stock market that the Fed is in the business of…something. The public has been led, by and large, to assume that something good happens when the Fed Chair shows up on TV.

Read More »

Economy: Curved Again

2020-02-27

by

2020-02-27

Mexican Economy, 2016-2019
Earlier today, Mexico’s Instituto Nacional de Estadística y Geografía (INEGI) confirmed the country’s economy is in recession. Updating its estimate for Q4 GDP, year-over-year output declined by 0.5% rather than -0.3% as first thought. On a quarterly basis, GDP was down for the second consecutive quarter which mainstream convention treats as a technical recession.

Read More »