Citi’s Willem Buiter and team’s main scenario for 2016 is now a global recession in which China’s slowdown drags down other emerging markets and eventually the advanced economies as well.
In a note this week, the team state that while a sufficient policy response from China and among developed market central banks should provide support, recent rhetoric suggests the Fed is still dead set on raising rates. Read more
Gold has been rising steadily since the start of the year.
Given the US taper, this might seem counterintuitive, especially if you believe that “money printing” should always justify higher gold prices.
But, as usual, everything is relative. Read more
The market vogue is to obsess about how the Fed is suppressing long-term rates.
But for years now, FT Alphaville has been trying to explain why, in reality, Fed intervention is as much focused on propping up short-term rates (preventing them from falling through zero) as it is about keeping longer-term rate expectations anchored. Read more
Icap’s Chris Clark alerts us on Friday to the fact that European liquidity markets are already preparing themselves for a potential liquidity squeeze come the end of the year.
As he notes:
Month-ends have become increasingly significant events for the Eurozone repo markets over the second half of this year as levels of excess liquidity have diminished and market rates have slowly edged higher. This Thanksgivings Day/November month-end liquidity hump has proved a tricky one for the market to manoeuvre, but already attention is focusing on the impending year-end as evidence stacks up to suggest funding might be problematic for some.
Scott E.D. Skyrm, repo specialist and author of an upcoming book on MF Global, presented an interesting repo chart on his blog this week:
As the chart shows, so-called GC repo rates are once again trading below the Fed Funds rate. Read more
A hat tip to John Kemp at Reuters for drawing our attention to this from the US Treasury on Friday:
WASHINGTON – The Treasury is calling for Large Position Reports from those entities whose reportable positions in the 0-3/4% Treasury Notes of September 2013 equaled or exceeded $2 billion as of close of business Wednesday, December 8, 2010. This call for Large Position Reports is a test. Entities with reportable positions in this note equal to or exceeding the $2 billion threshold must report these positions to the Federal Reserve Bank of New York.
Libor has, in many ways, already been disowned by the industry. But now the discussion of its inadequacies has entered the mainstream, thanks to the fines recently levied on Barclays for manipulating the rate, and its drawing unwelcome attention to the fact that it’s still used to determine payments on hundreds of trillions of financial products.
Some of the holders of said products are not happy, and have filed class action suits to show it.
Clap your hands. Read more
It’s all very well bashing Bob and calling for bankers’ heads.
But we shouldn’t overlook another exceedingly important point about the Libor affair, as picked up by Claire Jones over on the FT’s Money Supply blog. Read more
The BIS Annual report released this Sunday is jam-packed with data, charts, observations and analysis. Joseph has already stuck up some of the most compelling…
But one of the other key points to emerge is in its chapter on the “limits of monetary policy”. There is, it appears, a marked admission that central banks may be losing control. Read more
Or, what to do when your primary funding benchmark is in crisis.
The search is on in money markets for an alternative to Libor, amid doubts about the rate’s reflection of banks’ actual borrowing costs. So it seems a fortuitious coincidence that April this year will see a boost to the recently launched Repo Overnight Index Average (RONIA) as one such alternative. Ronia’s a secured rate. Unlike Libor, which emerges from a survey that asks banks “At what rate could you borrow funds etc..” Ronia is also derived from actual transactions. Read more
RBC Capital Markets takes an interesting take on the Fed’s newly released Fed Funds projections.
First the projections, which look like this: Read more
Oh dear. So much for the big Draghi LTRO helping out the Eurozone collateral crunch.
According to Icap’s latest repo makret report — and remember they operate the dominant electronic repo platform in Europe, Brokertec — the collateral crunch hasn’t eased at all. Read more
Bank of America Merrill Lynch’s global rates teams has interesting note out on Friday regarding Chinese repo rates.
As they point out, the seven-day rate currently implies something of a liquidity crunch in the market. While much of this is naturally down to the routine dash for cash ahead of the Chinese New Year, the rate rise has, nevertheless, been pretty significant and sharp when compared to previous years: Read more
We know the gold bug/Austrian case.
When the United States broke away from the gold standard in the 1970s it allowed for unchecked credit creation, beyond what could realistically be supported by economic growth. Read more
Back in October 2008, when the ECB first announced its list of extraordinary liquidity measures to help combat the financial crisis, most eyes were drawn to such things as widening eligibility of collateral and the announcement of long-term refinancing operations (LTROs) .
But there was one other very significant change, which *perhaps* went under the radar for most people. Read more
These two charts, courtesy of Icap’s Euro Repo Weekly, tell it all:
Who said demand for German debt was floundering?
Monday’s auction of six-month Bubills pulled in an impressive average yield of no less than 0.0005 per cent — yes, that’s to the fourth decimal point. Read more
First we had the ‘credit crunch’. Now some warn what Europe might in fact be experiencing is better described as a ‘collateral crunch’.
Ever since banks turned to the secured collateral markets known as ‘repo’ for their funding needs, especially over longer durations, quality collateral has become the most sought over security in town. So much so, in fact, that some quality collateral is hardly circulating. Getting your hands on it, meanwhile, can make the difference between being able to fund in the public market or having to turn to the ECB. Read more
In order to be effective, a central bank must act as a monopoly. It, just like Sauron, must control all. That’s the point.
All central banks thus routinely corner markets. If they didn’t, they would compromise their own position. Read more
Something strange is up in the world of ‘General Collateral’. And since eurozone funding markets are increasingly dependent on collateralised rather than unsecured loans, these are important developments that could be influencing rates elsewhere.
Nothing tells the story better than these charts, courtesy of Icap — a key repo market broker. What they pinpoint is a seemingly diverging attitude towards the various bond markets that make up so-called general collateral (GC) in the Eurozone, as far back as July this year: Read more
… the Fed continues to quietly sterilise away.
Case in point, the Fed’s continuing 28-day term deposit facilities. Read more
US Treasury repo rates are back in negative territory.
According to Reuters, both 10-year and 30-year bonds are currently trading “special” in the general collateral market. Read more