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EURUSD Breaks 1.3200, 4-Sigma Rich To Swap-Spreads

Tyler Durden's picture




 

Presented with little commentary except to note that EURUSD's inexorable rise has pushed it to over 1000pips rich to the USD vs EUR swap-spread fair-value - or over 4 sigma rich from its three-year mean. Of course, critically, the EUR strength / USD weakness is doing wonders for risk assets, even if correlation had dropped a little. Simply remarkable. Meanwhile, Swiss 2Y rates have seen the biggest 2-day drop (safe-haven seeking flows) in 3 months... So Euro is bid and flows are flying into Switzerland? Doesn't exactly sound risk-on eh? 


EURUSD vs EUR-USD swap spread model...

 

and Swiss 2Y plunges by most in 3 months...

 

Chart: Bloomberg

 

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Tue, 12/18/2012 - 11:54 | 3074769 chancee
chancee's picture

ES futures rampathon.

Tue, 12/18/2012 - 11:58 | 3074780 Captain Benny
Captain Benny's picture

Fiscal cliff?  What fiscal cliff?

Additional payroll taxes?  Hah, good luck when nobody is working ... and the working people are more likely to not spend further slowing the ponzi^H^H^H^H^Heconomy....

Tue, 12/18/2012 - 12:05 | 3074809 aint no fortuna...
aint no fortunate son's picture

swaps-spread model looks like something out of JAWS... I would note what all the former divergences reconciled to

Tue, 12/18/2012 - 11:57 | 3074773 Banksters
Banksters's picture

Paper and electronic data entry  money rule our world.     Sad but true.

 

Tue, 12/18/2012 - 11:57 | 3074777 fonzannoon
fonzannoon's picture

dollar selloff equals gold selloff. yup thats how it works.

Tue, 12/18/2012 - 11:57 | 3074781 dirtyfiles
dirtyfiles's picture

we don't need no education...

Tue, 12/18/2012 - 11:59 | 3074784 buzzsaw99
buzzsaw99's picture

citifx still has time to be right [/snark]

Tue, 12/18/2012 - 11:58 | 3074785 e_u_r_o
e_u_r_o's picture

as european I gotta love this  :P

Tue, 12/18/2012 - 12:31 | 3074914 francis_sawyer
francis_sawyer's picture

Are you having a good day or what?

~~~

http://www.youtube.com/watch?v=yQNgZHiPDB4

Tue, 12/18/2012 - 12:42 | 3074956 Urban Redneck
Urban Redneck's picture

If the CHFEUR peg breaks CHFUSD becomes one FUGLY bitch...

Tue, 12/18/2012 - 11:59 | 3074787 tuttisaluti
tuttisaluti's picture

Dollar down-Gold down

Dollar up -Gold down

QE 3 - Gold down

QE 4 - Gold down etc

Fiscal cliff solved - Gold down

Fiscal cliff not solved - Gold down

 

whats up guy's ????????

Tue, 12/18/2012 - 12:01 | 3074793 Confundido
Confundido's picture

gold is still trying to establish itself as money. That's what's up, plus below market lease rates, under the table, provided to the cartel by central banks to dump the price.

 

Tue, 12/18/2012 - 12:24 | 3074884 malikai
malikai's picture

I think gold sorted out that whole 'establish itself as money' thing a few thousand years ago.. But who'se counting really?

Tue, 12/18/2012 - 12:01 | 3074796 Orly
Orly's picture

Gold is a risk asset that is quickly losing its lustre.

:D

Tue, 12/18/2012 - 12:05 | 3074815 Spitzer
Spitzer's picture

So that means its not a bubble right ? Yep

Look at gold stocks... Do they look like home builder stocks pre housing collapse ?

keep buying those treasuries

Tue, 12/18/2012 - 12:10 | 3074840 Orly
Orly's picture

Believe I will.

Tue, 12/18/2012 - 12:20 | 3074870 Spitzer
Spitzer's picture

Yes Bernanke, we know this

Tue, 12/18/2012 - 12:24 | 3074894 EL INDIO
EL INDIO's picture

This is not Bernanke, he would’ve said it’s a tradition thing

This must be Roubini

Tue, 12/18/2012 - 12:15 | 3074857 JimBowie1958
JimBowie1958's picture

Yeah, that must be why every nation on the planet is hording gold and checking their inventories to make sure it is really there.

Meanwhile the market 'experts' tell fools like you that gold is losing its luster so they can buy it off you at a discount.

Idiots.

Tue, 12/18/2012 - 12:20 | 3074872 Bay of Pigs
Bay of Pigs's picture

Risk asset? In a 12 year bull market? Put the crack pipe down Orly.

 

Tue, 12/18/2012 - 13:19 | 3075137 debtor of last ...
debtor of last resort's picture

Gold is the Road Runner that will give a wink to Wiley Coyote in Wileys last manipulation.

Tue, 12/18/2012 - 12:23 | 3074879 EL INDIO
EL INDIO's picture

Be cool, Gold is doing its thing.

If it is down it has nothing to do with the news or the clowns in DC.

Things might look weird on a short time frame but the fundamentals always win on long term basis.

So just be cool and enjoy the holiday sale.

Are you buying ?

Tue, 12/18/2012 - 12:38 | 3074932 fuu
fuu's picture

She's waiting for $1,530/oz in 2013.

Tue, 12/18/2012 - 12:40 | 3074947 Orly
Orly's picture

$1564/oz. before the end of January...

Tue, 12/18/2012 - 12:01 | 3074790 David99
David99's picture

The biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Tue, 12/18/2012 - 12:00 | 3074792 ivana
ivana's picture

Something really bad is brewing ... think we are due for another engineered mega financial shock crisis

Tue, 12/18/2012 - 12:01 | 3074797 David99
David99's picture

The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Tue, 12/18/2012 - 12:02 | 3074801 Ness.
Ness.'s picture

WTF is going on withthe EUR?  Did I miss something or is it just the instrument of today's manipulation?

Tue, 12/18/2012 - 12:08 | 3074826 Orly
Orly's picture

You've apparently missed the fact that the Euro is easily the most manipulated asset on the planet and has been for many, many months.  It seems like this is the ramp before the boom is lowered.

According to my charts, the massive unwind should take place in about three weeks, give or take. Until then, the EURUSD and GBPUSD look to be moving rapidly higher, while the USDJPY retraces and consolidates.

:D

Tue, 12/18/2012 - 12:16 | 3074858 mktsrmanipulated
mktsrmanipulated's picture

euro ...what about the usd

Tue, 12/18/2012 - 12:26 | 3074903 Orly
Orly's picture

They are using (your...) USD to prop up the Euro.

Fed accounts: Other Holdings...

Tue, 12/18/2012 - 12:42 | 3074950 fuu
fuu's picture

"You've apparently missed the fact that the Euro is easily the most manipulated asset on the planet and has been for many, many months."

The US bond market called and said you were being disingenuous. Again.

Tue, 12/18/2012 - 12:02 | 3074802 TideFighter
TideFighter's picture

Another repayment phase to the Chinese, let them accumulate the shiny.

Tue, 12/18/2012 - 12:02 | 3074803 Spitzer
Spitzer's picture

Euro is the best fiat.

After a year of shit kicking on ZH and the mainstream media, the Euro rises.

Tue, 12/18/2012 - 12:25 | 3074896 Spitzer
Spitzer's picture

comment is -3 and +1 so far..

 

Dollar bubble

Tue, 12/18/2012 - 12:05 | 3074811 Confundido
Confundido's picture

Did any one check the intra-day correlation between 30yr treasuries and gold?? Is this the ultimate ccy war between China and the US?? (i.e. You dump our treasuries, and we dump your fucking gold?)

Tue, 12/18/2012 - 12:08 | 3074832 Orly
Orly's picture

I think you're beginning to see through this mess.

:D

Tue, 12/18/2012 - 12:22 | 3074881 Spitzer
Spitzer's picture

hows those Euro shorts working for you ? And you have to pay the higher interest rate to short the Euro haha

 

King Euro

Tue, 12/18/2012 - 13:09 | 3075096 laozi
laozi's picture

James G Rickards never doubted the € would come through. He has been correct on so many things lately. Better than anyone I've read actually.

Tue, 12/18/2012 - 12:24 | 3074885 fonzannoon
fonzannoon's picture

if that is the truth the US is totally fucked.

Tue, 12/18/2012 - 12:28 | 3074909 Orly
Orly's picture

No, that would be the Chinese...

Tue, 12/18/2012 - 12:31 | 3074917 fonzannoon
fonzannoon's picture

no point in debating. it's going to be interesting to see. 

Tue, 12/18/2012 - 13:05 | 3075083 Bay of Pigs
Bay of Pigs's picture

You needs facts to debate fairly and Orly ignores the facts.

Almost Roboesque in her posts.

 

Tue, 12/18/2012 - 13:15 | 3075124 laozi
laozi's picture

@orly you usually make sense. How can you think China will lose if they dump T-bills for gold? Will they go broke when they no longer get the 1% return? Or is it that gold will go worthless because deflation will last until 2030? Enlighten us.

Tue, 12/18/2012 - 13:20 | 3075141 Orly
Orly's picture

They can't dump their Treasury holdings unless they start a massive cascade of selling, in which game they lose big.

They have quietly been amassing gold, made available by the illustrious Mervyn King, at ever-higher prices.  If they start selling, they start a cascade of selling, in which game they lose big.

Now, we have the Chinese holding gigantic amounts of severely over-valued assets, just as their inflation starts to kick up, thanks to their accounting machinations, at the same time their economy cools and millions of people are looking for a job.

I'll give you one guess as to what happens next...

Tue, 12/18/2012 - 13:28 | 3075161 laozi
laozi's picture

They cant dump T-bills en masse, but they can stop buying, which should be bad enough.

I dont know what overvalued assets you talk about, do you mean the all the debt of the provinces?

Just came back from Hong Kong and the housing market is overheated there. Inflation is already a big problem in the major cities, if that is what you mean...?

Tue, 12/18/2012 - 13:43 | 3075198 Orly
Orly's picture

They have already stoped buying T-bills and have shifted their focus to precious metals.  That means they have over-priced Treasuries and over-priced rocks on their balance sheet.

Once the Fed feels like it, it can pull the rug right out from under the Chinese, leaving them high and dry, their population unable to find work and the price of rice going up a penny a day.  Certainly not a good situation.

What I meant about their debt was the central government of China has pushed the debt off into the provinces and the municipalities and the bosses there are doing their best to preserve what they can for themselves and their monkeysphere.  They are lying to the central commitees about their economic perfomance while stashing away millions in overseas accounts.

The entire scheme has been about bringing down the Communist Chinese without having to nuke a billion people.  The Fed is doing it the old-fashioned way: economic warfare.

Tue, 12/18/2012 - 14:08 | 3075283 fuu
fuu's picture

"Once the Fed feels like it, it can pull the rug right out from under the Chinese, leaving them high and dry, their population unable to find work "

Lulz, suddenly the rest of the world is going to start making things again? Because the Fed said so?

Tue, 12/18/2012 - 14:11 | 3075309 laozi
laozi's picture

Hmm. I understand some parts of what you say.

By pulling the rug, would that be to inflate the $ so that inflation lands in China?

But I do not understand how the Fed can create unemployment in China?

In my book gold is not yet an inflated asset, but that is of course discussable. Anyway, the US has much more of that asset.

Tue, 12/18/2012 - 14:28 | 3075357 Orly
Orly's picture

"Anyway, the US has much more of that asset."

But the US has its wealth spread out over many assets, whereas the Chinese wealth is much more concentrated in these two things.

The US cannot cause Chinese unemployment directly.  What it can do is export inflation to China by way of increasing commodity prices, for example, and the Chinese economy will slow naturally.  The stall speed for an increase in Chinese GDP to avoid an economic stall is almost upon them and any added slowdown from here may cause their system to buckle, leaving millions across the country looking for work where there is none to find.

With higher commodity prices, the price of basic foodstuffs for the Chinese populace, for which they spend a far greater amount of their monthly income than Americans do, will increase rapidly.  Food riots and job riots would not be far behind and that is something the Chinese government fears most of all.

As far as gold being in a bubble or not, it doesn't matter.  The Fed's minions at JPM/Chase and Goldman-Sachs can crash the price of gold just about on cue because the market is so thin and who owns what is so vague that it would be relatively easy to remove all support from gold and watch the price tank.

Tue, 12/18/2012 - 14:44 | 3075410 laozi
laozi's picture

I agree that (food) inflation is the most important question for China. But remember, they have had 100 million people from the countryside roaming the streets before. But back then many of them got jobs, so it is different.

Inflation will put a cap on how much stimulus ( infrastructure investments ) China can use to fight unemployment.

Tue, 12/18/2012 - 14:51 | 3075429 Bay of Pigs
Bay of Pigs's picture

You are so full of shit on gold. I doubt anyone here will ever listen to your garabge analysis.

Thank goodness there are of people here to refute your pitiful trollish nonsense.

Tue, 12/18/2012 - 14:55 | 3075447 laozi
laozi's picture

What? I like gold. You do not, or?

Tue, 12/18/2012 - 15:30 | 3075605 fuu
fuu's picture

He's talking to Orly, the one you are fluffing.

Tue, 12/18/2012 - 15:39 | 3075642 laozi
laozi's picture

Don' you know that your enemy is your best teacher. I like to ask myself: "why am I wrong?" The only person with a different view here is orly.

Tue, 12/18/2012 - 16:10 | 3075812 fuu
fuu's picture

<walks away shaking head>

Tue, 12/18/2012 - 12:05 | 3074818 SheepDog-One
SheepDog-One's picture

And so we close another chapter of 'Utterly Broken Markets Journal'....see ya next hour for a new episode.

Tue, 12/18/2012 - 12:07 | 3074827 Martdin
Martdin's picture

Eh, maybe I'll short it after the New Year.

Tue, 12/18/2012 - 12:13 | 3074848 mktsrmanipulated
mktsrmanipulated's picture

littel off basis to this but what ever happened to inflation...govt doesnt count food and energy so we dont have it...also what about the conventional philosophy for years of higher oil was bad for the mkts....Inflation bad for the mkts.

stock mkt is higher because qeternity...why???? did earnigns get better...no...did revenues get better???? no is guidance better??? no...it is simply inflation...simply put ALL us dollar denominated asset classes are inflated by the weak dollar...

Tue, 12/18/2012 - 12:29 | 3074911 mktsrmanipulated
mktsrmanipulated's picture

The only way inflation is bad for the stock market is if a central bank raises interest rates.....but Big Ben is never going to do so, he cant....

Tue, 12/18/2012 - 12:22 | 3074880 I Am Not a Copp...
I Am Not a Copper Top's picture

On days like today, I just think about the 1 oz eagle I bought over the weekend and look forward to my next purchase.

Tue, 12/18/2012 - 12:25 | 3074891 David99
David99's picture

Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Tue, 12/18/2012 - 12:26 | 3074904 David99
David99's picture

London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Tue, 12/18/2012 - 14:29 | 3075370 laozi
laozi's picture

You said something about the regulators. I did not catch it, could you repeat that?

Tue, 12/18/2012 - 12:27 | 3074905 Hannibal
Hannibal's picture

For years I been hearing the Euro is toast, Euro this, Euro that, Euro collapse on and on.

The perfect USD distractor,..eh!

Tue, 12/18/2012 - 12:55 | 3075041 David99
David99's picture

ZH is only doing good job and reporting correctly. Tyler is a real true person though I have never met him. FED+BOE+ECB+BOJ are the biggest manipulators and JPM +GS +20PD's act on their behalf in this Ponzi Casino. It is all rigged Ponzi Casino. JPM & GS do maximum manipulations from London as no regulators are looking what is going on daily. London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

Tue, 12/18/2012 - 12:58 | 3075057 ak_khanna
ak_khanna's picture

The market operators ie banksters are driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commodities, stock or currencies other than the USD.

The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.


http://www.marketoracle.co.uk/Article35345.html
www.letstalkmoney2012.in 

Tue, 12/18/2012 - 13:30 | 3075168 Rari Nantes In ...
Rari Nantes In Gurgite Vasto's picture

Could anyone tell me what maturity is used to calculate the fair swap spread? thanks in advance

Tue, 12/18/2012 - 15:20 | 3075543 TPTB_r_TBTF
TPTB_r_TBTF's picture

P(t) = 1/(1 + y(t))t

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