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Global USD Shortage As BoJ Swap Demand Jumps 48x
Its not just our European colleagues who are struggling under the weight of collateral value losses and de-hypothecation, the USD funding shortage is just as evident in Japan. As part of the globally coordinated central bank swap line extension, the Bank of Japan saw bids for their 84-day USD loans explode by 48 times to around $4.8bn. After jumping 25x the previous week, the short-dated loans (one-week term) demand drifted as demand for the 84-day loans (which would get them over the holiday/end-of-year funding debacles and a decent way into the first quarter refi-ganza of next year) was far preferred at the obviously preferential rate of 50bps over 3 month OIS (0.61%). It's also worth noting that the size and demand for Euro-based USD funding is still significantly higher and while cross-currency basis swaps for both JPY and EUR are leaking back towards extreme stress levels, the EUR-USD is getting worse faster than the JPY-USD level (as the differential has widened from 56bps to 78bps in the last week).
Both the JPY-USD and EUR-USD basis swaps are drifting back wider as the initial knee-jerk reaction to the swap lines was positive but as is very evident from the lower pane - the demand for USD relative to EUR is growing much faster as the differential has widened back close to record levels again.
(As an FYI, the longer-term JPY-USD basis swap market has been much more active than the short-term until the last 6 months when short-dated funding needs obviously picked up. The longer-term swap levels are significantly higher than the short-term still as traders find it a long-term way to manage currency exposure against the momentum behind the JPY-USD FX rate trend).
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Precious dollar theory.
King Dollar has come for a visit. He's going to be sticking around for much of 2012.
Physical FRNs - get some!
A visit, yes. As for how long he'll stay, that's anyone's guess.
Denninger will have his moment(s) to crow about deflation, and he'll be shouting it from the rooftops. And then, Mr. Market will realize that there's no way for the U.S. to pay its own sovereign debt when tax revenues are collapsing, and then Mr. Printing Press has his day. How long between the two events? Hours / days / months. When the sheeple demand that "someone do something," it will then be our idea, Ben will be absolved of responsibility, and that will be that.
the fact that FRN debt underlies 75% of the world and that debt must grow means we are able to marginally continue ganking countries fo' they golds and oils
USD shortage = USD carry trade unwind as first movers prepare for financialpocalypse in 2012. how will your portfolio be after ECB sterilization program ends?
They have already begun unwinding out of BRICs. see Shanghai Index. The debt supercycle ended in 2007. There's not enough safe collateral to back up the leverage. So you unwind, or die. Sell to survive.
LIBOR is at .28%.
GOFO is at .80%
There is no dollar shortage when gold loans are suddenly paying more interest than dollar loans. Operation print is in full effect.
131.80 Bid
Can someone please clarify this for me? As a simpleton I have been under the impression that the world was awash in USD. We were actually drowning the world in them and "exporting our inflation" through our drowning them in dollars. Now it seems there is in fact a global shortage of USD. Can someone smarter than I please reconcile these two points for me?
Dont believe everything negative you read about the usa.
Any explanation short enough for a post would be misleading.
Read the article on shadow banking to start.
that's right. especially do not believe anything bad you hear about the fed, us banks, or the failing us economy. it's all good.
Hehe.
I just said dont believe everything bad u see or hear.
The truth is bad enough.
i hear you brother...
I think the leverage in the global financial system is so huge (in the hundred+ of trillions of dollars) that your usual run-of-the-mill tsunami of paper dollars is not sufficient to keep the global system from unraveling. Since there is so much exponential leverage in this failing market(s) there is a need for more and more dollars to keep the status quo.
so that kind of propogates the theory that we probably can print to infinity no firing pin? Seems like we could hide behind the cover that the world needs them, not that we need to do it....
Case study Zimbabwe and Weimar Republic and let me know how printing to x/0 works out in the end.
agreed but in zimbabwe and weimar the rest of the world was not in a huge race to devalue their currency at the same time.
Yes, but now it would appear we are as this is a global financial crisis. Everyone wants to try to be on top of the pile now.
The turd on the top of the shit pile is still a turd. Just say'en.
The Fed has to collateralize all the fiat they print, usually with treasuries (aka monetizing the debt) they simply can't print like Zim did. Digital dollars will hyperinflate but fiat will not.
Believe me, I'm not support the "unlimited printing" camp...just answering the question!
I know I appreciate it. I am not trying to pin you to a position you don't believe in. I understand the points being made here.....as I watch the dow climb 87 points. I'm considering checking myself into a mental hospital. I feel like I have lost my mind.
In order to print, there has to be a reason. And no, they can't print an infinite amount without consequences.
Only a fool will accept MBA / Wharton / B School the notion that "money" is the same thing as "credit." If printing "money" is acceptable and non-destructive, then the Fed should just print $10 Billion for each and every one of us, and then no one will ever have to work again, right?
Money is not leverage. Think, for crying out loud.
no, i don't want to think. i have central bankers and politicians to do that for me. i just want entertaining tv programming and soem games on my ipad.
It's hard to come to grasp with but I think the debt, derivitives and bad collateral taken on by international financial entities is many times the money created by the Federal Reserve and loaned/ given to these financial geniuses. Even I could grow wealthy if the Fed loaned me unlimited money at 0 percent and then paid me 3 percent to hold US Treasuries. I guess that spread isn't enough for this worldwide banking syndicate though.
No it is not enough since their collateral - real estate, sovereign loans etc - value is plumetting. Insolvency sneaks up on us as certain assets are deflating even while the printing press is running like a mad man.
What to do?
If I knew the answer to this I wouldn't be here at fight club. I'ld have two hookers at the Waldorf.
More people want dollars, and less want EUR or JPY. Lots of speculation that Japan is about to implode again, and well we all know that the EUR is burning.
USD denominated debt needs to be paid in USD.
Compared to the outstanding (toxic) debt in USD, there is a shortage of liquid USD. I think.
Let's say a few years ago you borrowed some money from me and gave me in return some fonzanoon bonds as collateral. I am concerned today that fonzanoon may be insolvent and may soon default and not pay me back. Before that happens I am being proactive and asking for my money today, in U.S. dollars. Multiply that by millions of such transactions and you have huge demand for U.S. dollars required for repayment. BTW you are reading ZH therefore you cannot be a simpleton. The simpletons are watching Cramer on CNBS right now.
Thanks, the example helps. I realize like someone said it is difficult to sum up quickly. Are the bonds you are speaking of in reality FRN?
No, everything but FRN. I used th fonzanoon reference to imply bonds of all different types, sovereign, corporate etc. As they say the FRNs are the cleanest shirt in the dirty laundry pile, so they are safe, for now.
Thanks for the education. The people on this site are the best. At least when the shtf I can explain to everyone else on the bread line in front of me why it happened.
A foriegn bond is a debt investment that is issued in a country by a non-domestic entity. International bonds are issued in countries outside of the United States, in their native country's currency - in exchange for an equivalent value of FRNs. They pay interest at specific intervals (adjusted for exchange rates), and pay the principal amount back to the bond's buyer at maturity.
International bonds include eurobonds, foreign bonds and global bonds. A different type of international bond is the Brady bond, which is issued in U.S. currency. Brady bonds are issued in order to help developing countries better manage their international debt. International bonds are also private corporate bonds issued by companies in foreign countries, and many mutual funds in the United States hold these bonds.
And to add to your simple, concise statement, the original "dollars" to which fonzanoon refers were not physical but digital, and they covered alot of shadow banking payoffs, derivatives, etc. They could not trickle down, as they were covering several trillions in secret and not so secret toxic shit.
It basically means they are stressed for liquidity. The other guys are right. A full explanation would be exhausting.
My suggestion.....start up Google.
It's quite simple: the dollar is the world's trade currency and merchants all over the world do their international business (oil, steel, rice, sugar, finished products etc) in USD, and so, international banks need lots of USDs. However their own central banks can't provide them with american dollars (except when they open swap lines with the FED), and so, they borrow them from US banks. In the past few months though, US banks have become less willing to lend to foreign banks (mainly because of all the bad mouthing of the euro), and this has caused international dollar liquidity to dry up.
The solution is simple: Europe, Japan et all should just abandon the USD and start trading in Euro, Yen, Yuan, etc. There's no reason whatsoever why they should cling on to the USD, other than habit and an unusual desire to please Uncle Sam.
For every printed dollar you hear about (fractional reserve conjuring), there is even more debt in dollars owed. Owed dollars have to be repaid.... Causing a shortage relative to times when many are owed and even more are being conjured into existence.
People need dollars to repay debts = need for dollars
That's my take on it. Read about fractional reserve banking. It boggles the mind when one finds out how money is really created.
Global demand for dollars is the same thing as exporting inflation.
This is getting good. Folks scared and running for US$. Folks pulling back their own dollars, hoarding maybe, indecision maybe. Folks saying, 'I'm not loaning you any for sure'. Building speed, "Warp factor 9 on the fan, Scottie!". "Captain, I don't think I can hold her! She's gonna blow!" Wooosh!! All the marked to unicorn dilithium crystals flushed out into hyperspace.
Damnit, Scotty, get some Libtard crap and throw it at the warp fan NOW! I need more power, NOT EXCUSES!
I'm surprised the U.S. mint is not selling green monster boxes filled with $100 bills.
Give it time.
Hold on to the first editions of these boxes, they might become collectors items in years to come.
Yes, if you collect toilet paper or worthless rags. Even Confederate bills are next to worthless except to a rare collector or museum. More of a novelty piece, really. I can buy nearly 500 confederate dollars, and actual correspondence - real handwritten Civil War era paperwork- with the actual pouch that contained all of that for about $300.00. The pouch and letters are worth the most. YMMV.
yes. and afterward one could store their beanie babies collection in them if the cabbage patch dolls don't fit.
No they are stacking them on pallets and shrink wrapping them.
The financial world is de-hypothecating as people are pulling their collateral. Hypothecation is a fractional reserve system on steroids.
'Shortage of dollars' LMAO!
What have we printed just in the last couple of years, $30 trillion dollars at least?
In 2007, the number of US Dollars in circulation was $800 billion to $1 trillion.
This is utter nonsense....THERE IS NO DAMN SHORTAGE OF DOLLARS! Theres a shortage of SANITY! A Fucking sanity DUSTBOWL DROUGHT in fact!
Fear can turn a mountain of dollars into a liquidity crunch.
All Dollars are debt.
All debts need to be paid off.
Payments happen in US Dollars.
They will keep expanding this beast, because anything else would lead to a deflationary collapse.
Dude, it's the fact that there is over $1,000 trillion in (toxic) USD debt and a shortage of LIQUID USD that creates the shortage. $30 trillion? Like pissing in the ocean and expecting the sea level to rise.
I dont EXPECT anything! Fact is, in 2007 the numbers of CIRCULATING dollars was $800 billion to $1 trillion or so dollars. To say anything like theres a shortage of dollars is ridiculous, what there is a shortage of is sanity and the truth...we're drowing in a sea of debt...more sea wont help.
I agree with what you're saying, just trying to explain the reason for the "shortage". The $ debt has to be paid in $'s. So much debt requires liquid $'s to be paid. Whatever.
By the way, I didn't junk you.
I have been saying for a year now the deflation monster is huge.
He is coming now.
But this is a game ben knows how to play.
Better hope he gets it right in spite of how much the brits and germans have fucked things up.
Au contraire, Ben does not know how to combat deflation, none of the neokeynes do, that's been obvious. Decision time is near anyway, he either lets go of the rod, or goes in with the fish, in the end deflation wins at any cost. Ben will discover this soon enough. Deflation runs the show. Period. When it comes into play, the game is not over until deflation says it is.
Yep...Ben would much prefer inflation to deflation
I suppose this is bullish.
Yes it is. Eventually. Wish I knew when.
of course it's bullish. can't be anything else!
The assets derived from hypothecation are illusions and reality is that 200 mph freight train that is thundering towards it’s train wreck.
Sheepdog i believe you worded my question more into a statement. Thank you.
"explode by 48 times... After jumping 25x the previous week" ?
F**KING HOLY MOTHER OF GOD !!
What a pathetic thought to think this junk currency backed by an insolvent goverment is the reerve currency of the world. Just laughable!
Yea! And really, the only 'backing' is 'Dont worry, we'll force our citizens to work all this off all these debts you hold'....unreal.
Well.
We started off virtuous and stable.
Then Nixon broke broke the international payment system and we americans got lazy and decided we would live off the worlds
surplus.
America wasnt always the way we are now. We used to be that city on the hill. We earned the trust and goodwill and now we foolishly squandered it. Just like the Oracle of Omaha's father said we would.
More laughable is the lengths people will go to in order to acquire more of this currency. The world is convinced that dollars are as good as gold. It is until it isn't. One day soon a dollar bill will change from something that people love into something people hate as they realize that the world has erroneously put faith in the federal reserve who ultimately backs the cotton and ink we all love today.
Hey just wanted to say 'thanks' for changing your avatar-perhaps the only case in which an actual picture is less satisfying than a drawing.
The formerly secret loans from the non-Federal non-Reserve, first it was $16 trillion then $23 trillion and now it is £29 trillion – where did all this go ?
Into the event horizon of the $1,500 trillion derivative singularity, that's where.
Problem is, the more they throw into the hole the deeper the hole gets.
It's banker bonus time again!
And Jeffries is 'clawing back' bonuses from fired bankers....nail bitin time you high roller banksters! This is the last bonus ever! Better use your bonus to build a bunker in Paraguay!
Are they still advertising 99 dollar sniperscopes on the zero hedge home page? They looked nice.
As I've been saying for weeks. Too much debt and credit and not enough dollars and an asteroid full of CDS death orbiting above. This, will not end well.
Does this mean BB will need to do QE3 ?
Found something interesting on survival blog.
Check out shtfschool.com
A bosnian who knows his shit wrote it.
And in Australia rather than converting to USD while the rates are nearly 1;1 versus historic 60c, the public is hoarding cash creating the growth in cash Term Deposits (clearly assisted by the fact that the local banks cannot find overseas funding either and are prepared to pay extra locally): http://inkom.com.au/blog/australian-term-deposit-growth
When trust is fulfilled, it's a wonderful thing. When trust is misplaced, it is catastrophic. The European debt crisis is one jaw of a leg hold trap. The coming U. S. debt crisis is the other. We see the European situation moving and closing in on us. The USD is just waiting there, ready to pin us down.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
US has been dumping so much SHIT on the rest of world so the demand for USD is huge because of margin calls....
but the tide will change....whatch out Washington