LIBOR

The Dollar Funding Shortage: It Never Went Away And It's Starting To Get Worse Again

Negative cross currency basis swaps indicate that the structural tightness in dollar liquidity never disappeared despite the weaker dollar. If dollar funding markets get a lot tighter again, this won’t be good news for EM markets with offshore (Euro) dollar debt in the region of $10 trillion. Rolling over dollar debt periodically will be uncomfortable, to say the least, for some of the region’s banks.

"Dear Fed, Hike Slower... Shrink Faster..."

"Investors not being properly rewarded for the risk they are taking can have longer term repercussions... The normal process of price discovery has been changed, not just by the Fed’s activity in the market using its balance sheet, but also through the constant barrage of headlines designed to move markets."

A Brief History Of Tail Risk: From LTCM, ABX, CDS, To VIX

"While I think valuations may be stretched, my bigger concern is that the real risk lies in market structure – more specifically to volatility and correlation strategies that quickly propagate through the financial markets with the aid of algorithmic trading..."

Frontrunning: August 25

  • Trump to push for tax reform passage by year’s end, says Cohn (FT)
  • Bond Routs, Stock Surges: Jackson Hole Can Be Messy for Markets (BBG)
  • Hurricane Harvey intensifies (Reuters)
  • GOP Plan to Kill Estate Tax Sets Up Conflict Over Charitable Giving (BBG)
  • ECB Is Set to Buy More Bonds (WSJ)

Frontrunning: August 17

  • Trump policy doubts, weak inflation to weigh on Wall Street (Reuters)
  • Trump Remarks on Violent Rally Rattle Aides, Risk Agenda (WSJ)
  • Trump blasts Republican senators over Charlottesville criticism (Reuters)
  • Trump's crisis spurs talk of White House departures (Reuters)
  • Apple denounces neo-Nazis as Spotify bans ‘white power’ tracks (Guardian)

Global Stocks Rise Amid Unexpected ECB "Trial Balloon"; Dollar Flat Ahead Of Fed Minutes

European markets continued their risk-on trend in early trading, rising to the highest in over a week and rallying from the open led by mining stocks as industrial metals spike higher after zinc forwards hit highest level since 2007. The EUR sold off sharply, boosting local bond and risk prices after the previously discussed Reuters "trial balloon" report that Draghi's speech at Jackson Hole would not announce the start of the ECB's taper.

Risk Off: Global Stocks Slide As "Fire And Fury" Results In "Selling And Fear"

US futures are set for a sharply lower open (at least in recent market terms) following a steep decline in European stocks and a selloff in Asian shares, following yesterday's sharp escalation in the war of words between the U.S. and North Korea. In a broad risk-off move U.S. Treasuries rose, the VIX surged above 12 overnight, while German bund futures climbed to the highest level in six weeks.