LIBOR

The First Victims Of The Libor Surge Have Emerged... In Japan

So far US banks have escaped the recent Libor surge, but the higher funding costs and shrunken market are hitting Japanese banks particularly hard, as they have been sourcing as much as a third of their U.S. dollar liquidity in the short-term U.S. market. Japanese banks have about $125 billion to $150 billion of CP and CDs maturing before the end of September.

Jeffrey Snider: All Signs Point To Systemic Reset

"... what’s happened in stocks is more a myth than actual reality. Investors in stocks are buying at ridiculous valuations based on the premise that the Fed can create a recovery through liquidity. And what 2014 and 2015 show us is that this simply wasn’t true! ...the longer the earnings recession lingers, the higher the risk that stock investors will realize that they’ve been following the wrong story all along!"

FOMC Minutes Show Fed Members Split Over July Rate-Hike, Fear Financial Risks From Low Rates

With Fed speakers attempting to jawbone the current narrative back from the uber-dovish record-high-creating Fed statement, all eyes today were glued on how hawkish the statement would be with regard 2016 hikes - few, some, or many? Since The Fed statement, GDP expectations have crashed to cycle lows but that has not seemed to stop The Fed:

  • *FED OFFICIALS SPLIT IN JULY ON WHETHER RATE HIKE NEEDED SOON
  • *A COUPLE FED OFFICIALS BACKED JULY RATE HIKE
  • *FOMC VOTERS AGREED TO WAIT FOR MORE DATA TO GAUGE ECONOMY

But perhaps most notably, several Fed officials are concerned of financial risks from too low rates.

"Trouble In Paradise" - Hopes Of Economic Growth Just Took A Beating

The ongoing misinterpretation and massaging of economic data to spin a positive view on the economy are fine and good. However, real economic recovery must start with the average American since consumption makes up nearly 70% of economic growth. While the current Administration and Federal Reserve promote policies that are supposed to create economic prosperity for all, the reality is that remains bottled up on Wall Street.

Currency Wars Escalate As Fed Treasuries In Custody Tumble To 2012 Lows

The latest custody data from the Fed shows that reserve manager holdings of Treasuries has tumbled by $17 billion in the past week, to the lowest effective level since late 2012. The prevailing hypothesis is that smaller central banks and reserve managers sell US paper to defend their currencies, while OPEC countries such as Saudi Arabia are quietly raising cash in an environment of low oil prices and acute budgetary tightness.

Insanity, Oddities, And Dark Clouds In Credit-Land

Distortions in financial markets keep growing, as central banks all over the world are desperately intensifying monetary pumping. What is currently happening in various bond markets as a result of this and other interventions is simply jaw-dropping insanity. It is not so much that it defies rational explanation – in fact, all of these moves can be explained. What makes the situation so troubling is the fact that investors seem to be oblivious to the enormous risks they are taking.  They are sitting on a powder keg.