- After considering the alternative scenarios of Grexit, debt renegotiation, transferring of debt, a deflationary spiral and so on, it is concluded that this will either result (ceteris paribus) in an increase in sovereign debt yields or a decrease in the volume of sovereign debt issued. This is worrying; not only due to the events in Greece and the ripples it has sent throughout the Eurozone but also because elections are approaching in other peripheral countries.
- The effect that this has on Repo market rates (where “government bond collateral” accounted “for almost 80% of EU-originated repo collateral” in the European repo market) would then have a subsequent, significant impact on EURIBOR rates (EURIBOR being a key rate for unsecured lending which many derivatives – OTC interest rate derivatives especially – are linked to).
- Given that EURIBOR has remained relatively low in recent years and governments have sought to keep interest rates low in an effort to stimulate a recovery, this would be a sudden shock to a vulnerable, sensitive system.
- It is further argued (using Keynes’ theoretical analysis) that the sharp increase in liquidity preference and the depression of the marginal of efficiency of capital is, in general, far greater than that which occurred during the Great Depression and that, due to the especially uncertain climate of monetary policy, this means that Central Banking has been the reason why the OTC Interest Rate Derivatives market has been systemically primed for a crisis.
- I further argue that the potential scale of the OTC Interest Rate Derivatives crisis dwarfs both the Credit Default Swaps and Collateralised Debt Obligations positions that were associated with the Great Recession.
- It is also argued that the risks are greater than the Great Depression and that, if the money and banking system remains unreformed, the world could be plunged into a crisis that belittles the Great Depression itself.
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Silver Market In Disarray After Benchmark Price Fix Manipulation
Silver Market In Disarray After Benchmark Price Fix Manipulation
The LBMA Silver Price – the crucial daily benchmark used by producers and traders around the world to settle silver products and derivatives contracts – was set at $13.58 per ounce.At the time of the auction, which begins at 12 noon London time, the spot price was at $14.42 per ounce while the futures price on the CME was at $14.415, leaving a number of market participants extremely confused as to what has happened.
“Unfortunately, it is not [a mistake],” Ole Hansen, head of commodity strategy for Saxo Bank, told FastMarkets. “This could be the end of the fix. It took 14 minutes to find a fix – they obviously found a fix way off of the market.”
The difference between the two was nearly six percent but the benchmark cannot be changed,a person familiar with proceedings told FastMarkets.
Another source also suggested that the continued existence of the fix has been put in jeopardy by the huge discrepancy in today’s price, adding that many producers – who still use the price as their daily reference – may have lost significant amounts of money if any contracts have been settled according to the fix.
“A huge number of contracts are still settled on that price,” another said. “This will no doubt cause significant problems.”
The matter is being investigated internally,FastMarkets understands, so CME has no official comment at this time.
This is how the market reacted to this clear manipulation…
As we have detailed previously, the ‘fix’ or ‘benchmark’, as it is now known, is still the global benchmark reference price used by central banks, miners, refiners, jewellers and the surrounding financial industry to settle silver-based contracts.
As Bulliondesk.com’s Ian Walker reports, the silver market was thrown into disarray on Thursday after the LBMA Silver Price was set 84 cents below the spot and futures price this morning.
…click on the above link to read the rest of the article…
The Big Short is a Great Movie, But…
The Big Short is a Great Movie, But…
Paris — Michael Lewis is the chronicler of Wall Street. He takes the complexity behind which the inhabitants of the financial world hide and weaves a tale that is both understandable and compelling. Starting with the classic “Liars Poker” (1989), Lewis has produced a number of books about the financial markets including “Flash Boys: A Wall Street Revolt” (2014) and “The Big Short: Inside the Doomsday Machine” (2010). Working with director Adam McKay and some great actors and screen writers, Lewis has managed to produce what is perhaps the most accessible and relevant treatment of the mortgage boom and financial bust of the 2000s, and the subsequent 2008 financial crisis.
The beauty of “The Big Short,” both as a movie and a book, is that it provides sufficient detail to inform the general audience about events and issues that are not part of everyday life. Wall Street is a secretive place, but “The Big Short” manages to convey enough of the details to make the story credible as a journalistic effort, yet also enormously entertaining. Lewis does this with two essential ingredients of any film: a simple story and compelling characters.
Images of greed and stupidity are presented like Italian frescos in “The Big Short,” pictures that are memorable and thought provoking. Indeed, what many people know and remember years from now about the 2008 financial crisis will be shaped by creative efforts such as “The Big Short” for the simple reason that Lewis has simplified the description into a manageable portion. Unlike hedge fund manager Michael Burry (played by Christian Bale), most people lack the patience and expertise to sift through and understand reams of financial data.
…click on the above link to read the rest of the article…
The Eurozone Sovereign Debt Crisis and a Potential OTC Interest Rate Derivatives Crisis
Summary
…click on the above link to read the rest of the article…
The Irony Of Market Manipulation
The Irony Of Market Manipulation
Having gazed ominously at the extreme monetary policy smoke-and-mirrors intervention in bond markets, and previously explained that “the stock market is to important to leave to the vagaries of an actual market.“ While the rest of the world’s central banks’ direct (BoJ) and indirect (Fed, ECB) manipulation of equity markets, nobody bats an eyelid; but when PBOC steps on market volatility’s throat (like a bull in a China bear store), people start complaining… finally. There is no difference – none! And no lesser Asian expert than Stephen Roach warns that we should be afraid, very afraid as he states, the great irony of manipulation, he explains, is that “the more we depend on markets, the less we trust them.”
BoJ is directly buying Japanese Stocks and the rest of the world’s central banks are buying bonds with both hands and feet… for the first time ever, central banks are set to monetize all global government debt, something we showed previously…
But with China’s heavy handed “measures” seemed to save the world (until the last 2 days)…
9-Jul-15 Thurs CSRC:
1) suspended reviews of IPOs & other secondary market fundraising activities from Jul 9;
2) asked listcos to choose 1 out of 5 measures (including share buyback by major shareholders, companies and senior executives, employee stock buyback
incentive & employee stock ownership) to protect share price.
China Banking Regulatory Commission (CBRC):
1) allowed banks to roll over matured loans pledged by stocks;
2) encouraged banks to provide liquidity to China Securities Finance Corp Ltd. (CSFC) & offer financing to listed companies to buy back shares.
China Insurance Regulatory Commission (CIRC): insurance asset mgt companies should not demand early repayment from brokers for debt products on margin financing.
Minister of Public Security & CSRC: to investigate malicious short selling activities on Jul 9.
State-Owned Assets Supervision & Admin Commission (SASAC): asked provincial SASACs to submit daily report if local SOEs’ increased stock holdings starting Jul 9.
CSFC: issued Rmb80bn short-term note in interbank market on Jul 9, yield at 4.5% p.a., duration at 3 months; and will purchase mutual fund products to stabilize liquidity.
…click on the above link to read the rest of the article…
