{"id":51740,"date":"2020-03-12T08:16:06","date_gmt":"2020-03-12T13:16:06","guid":{"rendered":"https:\/\/olduvai.ca\/?p=51740"},"modified":"2020-03-12T08:16:10","modified_gmt":"2020-03-12T13:16:10","slug":"funding-markets-are-freezing-global-dollar-shortage-hits-alarming-levels","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=51740","title":{"rendered":"Funding Markets Are Freezing: Global Dollar Shortage Hits Alarming Levels"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.zerohedge.com\/markets\/funding-markets-are-freezing-global-dollar-shortage-hits-alarming-levels\">Funding Markets Are Freezing: Global Dollar Shortage Hits Alarming Levels<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The surging demand for repo liquidity &#8211; and massively expanded bailout facility size by the New York Fed &#8211; suggests there is a major global scramble for USD funding, and today&#8217;s price action in the archaic money markets exposes it has now reached extremely alarming levels.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Surging cross-currency basis swaps (measuring how much investors are willing to pay to swap their currencies for dollars for 3m) signal something has snapped&#8230;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfmAC9D.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">And it appears to be centered on Japan (though EUR and UK are also seeing huge demand for USDs)<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfmC520.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Additionally, the FRA\/OIS spread is screaming liquidity crisis&#8230;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfmD6A2.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Which helps explain why The Fed just upped its daily repo limit to $175 billion (yes billion)&#8230;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfm245_1.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">But as evidenced in today&#8217;s worsening situation in liquidity markets, it is not helping.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is all exacerbating the massive tightening in US financial conditions&#8230;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfmB90C.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Which has sparked demand from the market for almost a 100bps rate-cut next week (or before) when The Fed meets&#8230;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com\/s3fs-public\/inline-images\/bfmACE3.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Summing up, Bloomberg&#8217;s Cameron Crise notes that in fixed-income relative value &#8211; historically a very profitable, highly leveraged strategy &#8211; relationships have frayed to the point of incredulity,&nbsp;<strong>indicating high levels of distress<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">One consequence of this basis swap repricing is that USD-denominated treasuries are suddenly more expensive to hedged foreign buyers to the tune of roughly one rate hike. Which,&nbsp;<strong>all else equal, would mean that there is now that much less demand by international buyers for TSY paper on the long end<\/strong>. Could this shift in supply-demand mechanics impact the yield on long-dated paper? Which is what we have seen in recent days as bonds have not rallied as much as one would expect given the carnage in stocks.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Funding Markets Are Freezing: Global Dollar Shortage Hits Alarming Levels The surging demand for repo liquidity &#8211; and massively expanded bailout facility size by the New York Fed &#8211; suggests there is a major global scramble for USD funding, and today&#8217;s price action in the archaic money markets exposes it has now reached extremely alarming [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[29212,303,29211,839,4318],"class_list":["post-51740","post","type-post","status-publish","format-standard","hentry","category-economics","tag-currency-swaps","tag-fed","tag-funding-markets","tag-us-dollar","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51740","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=51740"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51740\/revisions"}],"predecessor-version":[{"id":51741,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51740\/revisions\/51741"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=51740"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=51740"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=51740"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}