Wednesday, June 15, 2011

USD Libor futures: Are Banks Funding Disappearing?

Interesting moves in Eurodollar contracts (and Euribor contracts too).

The short-end of the curve, much linked to the Fed Funds rate, for instance, has widened.
Is this the same move experienced in late 2010? In 2008?

I do not know. But stay tuned to possible funding issues now with european banks on negative watch due to the debt crisis.

With equity markets taking a beating it doesn't make much sense to see rates going up...

The book HOUSE OF CARDS was very fun to read and it touched this exact topic. Bear Sterns died (and Lehman) when funding dried up and the short-term funding x long-term assets issue popped up.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

No comments:

Post a Comment