You are here
The world is awash in dollar liquidity no one wants
By Tracy Alloway
Thursday, September 2, 2021
There's a seismic shift underway in money markets, the equivalent of going from famine to feast.
For years the premium paid for dollars over the euro, Japanese yen, and so on in the cross-currency markets has been negative, indicating rampant demand for greenbacks. Now these so-called cross-currency basis swaps are on the verge of turning positive in a major shift for money markets.
... Dispatch continues below ...
Buy, Sell, or Store Precious Metals with Money Metals Exchange
Money Metals Exchange, a national bullion dealer recently named "Best Overall" by Investopedia.com --
-- is a great low-cost source for precious metals coins, rounds, and bars. Money Metals also pays handsomely when you wish to sell your precious metals.
Shop online with Money Metals Exchange here --
-- or by calling 1-800-800-1865.
Meanwhile, Money Metals Depository will store your precious metals in a segregated account at low cost:
"Things that haven't happened before are now happening," says Credit Suisse AG strategist Zoltan Pozsar, in an upcoming episode of "Odd Lots." He points out that cross-currency basis swaps are "something that we are used to as being very negative. There's always an excess demand for dollars, and that excess demand for dollars is gone."
Extraordinary measures from central banks, including the massive provision of liquidity from the Federal Reserve in the form of dollar swap lines and new repo facilities, mean the financial system is essentially swimming in cash. It’s the reversal of an earlier dollar crunch that saw the U.S. central bank withdrawing dollar liquidity from the market in 2015 just as the Bank of Japan and the European Central Bank were ramping up their own quantitative easing programs.
"Some of the most experienced short-term-interest-rate traders would tell you that they've never traded as much front-end basis in their career -- some of those careers span 30 years -- as they did between 2015 and 2019," Pozsar says of the period. "So then you fast-forward to today, and we now have so much liquidity, and this is particularly the case for the U.S. dollar that the Fed is doing QE faster than the BoJ or the ECB. So there's just an ample supply of U.S. dollars. Regulations are not getting tighter. If anything, they are getting easier. The Fed has become a dealer of last resort."
Even cross-currency basis swaps at longer tenors -- such as the 10-year swap between the Japanese yen and the U.S. dollar -- are on the verge of turning positive. That premium now sits at -34 basis points, the narrowest level in more than a decade.
Such swaps are a way of gauging the difference in the cost of borrowing dollars in Japan versus borrowing dollars in the U.S., with a negative rate indicating that borrowing in yen is more expensive than doing the same in greenbacks. In theory, that difference shouldn’t exist as players arbitrage the differences away, but regulations introduced after the financial crisis may have restricted their ability to do so. ...
... For the remainder of the report:
* * *
Join GATA here:
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
2 Poydras St., New Orleans, Louisiana
Tuesday-Friday, October 19-22, 2021
* * *
Toast to a free gold market
with great GATA-label wine
Wine carrying the label of the Gold Anti-Trust Action Committee, cases of which were awarded to three lucky donors in GATA's recent fundraising campaign, are now available for purchase by the case from Fay J Winery LLC in Texarkana, Texas. Each case has 12 bottles and the cost is $240, which includes shipping via Federal Express.
Here's what the bottles look like:
Buyers can compose their case by choosing as many as four varietals from the list here:
GATA will receive a commission on each case of GATA-label wine sold. So if you like wine and buy it anyway, why not buy it in a way that supports our work to achieve free and transparent markets in the monetary metals?
To order a case of GATA-label wine, please e-mail Fay J Winery at firstname.lastname@example.org.
* * *
Support GATA by purchasing
Stuart Englert's "Rigged"
"Rigged" is a concise explanation of government's currency market rigging policy and extensively credits GATA's work exposing it. Ten percent of sales proceeds are contributed to GATA. Buy a copy for $14.99 through Amazon --
-- or for an additional $3 and a penny buy an autographed copy from Englert himself by contacting him at email@example.com.
* * *
Help keep GATA going:
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit: