LIQUIDITY ANALYSIS. THE DEFEAT OF THE YIELD CURVE
[Latest Global Dollar Liquidity Measure: +14.5% annual growth rate; latest Endogenous Liquidity Index: +8.4%]
The yield curve is finally normalizing. When it became deeply inverted in August 2006, I briefly went bearish on risky assets. A sudden collapse in the demand for bank reserves, I reasoned, would force the Fed to sell treasuries — thus putting and end to the liquidity boom. But foreign CBs kept on buying U.S. bonds. Far from retreating, global dollarized liquidity gained more and more ground. In the new global context, the yield curve suddenly mattered less. Score one for the "It's Different This Time" (IDTT) crowd.
7 comments:
Hi Agustin. Am just wondering if you changed your mind abt your data. In any case I havent received anything yet. I hope you can access my email address, if not please let me know. Thanks and cheers.
Agustin,
What is your take on the most recent (6/12) Ten Year T-Note Auction?
Correct me if I am wrong, but it appeared that there was a significant decline in FCB participation through indirect bids (as a percentage of the offering) from what was observed in May.
I recognize that this could simply be an isolated event, but if lack of FCB participation continues, doesn't that potentially place a damper on the IDTT argumemt?
Robert. I guess you're right. I don't usually pay much attention to notes & bonds auctions. My mistake!
All right guys, I'm prepared to send PART of my excell files. Bitr: do I have your e-mail?
Bitr,
Once you get some of those charts prepared (especially against the Ten Year), please reply to Agustin so that he can post if he wishes to or please e-mail me if possible. I am very interested to evaluate any potential correlations.
Agustin,
Could the lack or FCB particpation in the recent auction be a response to the recent volatility in yields? or do you think that would have the opposite effect?
Agustin, it seems like you dont hv the email for me. Please try bitr125@yahoo.com. I look fwd to the data. Thanks and cheers
Robert, I ll do my best within Agustin's instructions (once i get them). But i cant see your email anyways. So if anything drop me a message at the above mentioned address. Cheers
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