11-30-2011 07:49 AM
Risk rocketing higher as US announces expanded USD swap lines.
The question you have to ask is, is it just a shortage of USD liquidity that is locking up european markets?
Clearly not. It does potentially relieve a short term problem but actually exacerbates a greater problem- Europe is falling into recession and really needs a cheaper euro, not a stronger currency.
Doesn't mean that da boyz won't take the opportunity to make a buck on the "news", though.
11-30-2011 07:55 AM
WOW nox from when I got up to do chores till I got back in the dollar fell almost a whole point! Corn was down about 8.6 when I went outside a dark thirty to up 3! WOW ANd I will say it backwards WOW!
11-30-2011 08:05 AM
"The foreign currency that the Federal Reserve acquires is an asset on the Federal Reserve's balance sheet. In tables 1, 9, and 10 of the H.4.1 statistical release, the dollar value of amounts that the foreign central banks have drawn but not yet repaid is reported in the line "Central bank liquidity swaps." Because the swap will be unwound at the same exchange rate that was used in the initial draw, the dollar value of the asset is not affected by changes in the market exchange rate. The dollar funds deposited in the accounts that foreign central banks maintain at the Federal Reserve Bank of New York are a Federal Reserve liability. In principle, draws would initially appear in tables 1, 9, and 10 in the line "foreign and official" deposits. However, the foreign central banks generally lend the dollars shortly after drawing on the swap line. At that point, the funds shift to the line "deposits of depository institutions."
When a foreign central bank draws on its swap line to fund its dollar tender operations, it pays interest to the Federal Reserve in an amount equal to the interest the foreign central bank earns on its tender operations. The Federal Reserve holds the foreign currency that it acquires in the swap transaction at the foreign central bank (rather than lending it or investing it in private markets) and does not pay interest. The structure of the arrangement serves to avoid domestic currency reserve management difficulties for foreign central banks that could arise if the Federal Reserve actively invested the foreign currency holdings in the marketplace.
The Federal Reserve Board issues a weekly release that includes information on the aggregate value of swap drawings outstanding. With the onset of the Global financial crisis of 2008–2009 and the collapse of Lehman Brothers on September 15, 2008, the balance grew rapidly. As of April 2009[update] the balance was $293,533 million. Central bank liquidity swaps have maturities ranging from overnight to three months. Table 2 of the H.4.1 statistical release reports the remaining maturity of outstanding central bank liquidity swaps."
11-30-2011 09:17 AM
Glad to brighten your day. Were sittin here with over half the corn in the field standing in 6 inches of water or more. Gotta find a smile somewhere.
Thought I heard someone singing when I woke up but soon found out it was the hum of the printing presses.
12-01-2011 09:19 AM
FWIW, didn't completely describe the swap line news correctly yesterday. Really just a cut in the interest rate from 1% to .5% on existing lines. Which if you are in need of short term liquidity assistance is no big deal either way.
The other big news ittems: China announced that they were shifting to a more stimulative posture which was taken as China joining in for a coordinated effort to help the global economy. After the close, China manufacturing PMI came in terrible- worst 2 month drop since Nov/Dec 2008. So china wasn't saving the world, China is trying to save China.
Also ADP payrolls number was red hot, not confirmed by initial claims this morning which came in above expecations and, as alwats, last week was revised upwards.
Got 500 pts in the Dow out of it, though. However crappy performance in the grains despite the risk on orgy should be noted.
Also, looks like the big European Bank that was rumored to be teetering may have been French bank Credit Agricole.