Strange things have been happening in markets, that much we know.
In the credit world, derivatives linked to the corporate debt sold by companies have been trading at a tighter level than the cash bonds themselves. In the vast and shadowy repo market, the rates charged for interest rate swaps have plunged below equivalent U.S. Treasury yields. Meanwhile, in FX markets, the cost to convert local currency payments from the euro area, the U.K., and Japan into dollars has jumped, sending the so-called "cross-currency" basis deeper into negative territory.
While a sharply subzero cross-currency basis would normally be interpreted as a symptom of a profound dollar funding crunch associated with stressed-out banks trying desperately to hedge their liabilities, this particular bout of negativity appears to be more about massive post-2008 changes wrought on the wider financial system.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
- Exclusive discounts on ALM and Treasury & Risk events.
- Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
*May exclude premium content
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
