Spitballing In German

Something just doesn’t smell right. As I’ve pointed out over the past few weeks, bill yields have been falling. The front, the 4-week instrument, has seen its equivalent rate plummet. This is consistent with deep liquidity problems as well as looming rate cuts (the two do go hand-in-hand).

Over the past two sessions, including today, however, bill yields have spiked. No rate cuts, problem solved? Hardly. Bill markets aren’t supposed to behave this way – in either direction. What you see below are positions getting crushed, people taken out on stretchers (to repurpose an old euphemism) for reasons that have nothing directly to do with T-bills.

(Click on image to enlarge)

What follows is more pure speculation on my part, so if that’s not your interest then this mess in bills is already enough to keep anyone busy wondering. Otherwise, I can’t help but figure about that one German bank whose name keeps popping up at these sorts of moments.

The fact that Deutsche Bank is still upright at all might seem evidence to the contrary; in other words, it’s been called a “troubled” bank for many years and no major systemic consequences to this point.

The real problem, in my hypothetical view, is that no one has as yet properly defined “troubled.” For much of those prior years, up until early 2017, DB was obviously in trouble with the US government. Some untoward behavior during the last housing bubble.

After they paid a big fine for it, the matter like the bank was forgotten during globally synchronized growth. And that’s ultimately what grabs my attention – DB’s time on the front pages coincides with eurodollar squeezes. The current one included; including the intensity of Euro$ #4 so far.

I’ve been writing about DB for years. In October 2016, for example, while the DOJ fine was the only explanation put forward you could already tell it was much deeper than that. It’s all but forgotten now, superseded by more insanity, but this one behemoth had actually gotten caught cheating on its stress test – and authorities quite purposefully looked the other way!

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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