Last Week Eurodollar, This Week Starts W/RRR; Or, The Twelve Days Of Deflation

The Euro$ curve inversion of 2018 wasn’t an isolated case by any means. Along with all the other “bond market” stuff, these together had been a useful warning three years ago for reality as it unfolded the opposite way from the narrative about accelerating growth and inflation. Not just the one curve kinked, an escalating stream of alarms.

There was the dollar’s exchange value which “unexpectedly” went upward. The US Treasury curve became flatter and flatter until, on May 29, 2018, the collateral system buckled. Inflation expectations (TIPS) then topped while swap spreads compressed.

And the Chinese had been there, too, with their own contributed deflationary warnings. The RRR had been cut not once, not twice, but three times by October 2018; the second and third of those being implemented after the eurodollar futures curve inversion (and then three more in 2019 as more cautions/useless gestures).

Eurodollar University’s Making Sense; Episode 89, Part 2: Let’s Crack China’s RRR Code
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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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