http://libertystreeteconomics.newyo...cess-reserves-and-cash-parked-at-the-fed.html The resolution to this apparent puzzle is that when one bank decides to hold a lower balance in its reserve account, the funds it sheds necessarily end up in the account of another bank, leaving the total unchanged (see FT Alphaville and this New York Fed Current Issues in Economics and Finance article for more detailed discussions of this point). In the aggregate, therefore, these balances do not represent âidleâ funds that the banking system is unwilling to lend. In fact, the total quantity of reserve balances held by banks conveys no information about their lending activities â it simply reflects the Federal Reserveâs decisions on how many assets to acquire. A cut in the IOR would probably lead to a rush into short-term USTs, the price would get to a point where banks would not buy them any longer. Deposits at the fed would remain unchanged. The excess reserves 'sitting at the fed and not being lent' as same people put it will not change until the fed wants it to change
No, I mean STIR futures and options on them. So sub-2y interest rates... As to the books, you can try the "Eurodollar Futures and Options Handbook" by Galen Burghardt. It's sort of the bible.
Judging by the recent rhetoric, an IOER cut isn't very likely (certainly, not with the money mkt fund reform stalled). However, if you think it's a non-zero probability, TU is cheap here. I am long and I think it's one of the best in class calamity hedges around.
Bass' fund is a beautiful example for one of these 'I have this great asymmetric payoff trade, this is a no-brainer' ideas gone haywire. There's no guarantee the trade will not incur a severe loss of capital even if premium is seemingly 'cheap' and something is 'obviously a bubble'.
Well, tbh, there are occasionally these genuine opportunities where optionality is massively mispriced. However, these types of "no-brainer" trades are few and far between and, even in those cases, timing is still a very important element. So I was generally willing to assume that Bass managed to get some muppets to sell him some options that were just stupid cheap. Clearly, that wasn't the case. As I mentioned, this is in stark contrast to the one guy who did a good job - Hugh Hendry with his "short corporate Napaj" CDS trade. I am not a huge fan of Hugh Hendry, generally, but this trade was just pure gold (in hindsight, of course).
Central planning has erased vol from the markets except on the days when these bureaucrats speak. http://www.ifre.com/a-new-regime?/21037545.article No wonder the big guys (see Bacon) are frustrated.
My one question about this is if mkts are truly this difficult, why are the biggest macro funds, like Bridgewater or Brevan Howard, not throwing the towel? Just sayin'...
Thank you Martinghoul, I will take a look. I thought Brvan Howard is more like Capula Investment , do you know how these guy trades? In a bloomberg news, it says their main fund is on the relative value, sort of spread trading? Thanks