Since collat transformation and rheypothecation are clearly linking corporate security such as CLO or IG with UST (provision of safe asset like by shadow banking), and that repo runs occur when credit spread widen. I guess the specialness premium should impact +/- loudly IG/HY
All of this ressources mobilized to the formation of elites.. And at the end of the day graduated ppl pray technical analysis before to sleep and think that because they doesn't have market power they're not influencing the price.. 😅 (true story)
I guess that's why ecb is preparing to structurally backstop shadow banking solvency in order to keep corporates and sov bonds liquidity. So ok ecb is fixing a bit the systemic risk but at the price to overfixing the power of G-sib over the time in financial market.
Schnabel is pointing the real issue, for instance the safe asset scarcity in 2017 that leaded to € RRP. But the policy is often at the european picture.. Good idea but badly executed.
Even with large repo market, we're still a banking zone, reg could mitigate the risk of crash
QE + regulatory requirements + collateral transformations are the structural driver of demand for safe asset. Interestingly, most of the AAA in € zone are owned by domestic sector. Hence the smaller amount hold by banks / SB are re-used and is subject to specialness premium.
That's why a larger amount of collateral pledged to ccp concerned country such as Greek and Italian, thanks to change of margin regulation. Bad collateral chasing the good. As a result, short rates are negative and corporates (CLO) are largely used as safe asset like
Problem : banks discriminate the good and bad borrower, to mitigate counterparty risk and cap the rates low, bad borrowers are not included to the price while only good dtill receiving loans. Hence credit spread is not a good proxy to estimate credit risk. Interest rates fallacy
Fundamental should leads it lower, hash rates is in sharp decreasing since some month due to energy cost. But liquidity fixt the gap between valuation / fundamental, even more with the new btc ETF and credit spread that stop to widening. Didn't looked MM gamma though
Who's the buyer? Shadow banking for leverage purpose. Since there is investment opportunities, even shittiest like nft, ust would stay overliquid. Especially since ccp for ust, srf etc..
If it's not broken, don't fix it right? 😏
I knew southern, fucking crazy 😂 (i say it respectuously man)
But indeed it's really impressive how much the shadow of the war is present even in the 3nd generation. Like a lot the culture, but i got to say that.. No more couple with viet girl 😂