Forwarded from Dissident Thoughts (Conks)
Dissident Thoughts
The Cash-Futures Basis Trade In early 2018, a string of events formed an exploit in America’s sovereign debt market. Following a surge in Treasury issuance and regulatory reforms, asset managers (pension funds, mutual funds, and insurance companies) began…
Implementing Basis Trades
Understanding sources of risk for basis trades and where stress can manifest requires understanding the technical details of how these trades are implemented.
The basis — or the profitability of a cash-futures basis trade — is characterized by the implied repo rate (IRR), which reflects the cost of carrying the security (including financing costs) until the futures contract's expiration.
When the implied repo rate is greater than the actual repo rate, basis traders borrowing in the repo market can profit by buying the cash Treasury and shorting the corresponding futures. At delivery, the trader will earn the spread between the IRR and the repo rate. When the actual repo rate is greater than the implied rate, a "long basis" trade is not profitable.
The IRR is closely related to the yield on a Treasury bill because the cash flows from the basis trade replicate those from a Treasury bill maturing on the futures delivery date.
In particular, in times of relative illiquidity and high balance sheet costs, the implied repo rate has deviated significantly from the rate of return on bills.
One example of these deviations occurred following the collapse of Lehman Brothers in 2008 (see Figure 4 above). Immediately after that collapse, as liquidity dried up in financial markets, implied repo rates collapsed deeply negative across contracts. The IRR decline reflected a flight to safety in Treasury markets.
Because the futures price and the cash price of the Treasury are known to the basis trader, provided he also knows the repo rate, profits on these bets at delivery are guaranteed.
The basis trade does not, however, offer risk-free profits. Several risks threaten the profitability of the basis trade, and thus create potential consequences for financial stability.
5/6
Understanding sources of risk for basis trades and where stress can manifest requires understanding the technical details of how these trades are implemented.
The basis — or the profitability of a cash-futures basis trade — is characterized by the implied repo rate (IRR), which reflects the cost of carrying the security (including financing costs) until the futures contract's expiration.
When the implied repo rate is greater than the actual repo rate, basis traders borrowing in the repo market can profit by buying the cash Treasury and shorting the corresponding futures. At delivery, the trader will earn the spread between the IRR and the repo rate. When the actual repo rate is greater than the implied rate, a "long basis" trade is not profitable.
The IRR is closely related to the yield on a Treasury bill because the cash flows from the basis trade replicate those from a Treasury bill maturing on the futures delivery date.
In particular, in times of relative illiquidity and high balance sheet costs, the implied repo rate has deviated significantly from the rate of return on bills.
One example of these deviations occurred following the collapse of Lehman Brothers in 2008 (see Figure 4 above). Immediately after that collapse, as liquidity dried up in financial markets, implied repo rates collapsed deeply negative across contracts. The IRR decline reflected a flight to safety in Treasury markets.
Because the futures price and the cash price of the Treasury are known to the basis trader, provided he also knows the repo rate, profits on these bets at delivery are guaranteed.
The basis trade does not, however, offer risk-free profits. Several risks threaten the profitability of the basis trade, and thus create potential consequences for financial stability.
5/6
Forwarded from Dissident Thoughts (Conks)
Dissident Thoughts
Implementing Basis Trades Understanding sources of risk for basis trades and where stress can manifest requires understanding the technical details of how these trades are implemented. The basis — or the profitability of a cash-futures basis trade — is characterized…
The Greatest Credit Event of All
In just the last few weeks, we've seen two major trades — the Yen carry trade and the short volatility trade — "blow up", even though neither lasted nor took the street down with it. What about the basis trade?
We alluded at the start of the year that the "mother of all credit events" would be a disorderly rise in bond yields leading to dollar debasement. This is the "de-dollarization" that keeps Treasury and Federal Reserve officials up at night — not means of trade being re-routed off the dollar and onto other forms of settlement.
There are two legs to the basis trade: the asset managers who express Treasury exposure via buying futures, and the hedge funds who repo finance cash Treasury purchases. While hedge funds are the marginal buyers of cash Treasuries, it's the asset managers who buy Treasury futures that ultimately hold the risk.
The marginal absorber of cash Treasuries remains the basis trade, but it can run into limits either from a regulatory crack down on hedge funds or limitations on dealer repo financing. New research from TBAC suggests that changes in the credit environment could also threaten the trade.
What asset managers do is effectively take the opposite side of the basis trade by selling cash Treasuries outright and using the proceeds to finance their credit investments. They then add back the Treasury exposure through futures.
That positioning also more directly links the Treasury & credit markets together, as potential losses on credit may lead to deleveraging in Treasury positions as managers de-gross.
It could also lead to liquidity squeezes as managers sell Treasuries to meet redemptions, as credit markets may not be liquid to enough to raise cash. Outside of a systemic or apparent credit event, note that credit spreads have spiked this month.
In the wake of such a risk-off credit event (think: a bank failure), monetary authorities are limited to only a few modes of easing. But the rise of foreign, non-official, unhedged accounts as the marginal buyer for Treasuries means that they are particularly vulnerable to dollar devaluation that results from a policy of easing.
Aggressive rate cuts in the name of providing economic support for example may therefore paradoxically be ill advised insofar as it weakens the dollar against other currencies (like the euro), because said non-official accounts would likely firesale their Treasury holdings as they try to avoid realizing losses, spiking repo financing costs and repo rates as dealer warehousing capacity is pushed to the edge.
That was the case in March 2020, when risk-off paradoxically led to a spike in yields, as Treasury holders aggressively sold their securities for cash. Although this time, it may be to preserve foreign capital against unhedged Treasury losses.
(Disclaimer: this is a theoretical but plausible example).
6/6
In just the last few weeks, we've seen two major trades — the Yen carry trade and the short volatility trade — "blow up", even though neither lasted nor took the street down with it. What about the basis trade?
We alluded at the start of the year that the "mother of all credit events" would be a disorderly rise in bond yields leading to dollar debasement. This is the "de-dollarization" that keeps Treasury and Federal Reserve officials up at night — not means of trade being re-routed off the dollar and onto other forms of settlement.
A credit event occurs when a borrower can no longer meet debt obligations, leading to a default, bankruptcy, or restructuring. For example, an insolvent bank being unable to pay depositors in a bank run.
There are two legs to the basis trade: the asset managers who express Treasury exposure via buying futures, and the hedge funds who repo finance cash Treasury purchases. While hedge funds are the marginal buyers of cash Treasuries, it's the asset managers who buy Treasury futures that ultimately hold the risk.
The marginal absorber of cash Treasuries remains the basis trade, but it can run into limits either from a regulatory crack down on hedge funds or limitations on dealer repo financing. New research from TBAC suggests that changes in the credit environment could also threaten the trade.
What asset managers do is effectively take the opposite side of the basis trade by selling cash Treasuries outright and using the proceeds to finance their credit investments. They then add back the Treasury exposure through futures.
That positioning also more directly links the Treasury & credit markets together, as potential losses on credit may lead to deleveraging in Treasury positions as managers de-gross.
It could also lead to liquidity squeezes as managers sell Treasuries to meet redemptions, as credit markets may not be liquid to enough to raise cash. Outside of a systemic or apparent credit event, note that credit spreads have spiked this month.
In the wake of such a risk-off credit event (think: a bank failure), monetary authorities are limited to only a few modes of easing. But the rise of foreign, non-official, unhedged accounts as the marginal buyer for Treasuries means that they are particularly vulnerable to dollar devaluation that results from a policy of easing.
Aggressive rate cuts in the name of providing economic support for example may therefore paradoxically be ill advised insofar as it weakens the dollar against other currencies (like the euro), because said non-official accounts would likely firesale their Treasury holdings as they try to avoid realizing losses, spiking repo financing costs and repo rates as dealer warehousing capacity is pushed to the edge.
That was the case in March 2020, when risk-off paradoxically led to a spike in yields, as Treasury holders aggressively sold their securities for cash. Although this time, it may be to preserve foreign capital against unhedged Treasury losses.
(Disclaimer: this is a theoretical but plausible example).
6/6
Forwarded from Imperium Press
Liberalism means total war because liberalism is an identity based on a belief rather than say blood.
Ideas are geographically unbounded so "unfreedom anywhere threatens freedom anywhere". Thus liberalism must fight to extinction. Ironically "blood" identities aren't this way.
And it gets worse.
You can exterminate a people but you can't exterminate an idea. Illiberalism can always arise spontaneously. And because it's healthy, it surely will. So liberalism must be ever-vigilant. The barest whiff of "authoritarianism" sets off an allergic reaction.
So ironically, liberalism poses as tolerant but is totalizing to a degree unimaginable for a "blood and soil" worldview. The infidels must be —.
Every identity based on affirming a "truth" is this way.
Think about this, and you will understand history at a much deeper level.
Ideas are geographically unbounded so "unfreedom anywhere threatens freedom anywhere". Thus liberalism must fight to extinction. Ironically "blood" identities aren't this way.
And it gets worse.
You can exterminate a people but you can't exterminate an idea. Illiberalism can always arise spontaneously. And because it's healthy, it surely will. So liberalism must be ever-vigilant. The barest whiff of "authoritarianism" sets off an allergic reaction.
So ironically, liberalism poses as tolerant but is totalizing to a degree unimaginable for a "blood and soil" worldview. The infidels must be —.
Every identity based on affirming a "truth" is this way.
Think about this, and you will understand history at a much deeper level.
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List of main protests:
— Blackpool
— Bolton
— Brighton
— Bristol
— Hull
— Liverpool
— Middlesborough
— Newcastle
— Nottingham
— Oldham
— Portsmouth
— Rotherham
— Sheffield
— Stoke
— Southampton
— Sunderland
— Tamworth
— Wigan
🔗 Source (including full list):
❗️Important:
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Forwarded from /SCI/ Southern Cross Intelligence - (𝙱𝚕𝚒𝚝𝚣 🇦🇷🦅)
The Argentine government is considering evacuating its diplomats from Lebanon due to the escalation of the conflict in the Middle East, a topic discussed at today's cabinet meeting.
At the moment the diplomats are working normally
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Forwarded from Intel Slava
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@CIG_telegram
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428 people were arrested so far and 120 were charged and locked up.
@CIG_telegram
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Sir Richard Dearlove says false identification of suspect is a ‘fundamental tactic’ used by Putin against the West.
Russia’s fake news about the Southport stabbings is part of Vladimir Putin’s “grey warfare” against the West, a former head of MI6 has said.
Russian state media were among those who falsely identified the suspect – who was charged overnight – as an asylum seeker who had arrived in the UK in a small boat.
He told LBC’s Nick Ferrari: “What I can tell you is that we’re in a state of grey warfare with Russia – we may not feel that we are, but they certainly think they are.
“The exploitation of that space is a fundamental tactic in their conflict with the West. So if these bots have been used to stir up through social media a violent response, I’m not the slightest bit surprised.
“People just don’t seem to understand the extent of the Russian attitude to conflict and the way every aspect of their relationship with us will be seen as a basis to attack us.”
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archive.ph
Southport stabbing: Russian fake news about attack is 'grey warfare',…
archived 5 Aug 2024 19:04:10 UTC
The End Times
Photo
In the Rotherham child gang rape scandal, it took British courts in some cases, 35 years to identify, charge and convicts suspects for their crimes against British children.
🔗 Politics UK
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🇮🇪 Keith Woods on X:
🇬🇧 🇮🇱 'Tommy Robinson is a traitor and a sellout, not a nationalist.'
🔶️ "Not only has he told Europeans to "open your borders to Hindus and Sikhs", here he says he would let the 18 million women in Saudi Arabia enter the UK as a way to undermine Islam."
🔶️ "I don't think he's the cause of the riots, but when he's in the news I will remind people he's no friend to nationalists"
📎 Keith Woods
🇬🇧 🇮🇱 'Tommy Robinson is a traitor and a sellout, not a nationalist.'
🔶️ "Not only has he told Europeans to "open your borders to Hindus and Sikhs", here he says he would let the 18 million women in Saudi Arabia enter the UK as a way to undermine Islam."
🔶️ "I don't think he's the cause of the riots, but when he's in the news I will remind people he's no friend to nationalists"
📎 Keith Woods
/CIG/ Telegram | Counter Intelligence Global
They say that the assault is being actively investigated however, by the clothes the teenager and the migrants were wearing, it looks like the assault happened sometime during the winter or early spring when temperatures were much colder and warranted the use of jackets.
Now that the video resurfaced in August, where has the investigation led to? Are there any convictions? Who are the people that assaulted the teenager? Only the Bremerhaven Police know.
@CIG_telegram
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/CIG/ Telegram | Counter Intelligence Global
French politician and EU Commissioner for the Internal Market, Thierry Breton, pushed for and spearheaded the Digital Services Act (DSA), the EU's "groundbreaking" social media regulations. He argued at the time that social media was allowing migrants and French nationalists to organise and cause more trouble for France and the EU and actively threated social media companies with fines if they do not take down posts from their websites.
Breton even launched a probe into X (Twitter) for allowing "illegal content" and "misinformation" on its platform. In the end, the French government did indeed begin to heavily censor both Twitter and Snapchat, widely used by rioters and nationalists alike, which led to fewer videos and images coming from France but the return to the uneasy peace was credited by most observers and some police officers not to the efforts of the French authorities but to the migrants themselves who decided to stop rioting because their drug trafficking and selling operations were beginning to hurt and they were losing an important revenue stream.
The appetite of the EU for censorship is not satisfied. In May of 2024, the EU Commissioner for Values & Transparency was seething at the fact that Telegram is under the threshold of the DSA, because, Telegram, in the EU, has 42 million users while the DSA sets a limit of 45 million users for the app to fall under its dispositions. A month later, the EU received a massive blow to its draconian censorship plans when EU members couldn't agree how far this censorship should go and the plan was scrapped.
The UK being smaller in size than the EU means it has less leverage and power to censor social media and salvage its image and this state of affairs has sent its government into a frenzy, scrambling to punish anyone it can under every possible pretext as its credibility and trust in its institutions collapse with two tier policing becoming ever more clearer.
Germany too has been employing heavy censorship on social media for a few years already, which became very apparent with the "Auslander Raus" (Foreigners out!) music videos from last May-June and promised to prosecute anyone that was caught singing.
Now it seems it will become standard practice for countries in the Western world to shut down social media sites and prosecute those users that post "illegal content" in the name of "keeping communities safe" when, in reality, liberal politicians are making last ditch efforts to keep race relations manageable and friendly enough so that their multicultural societies don't collapse in full fledged civil war and anarchy.
The instability and violence seen rising across Europe will not end until every non-white individual is kicked out of this continent. Governments, politicians, judges, policemen, journalists will not step in to protect Europeans in their own countries so it remains up to the people to fight for their interests and lives.
@CIG_telegram
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🔸 Denmark even created a modest remigration plan, offering non-EU immigrants and dual citizens a financial package to return to their home country
🔸 It's impossible to imagine anything like this from the left in the UK or Ireland, who are motivated more by spite and White guilt than any desire to have a functioning welfare state
🔸 They would sooner turn our nations into tyrannical police states than cede an inch of ground to nationalists on immigration
🔗 Keith Woods
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