The non-shock wave banging through funding markets this morning was the open spigot Swap lines announced by DM central banks. Forward rates for December fell 12 bp and are settling in around 50bp implied for Dec. The expiring Sep. contract for 3 month money is 99.64+ or .35+ (Monday settle). The strip has returned to the quasi-stability of 99.47 we noted before the recent fear eruption. The money does not come cheaply (100 +OIS) but amounts are unlimited.
The activity, we believe, is a way to ease stress into what will be a stressful 4th quarter for the system. As in 2008, the widely held believe that there "are too many dollars out there" applies only when no one wants/needs them. This is the core reason that the general direction of a Reserve Currency is down. (Time to brush up on the Triffin Paradox folks) The "strong" Euro remains a key detriment to the national/bank debt web that is the EZ. Unlimited amounts of dollar funding do nothing for national solvency issues. Bottom line- the Fed recognizes that there are unsavory (some would say unconstitutional) facilities that can alleviate dollar sourcing pressure but not cure the disease.
Prepare for loss recognition.