There's something happening here
What it is ain't exactly clear
There's a man with a gun over there
Tellin' me I got to beware ...............For What Its Worth, Buffalo Springfield.
The glacial move up in LIBOR sets for Dollars and Euros continued this morning into the quarter end. 3 month money for dollars set at .374 (48 days, no decline) and 1.554 for Euros. The futures for December are 99.48 (52 implied) for dollars and 98.74 (1.26) for euros. "What it is ain't exactly clear." Stress. Yes. Another Lehman? Meh. As a mental exercise, if it didn't exist, where would we price LIBOR at invention? I'll take - not here.
The problem is even these glacial movements toward reality are (mis)construed as crisis. We have called this "opting for the Matrix" for years. In other words, reality is too scary so counterparties have elected to embrace the lie. Actual currency sourcing is not accessed through the market with robust (and needed) central bank facility usage so the structure is an elaborate extrapolation of an anachronistic constant. LIBOR = FF + 14. Unlearn that. Refer back to the song.
We'll know more (or less) next week. The relationship between EDZ and EDH (in 1 month and Euros also) should be monitored in early Q4. Presently trading 5 up from -8 in early August. (Geeks can see Chptr 16 of The Eurodollar Futures and Options handbook -avail online- for my metrics on this) Refer back to the song.