Thread by @gamesblazer06

$DXY Ripping Does NOT = Bank Funding Shortage (Global De-Levering #WreckingBall) imho

Here’s one clue… FRA OIS is still pinned at 3bps & NII still stinks…
Partly why Credit markets couldn’t care any less about the 5s30s Curve coz nobody funds at the 5 year point.

https://twitter.com/gamesblazer06/status/1338231521820360704

Let’s move across the pond to some European Banks… they have almost Zero issues with access to $DXY. 3M Cross FX Basis Spreads are -3bps.. But the Intelligentsia they keep telling me EM & EMEA has a lot of dollar debt.. u know all those BIS Reports and all…

While true that there are large Cross FX Claims…higher $DXY has a marginal impact on debt service.. but higher $DXY just means there’s some marginal increase in debt service.. that could pail in comparison to a Reopen & stronger earnings power that’s lagged by 6 months on Covid.

But what Fed has done with $DXY access…learned from all previous mistakes…& if they r serious about providing Reg Relief.. & even getting 50% harmonization with Global Basel III & Roll back of Gold Plating…

Watch out…GlobalWrecking Ball could be so Yesterday’s News.

If they do…u could get QT… big rise in Loan/Deposit ratios… & despite that coz of Reg Relief actually get even more access to Bank Sheet.. meaning $DXY gets flattened even more throughout the global system & Fed can police less… let Banks do more harvesting of Vol.