Eurodollar University U.S. URGENT: Banks Are Preparing for a Rate Collapse?
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Apr 24, 2025 The discussion reveals how American banks are still crucial global lenders despite the narrative around declining dollar asset demand. It highlights increased lending during economic uncertainty and its effects on U.S. Treasury yields. Delving into the evolution of these yields, the podcast examines the Federal Reserve's influence, the flattening yield curve, and pandemic impacts. Additionally, it challenges misconceptions about foreign investment and emphasizes the complex relationship between Treasury yields and deflationary trends.
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American Banks as Global Lender
- American banks act as the real lender of last resort to global markets by lending dollars offshore.
- This lending happens via collateralized repos (resales) which increase during global dollar shortages.
Resales Track Dollar Cycles
- Resale activity by American banks correlates strongly with eurodollar cycles and treasury yield movements.
- Resales soared during past dollar shortages and declined during reflationary periods, matching treasury yield trends.
Resales Surge Amid Bank Crisis
- Resale activity surged sharply leading up to and throughout the 2023 bank crisis, reaching $1.8 trillion by February 2025.
- This rise indicates increasing deflationary monetary conditions with American banks stepping in as lenders of last resort.