A black swan in the money market

TAF spread

Mish has charts and a detailed explanation.

What’s striking to me is the amazing calm before the storm. That decreased volatility was like being in the eye of a hurricane, and somehow not knowing it.

The short version of this story is that banks do not trust each other, so they are unwilling to lend to each other except at an unusually wide premium. But why should they trust each other?

The title to this post is from the source document – which is from the Federal Bank of San Francisco…

We are living in unsettled and unsettling times indeed.

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