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Spread & Containment

Eurobonds Behind Euro$ #5’s Collateral Case

The bond market is allegedly populated by the “smart” set, whereas those trading equities derided as the “dumb” money (not without some truth)….



The bond market is allegedly populated by the “smart” set, whereas those trading equities derided as the “dumb” money (not without some truth). I often wonder if it’s either/or. The fixed income system just went through this scarcely three years ago, yet all signs and evidence point to another repeat. So, how smart can Eurobond agents really be if they’ve gone and done it again?

What is it?

Let’s roll the clock back to the landmine of 2018. Collateral shortage, financial chaos, rising dollar and all that stuff.

But, Argentina has been an absolute darling, a media frenzy and Wall Street hero. Since 2016, the Eurobond market had embraced this long-shunned section of South America. Where before this poor country couldn’t sell one single dollar in securities no matter how high the coupon attached, in 2017 in particular the world couldn’t get enough Argentine paper at any price.

In the context of securities lending, that would’ve meant right around the end of 2017 Argentine debt almost certainly was given more favorable terms (in securities lending) than it should have ever been afforded. I don’t know for sure if it was subprime MBS-like friendly, but undoubtedly way too far in the same direction. Argentina bonds were great because everyone loved Argentina.

Then they didn’t.

A Eurobond is simply a debt instrument issued outside the home country of the borrower (who could also be a private non-financial company, not just sovereigns or banks). Typically denominated in US dollars, the borrowing could be in whichever currency the obligor requires at the time (usually dollars).

Sounds simple enough, but there’s more. Here’s a pretty straightforward sketch behind “more” and where it all intersects with repo, collateral, the real fun stuff:

During 2017’s “globally synchronized growth” fiasco, Eurobond investors and the dealer banks who sit in between all the heavy financial arrangements got drunk on central bank assurances that the “growth” part was real this time.

Spoiler: it wasn’t. In never is; false dawns only. 

Realizing this, a chain reaction triggers for a whole bunch more than Argentina Eurobonds: when everyone loved Argentina and “globally synchronized growth”, that and so much other junk was let infect the global collateral stream. Transformations as shown above along with straight up use as collateral, much supported by shake-your-head quality credit.

Then, 2018, they didn’t love Argentina; collateral shortage system-wide as haircuts got adjusted and collateral calls (May 29, 2018) issued for better quality (USTs and the like). Once that becomes clear, everything on the chart above must reverse. The dealer (Bank B) isn’t going to accept the Argentine Eurobond as collateral in its collateral-for-collateral swap delivering the Insurance Company C’s UST. This leaves Argentina Bank A exposed, unable to rollover in US$ repo unless it can somehow find better collateral to post to repo or to swap. 

We don’t really know ultimately how this Euro$ #4 basis would’ve played out in the end, the coronavirus came along and the rest is buried under forgotten history.

On the other side of it, however, history apparently repeated because the Eurobond market is either truly that stupid or so plain gullible combined with short-termism and an unreasonable ability to rationalize central bank promises and projections.

What do I mean? In late 2020 and early 2021, maybe Argentina wasn’t back in the Eurobond game…but a whole bunch of others came to be, including some of the worst credits in Africa. Countries like Ghana and Zambia have been issuing Eurobonds almost like Argentina once did.

Having floated billions last year, the Ghanian government today complains repeatedly that its Eurobonds have been unfairly singled out, having crashed for reasons beyond fundamentals. Officials there, of course, blame the Federal Reserve and its “rate hikes” because they like everyone else including the entire financial media has been taught to think only in those terms; if something happens, must be central bank.

The problem is collateral, not Jay Politics Powell.

How do we know? Let’s check the spreads.

Unfortunately, there just isn’t enough (or really much) data on Eurobonds let alone the spreads (above USTs) for them (let alone Eurobonds used as collateral in multi-leg reuse transactions). In lieu of anything else, it’ll suffice to pull out a couple of single issues trading in Luxemburg.

First up, a control of sorts, one from South Africa which is one of the better-quality credits floating around the offshore marketplace.

Prices down, yields up and mostly keeping in line with the similar 7-year UST. The South African government, if it wanted, really can blame Powell’s rate hikes because the interest rate environment (all in US$s) is clearly behind the fall in this Eurobond’s price.

Among Africa’s lesser quality issuers, however, it’s definitely not FOMC policy behind bond plunges. And while I don’t have any Eurobonds from Ghana or Zambia to show you, I can choose a number from Egypt which will stand in just fine for those.

First off, a higher coupon because of its perceived higher risk that eventually offers no shelter once the system goes astray.

And while it would be easy to blame the likely-to-be-seriously-bad fallout from the war in Eastern Europe (especially in terms of food prices or even availability in Egypt), bond prices have been falling for much longer than Russians have been in the rest of Ukraine; spreads were going up and rapidly, particularly that bump late September/early October and then again around December 1. By early February, the spread was already sneaking up toward 575 bps from last June’s low of 340 or so.

Those two time periods – October and December – should ring all sorts of bells where the systemic collateral condition has been concerned. Repo fails, etc. The already ironclad collateral case for curves in 2021 and 2022 is clad in even more iron from the Eurobond forge.

In fact, you can compare the spread on Egypt’s one Eurobond to others that are more generalized, such as ICE’s option-adjusted calculation for emerging market corporates as a group. The chart immediately above looks quite a lot like the one immediately below.

The Egyptian Eurobond spread also looks even more like the two charts above. These in the green are euro-denominated “high yield” corporates, though they also include more than a few placed in the Eurobond market, too.

In other words, it’s not just Egypt nor is it primarily dollars or Eurobonds. There’s a whole lot of systemic risk aversion especially in market segments which correspond and connect with those first. In them, for some of these spreads, Euro$ #5 has already surpassed Euro$ #4’s worst point, beginning to rival spread levels from late 2014/early 2015’s Euro$ #3.

This spread widening throughout weaker-quality collateral instruments has also and already spilled over into domestic issued corporate junk, if not yet with the same amount of puking.

Credit spreads aren’t blowing out, the market isn’t blowing up, rather it’s the opening stages for the link between falling prices and risk aversion which has been well-established as a key collateral factor globally. It starts at the outer edges, the more stupid of the Eurobonds, and then moves closer to the center.

That center isn’t the Fed nor its inert, useless bank reserves, rather the herding instincts of increasingly risk averse dealers who more and more will only deal in the better issues of collateral the more this thing, Euro$ #5, keeps going.

Back in the middle of 2018, even the rate-hiking hawks of the FOMC couldn’t help but acknowledge the sudden “strong worldwide demand for safe assets” as officials called it (trying to downplay the whole thing). They never could quite figure out why. Safe, yes, but more so highly and dependably liquid.

The collateral multiplier had shrunk once the real monetary system rethought and then repriced if not rejected so much stupid junk.

Ghanian or Egyptian Eurobonds might’ve been thought reasonable last year on those terms, absurdly the same terms as “globally synchronized growth.” Now that another false dawn, a Euro$ #5 steps over the horizon, here we go again.

History repeats because everyone listens to the Fed.

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The Battle For Control Of Your Mind

The Battle For Control Of Your Mind

Authored by Aaron Kheriaty via The Brownstone Institute

In his classic dystopian novel 1984, George…



The Battle For Control Of Your Mind

Authored by Aaron Kheriaty via The Brownstone Institute

In his classic dystopian novel 1984, George Orwell famously wrote, “If you want a picture of the future, imagine a boot stamping on a human face—for ever.” This striking image served as a potent symbol for totalitarianism in the 20th Century. But as Caylan Ford recently observed, with the advent of digital health passports in the emerging biomedical security state, the new symbol of totalitarian repression is “not a boot, but an algorithm in the cloud: emotionless, impervious to appeal, silently shaping the biomass.”

These new digital surveillance and control mechanisms will be no less oppressive for being virtual rather than physical. Contact tracing apps, for example, have proliferated with at least 120 different apps in used in 71 different states, and 60 other digital contact-tracing measures have been used across 38 countries. There is currently no evidence that contact tracing apps or other methods of digital surveillance have helped to slow the spread of covid; but as with so many of our pandemic policies, this does not seem to have deterred their use.

Other advanced technologies were deployed in what one writer has called, with a nod to Orwell, “the stomp reflex,” to describe governments’ propensity to abuse emergency powers. Twenty-two countries used surveillance drones to monitor their populations for covid rule-breakers, others deployed facial recognition technologies, twenty-eight countries used internet censorship and thirteen countries resorted to internet shutdowns to manage populations during covid. A total of thirty-two countries have used militaries or military ordnances to enforce rules, which has included casualties. In Angola, for example, police shot and killed several citizens while imposing a lockdown.

Orwell explored the power of language to shape our thinking, including the power of sloppy or degraded language to distort thought. He articulated these concerns not only in his novels Animal Farm and 1984 but in his classic essay, “Politics and the English Language,” where he argues that “if thought corrupts language, language can also corrupt thought.”

The totalitarian regime depicted in 1984 requires citizens to communicate in Newspeak, a carefully controlled language of simplified grammar and restricted vocabulary designed to limit the individual’s ability to think or articulate subversive concepts such as personal identity, self-expression, and free will. With this bastardization of language, complete thoughts are reduced to simple terms conveying only simplistic meaning.  

Newspeak eliminates the possibility of nuance, rendering impossible consideration and communication of shades of meaning. The Party also intends with Newspeak’s short words to make speech physically automatic and thereby make speech largely unconscious, which further diminishes the possibility of genuinely critical thought.

In the novel, character Syme discusses his editorial work on the latest edition of the Newspeak Dictionary:

By 2050—earlier, probably—all real knowledge of Oldspeak [standard English] will have disappeared. The whole literature of the past will have been destroyed. Chaucer, Shakespeare, Milton, Byron—they’ll exist only in Newspeak versions, not merely changed into something different, but actually contradictory of what they used to be. Even the literature of The Party will change. Even the slogans will change. How could you have a slogan like Freedom is Slavery when the concept of freedom has been abolished? The whole climate of thought will be different. In fact, there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness.

Several terms of disparagement were repeatedly deployed during the pandemic, phrases whose only function was to halt the possibility of critical thought. These included, among others, ‘covid denier,’ ‘anti-vax,’ and ‘conspiracy theorist’. Some commentators will doubtless mischaracterize this book, and particularly this chapter, using these and similar terms—ready-made shortcuts that save critics the trouble of reading the book or critically engaging my evidence or arguments.

A brief comment on each of these may be helpful in illustrating how they function.

The first term, ‘covid denier,’ requires little attention. Those who sling this charge at any critic of our pandemic response recklessly equate covid with the Holocaust, which suggests that antisemitism continues to infect discourse on both the right and the left. We need not detain ourselves with more commentary on this phrase.

The epithet ‘anti-vax,’ deployed to characterize anyone who raises questions about the mass vaccination campaign or the safety and efficacy of covid vaccines, functions similarly as a conversation stopper rather than an accurately descriptive label. When people ask me whether I am anti-vax for challenging vaccine mandates I can only respond that the question makes about as much sense to me as the question, “Dr. Kheriaty, are you ‘pro-medication’ or ‘anti-medication’?” The answer is obviously contingent and nuanced: which medication, for which patient or patient population, under what circumstances, and for what indications? There is clearly no such thing as a medication, or a vaccine for that matter, that’s always good for everyone in every circumstance and all the time.

Regarding the term “conspiracy theorist,” Agamben notes that its indiscriminate deployment “demonstrates a surprising historical ignorance.” For anyone familiar with history knows that the stories historians recount retrace and reconstruct the actions of individuals, groups, and factions working in common purpose to achieve their goals using all available means. He mentions three examples from among thousands in the historical record.

In 415 B.C. Alcibiades deployed his influence and money to convince the Athenians to embark on an expedition to Sicily, a venture that turned out disastrously and marked the end of Athenian supremacy. In retaliation, Alcibiades enemies hired false witnesses and conspired against him to condemn him to death. In 1799 Napoleon Bonaparte violated his oath of fidelity to the Republic’s Constitution, overthrowing the directory in a coup, assumed full powers, and ending the Revolution. Days prior, he had met with co-conspirators to fine-tune their strategy against the anticipated opposition of the Council of Five Hundred.

Closer to our own day, he mentions the March on Rome by 25,000 Italian fascists in October 1922. Leading up to this even, Mussolini prepared the march with three collaborators, initiated contacts with the Prime Minister and powerful figures from the business world (some even maintain that Mussolini secretly met with the King to explore possible allegiances). The fascists rehearsed their occupation of Rome by a military occupation of Ancona two months prior.

Countless other examples, from the murder of Julius Caesar to the Bolshevik revolution, will occur to any student of history. In all these cases, individuals gathering in groups or parties to strategize goals and tactics, anticipate obstacles, then act resolutely to achieve their aims. Agamben acknowledges that this does not mean it is always necessary to aver to ‘conspiracies’ to explain historical events. “But anyone who labelled a historical who tried to reconstruct in detail the plots that triggered such events as a ‘conspiracy theorist’ would most definitely be demonstrating their own ignorance, if not idiocy.”

Anyone who mentioned “The Great Reset” in 2019 was accused of buying into a conspiracy theory—that is, until World Economic Forum founder and executive chairman Klaus Schwab published a book in 2020 laying out the WEF agenda with the helpful title,Covid-19: The Great Reset. Following new revelations about the lab leak hypothesis, U.S. funding of gain-of-function research at the Wuhan Institute of Virology, vaccine safety issues willfully suppressed, and coordinated media censorship and government smear campaigns against dissident voices, it seems the only difference between a conspiracy theory and credible news was about six months.

*  *  *

Originally posted at 'Human Flourishing' Substack.

Tyler Durden Mon, 05/16/2022 - 23:45

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World-first study reveals why people with COPD are more susceptible to COVID-19

Researchers from the Centenary Institute and the University of Technology Sydney have published the first study showing why people with chronic obstructive…



Researchers from the Centenary Institute and the University of Technology Sydney have published the first study showing why people with chronic obstructive pulmonary disease (COPD) are at higher risk of developing severe COVID-19.

Credit: Centenary Institute

Researchers from the Centenary Institute and the University of Technology Sydney have published the first study showing why people with chronic obstructive pulmonary disease (COPD) are at higher risk of developing severe COVID-19.

The findings, reported in the American Journal of Respiratory and Critical Care Medicine, could lead to the development of new therapeutic interventions that reduce COVID-19 infection in COPD patients.

An inflammatory lung condition, COPD causes airway blockage and makes it difficult to breathe. It affects around 400 million people globally. The increased susceptibility to COVID-19 of COPD patients is still to be fully understood.

In the study, the researchers infected differentiated airway cells from COPD patients and healthy people with SARS-CoV-2 (the virus that causes COVID-19).

The researchers found that the COPD airway cells had 24-fold greater infection with SARS-CoV-2 than the healthy cells.

“We examined the genetic information of infected cells through advanced single cell RNA-sequencing analysis,” said lead author of the study, Dr Matt Johansen, from the Centenary UTS Centre for Inflammation.

“Seven days after SARS-CoV-2 infection, there was a 24-fold increase of viral load in the COPD patient airway cells compared to the cells taken from healthy individuals.”

Significantly, the team found that the infected COPD cells had increased levels of transmembrane protease serine 2 (TMPRSS2) and cathepsin B (CTSB). Both are enzymes that SARS-CoV-2 uses to enter into the host cell.

“These two enzymes are increased in COPD patients and favour greater SARS-CoV-2 infection compared to healthy people. Simply put, easier and increased cell infection makes it far more likely that individuals with COPD will have more severe disease outcomes,” said Dr Johansen.

Other results from the study showed additional reasons for COPD patient susceptibility to severe COVID-19.

Key anti-viral proteins (interferons) that protect against infection were largely blunted in the COPD patient airway cells. This was a likely trigger in causing increased viral production in COPD patients.

Dr Johansen said that infected COPD patient airway cells also had higher levels of pro-inflammatory cytokines, which are linked to more severe COVID-19 and COPD outcomes.

“COPD is an inflammatory disease with patients having increased inflammation at baseline compared to healthy people. It’s highly likely that SARS-CoV-2 exacerbates this existing high inflammation level which leads to even poorer outcomes,” he said.

Initial laboratory drug testing by the researchers, to inhibit the enzymes TMPRSS2 and CTSB, and to target the high inflammation levels, successfully and substantially reduced SARS-CoV-2 viral levels in COPD patient cells, ultimately confirming the study’s results.

“Collectively, these findings have allowed us to understand the mechanisms of increased COVID-19 susceptibility in COPD patients,” said Professor Phil Hansbro, the study’s senior author and Director of the Centenary UTS Centre for Inflammation.

“We believe that new drug treatments targeting relevant enzymes and pro-inflammatory responses in SARS-CoV-2 infection could have excellent therapeutic potential in reducing the severity of COVID-19 in patients with COPD.”

Professor Hansbro said the research was critical with hundreds of millions of people affected by COPD globally and with COVID-19 likely to be around for many years to come.



Increased SARS-CoV-2 Infection, Protease and Inflammatory Responses in COPD Primary Bronchial Epithelial Cells Defined with Single Cell RNA-Sequencing.


Dr Matt Johansen:


Professor Phil Hansbro:


For all media and interview enquiries, please contact

Tony Crawshaw, Media and Communications Manager, Centenary Institute on 0402 770 403 or email:


About the Centenary Institute

The Centenary Institute is a world-leading independent medical research institute, closely affiliated to the University of Sydney and the Royal Prince Alfred Hospital. Our research focuses on three key areas: cancer, inflammation and cardiovascular disease. Our strength lies in uncovering disease mechanisms and applying this knowledge to improve diagnostics and treatments for patients.

For more information about the Centenary Institute, visit


About the University of Technology Sydney (UTS)

The University of Technology Sydney (UTS), located in central Sydney, is one of

Australia’s leading universities of technology. It is known for fusing innovation, creativity

and technology in its teaching and research and for being an industry-focused university.

For more information go to

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The New Rift Between WHO And China

The New Rift Between WHO And China

Authored by Jeffrey Tucker via The Brownstone Institute,

From the beginning of the pandemic, the World…



The New Rift Between WHO And China

Authored by Jeffrey Tucker via The Brownstone Institute,

From the beginning of the pandemic, the World Health Organization and China’s CCP have worked and spoken hand-in-glove, culminating in the Potemkin Village junket of mid-February 2020. The WHO-sponsored travel report—how wonderfully China had performed!—was written and signed by American public health officials who recommended Wuhan-style lockdowns, a disastrous policy that further inspired most governments in the world to do the same.

Twenty-six months later, it turns out that China in fact had not “eliminated the virus fully within its borders,” contrary to the over-the-top claims of TV pundit Devi Sridhar in her new book “Preventable.” They only pushed cases into the future, as the CCP discovered when positive tests appeared all over Shanghai, leading to 7 weeks of brutal lockdowns.

This move on China’s part has been a disaster for the country and the world economy, and presently endangers the financial and technological future of the entire country.

For Xi Jinping, lockdowns and zero-covid were his greatest achievement, one which was celebrated the world over, causing his political pride to swell beyond all bounds. Now, he cannot back off lest he face possible losses in upcoming party elections.

Just this past weekend, he made it clear to the entire government that there would be no backing off the zero-covid policy: the CCP will “unswervingly adhere to the general policy of ‘dynamic zero-Covid,’ and resolutely fight against any words and deeds that distort, doubt or deny our country’s epidemic prevention policies.”

The problem is acute: vast numbers in China likely need to acquire natural immunity via exposure. The lockdown policy likely puts a damper on the achievement of endemicity. That means long-term damage to China’s future.

Sensing this problem, the head of the WHO, Tedros Adhanom Ghebreyesus, offered a mild criticism:

“Considering the behavior of the virus, I think a shift will be very important,” adding that he had discussed this point with Chinese scientists.

What happened next is truly fascinating: Tedros’s comments were censored all over China and searches for the name Tedros were immediately blocked within the country.

Implausibly, merely by stating the incredibly obvious point, Tedros has made himself an enemy of the state.

Meanwhile, another WHO/China partisan, Bill Gates, has been sheepishly saying something very similar in interviews, namely that the virus cannot be eradicated.

It’s not just Tedros and Gates who are trying to flee their advocacy of lockdowns. Anthony Fauci himself denied that the United States ever had “complete lockdowns”—which is technically correct but not because he didn’t demand them.

On March 16, 2020, Fauci faced the national press and read from a CDC directive: “In states with evidence of community transmission, bars, restaurants, food courts, gyms and other indoor and outdoor venues where groups of people congregate should be closed.”

In fact, one gets the strong sense that governments around the world are pretending as if the whole pathetic and terrible affair never happened, even as they are attempting to reserve the power to do it all over again should the need arise.

On May 12, 2022, many governments around the world gathered for a video call and agreed to pour many billions more into covid work, and reaffirm their dedication to an “all-of-society” and “whole-of-government” approach to infectious disease. The U.S. government under the administration readily agreed to this idea.

Leaders reinforced the value of whole-of-government and whole-of-society approaches to bring the acute phase of COVID-19 to an end, and the importance of being prepared for future pandemic threats. The Summit was focused on preventing complacency, recognizing the pandemic is not over; protecting the most vulnerable, including the elderly, immunocompromised people, and frontline and health workers; and preventing future health crises, recognizing now is the time to secure political and financial commitment for pandemic preparedness.

The Summit catalyzed bold commitments. Financially, leaders committed to provide nearly $2 billion in new funding—additional to pledges made earlier in 2022. These funds will accelerate access to vaccinations, testing, and treatments, and they will contribute to a new pandemic preparedness and global health security fund housed at the World Bank.

Is it progress to see these people throwing around language from the much-criticized but now wholly vindicated Great Barrington Declaration? Doubtful. You can’t make a bad policy better by tossing around words. There is every indication from this statement that there will be no apologies, no regrets, and no changes in the default position that governments must always and everywhere have maximum power to control any pathogen of their choosing.

Despite Tedros’s censored words, it’s no wonder that Xi Jinping continues to feel vindicated and affirmed, and sees no real political danger in choosing his own power over the health and well-being of his people. Governments around the world still cannot muster the courage to make a full-throated and solid attack on zero-covid, for fear of the implications of such a concession. Nudges and hints, even from the WHO, will not do it.

Tyler Durden Mon, 05/16/2022 - 19:45

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