Mike Stroup
Mike Stroup 5 minutes reading from Bitcoin

Central Bank Swap Time? Central Bank Swap Lines Will Blow Up again

Since Central Bank swap lines are probably going to start blowing up again because of energy and FX issues, I decided I would make some charts on their usage during COVID. Because why not.

short thread btc macro DXY

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Currency swaps are a loan. Fed buys foreign currency from a central bank, and agrees to sell back later for same amount of , plus interest (in ). The € or ¥ could devalue vs in meantime, making that loan cost more than the published interest rate 2/

Mexico, Korea, and Singapore got really screwed on their 12-week swap interest rates early in the pandemic.

(1.08% vs 0.3%). Mexico's own policy rate at this time was pretty high, but the others were basically zero. Later they all got the same rates.

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Europe gets the BASKET CASE award for actually borrowing before Covid started. I'm sure there's a super normal reason for borrowing a yard from the USA in Sep 2019 and it has nothing to do with the EU monetary experiment being rickety

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Japan gets the GO BIG OR GO HOME award for totally sending it, topping out at 225 billion

Canada gets the ABSTINENCE award for not actually using the swap line (ok they tested 60,000 but didn't inhale).

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Denmark and Norway get ITS COMPLICATED award for being in NATO but not part of the Euro so they need their own swap line.

Taiwan, India, and Vietnam -- 8, 9, 10 largest trade partners with the US get the MAYBE NEXT TIME award for not making the list. Swaps for frens only 6/

The Swiss get the HOLIDAY SPIRIT award for always borrowing a lot for Xmas and New Years for some reason 🎅🎄. Not sure why because their FAANG portfolio was still doing OK both festive periods. 7/

Current rate for a 7 day swap is 2.58% annualized- similar to other rates in the US. But for Japan with a policy rate of -.10%, this is pretty high (purple line).

Check out this page as winter approaches to see if the swap lines take off again:

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Central Bank Liquidity Swap Operations - FEDERAL RESERVE BANK of NEW YORKCentral Bank Liquidity Swap Operations - FEDERAL RESERVE BANK of NEW YORK

Some of the central banks that didn't get swap lines in 2020 (but did in GFC) include: Brazil New Zealand Sweden

Probably still frens of USA, especially 5-eye NZ. From now we barely have free markets anymore-- geopolitics is at the forefront until things settle down. 9/

Just a little bit of humor (not a PhD thesis) and a few charts to get us ready for swap line extravaganza, winter 2023!

tagging swap line nerds out there to see what they have to add @matthew_pines @chilipiper234 @jameslavish @Max__Fin @LukeGromen @JeffSnider_AIP @huskerrx end/

This post is based on this twitter thread.

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