What A Negative Swap Spread Really Means (Spoiler Alert: Nothing Good)

Submitted by Tyler Durden on 11/21/2015 - 14:00

Swap spreads recently took a nosedive and are once again trading at negative levels, even for shorter maturities. This market perversion suggest that Wall Street is a safer counterpart than the very institution that underwrites the whole fractional reserve fraud in the first place. To price in a higher risk premium on the US government than on US banks is a contradiction in terms so there need to be another explanation behind this puzzling market phenomenon... There is, and you're not going to like it.

Historically, large and sudden shift in the value of the global reserve currency is synonymously with global turmoil. We guarantee you that this time is not different. We are heading straight into a massive deflationary inventory liquidation with mass defaults across the globe. This is what a negative SWAP spread is really telling us.