TIC For July 2018: June Was Even Bigger Than We Thought, Meaning May 29

You never quite know what you’re going to get with each monthly update. High-frequency data tends to be noisy anyway, more so in the more exotic series. Following a month where something really changes, however, you aren’t quite sure if it will turn out to be nothing more than a phantom. Does last month’s big number get revised down or even away? Or does it stick around for a second month and suggest there was something really going on?

The TIC figures for June 2018, released last month, were eye-opening. It wasn’t surprising that the data picked up on something. After all, May 29 wasn’t the usual trading session in global bond markets. By bond prices alone we knew it was a collateral call. We just couldn’t tell how much of one.

It had to have been sufficiently large enough so as to cause, and sustain, reverberating effects, ongoing ripples throughout the eurodollar system. The scale was unexpected, in the TIC view of it. The estimates for June suggested about $200 billion in collateral changes (as noted last month, leaving us more than questions than answers). Was it a statistical quirk, or would it survive revisions?

Not only did it remain in place for July, the collateral quake in June was revised upward. That is, whatever it ultimately was on May 29, this disruption maybe even dislocation was even bigger than originally calculated by the good folks at the Treasury Department.

The first run of June numbers initially put it at about $178 billion. These updated numbers now suggest an astounding $247 billion. There’s just nothing like it.

Very little changed in the estimates for July, the latest month, meaning that whatever happened following May 29 stayed with the system for another month further on. That wasn’t unexpected.

Nor was the additional data pointing out related negatives propagating throughout other parts of the vast eurodollar system. On the “blue” side of the ledger, where US banks lend dollars and collateral overseas, there was another large retreat, particularly against foreign bank counterparties. Small wonder, what with May 29 having shaken the system so deeply; a quarter-trillion deep.