It's Getting More Expensive to Borrow in Dollars - And It Could Get Worse
- As pressure lasts past quarter-end, analysts take notice
- For investors outside U.S., hedged yield declines as a result
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Signs of global dollar-funding pressures are bubbling up in currency derivatives, making it costlier for international investors to protect against swings in the greenback when they buy U.S. debt.
Cross-currency basis swaps, which money managers and corporate treasurers outside the U.S. can use to borrow in dollars, remain close to the widest levels since January even after quarter-end, when such financing strains typically dissipate. The market was a key indicator of stress during the financial crisis, and while it’s nowhere near the alarming levels of that era, it’s still garnering the attention of analysts.