Russian ambassador to Turkey assassinated; IMF's leadership questioned; Yellen talks up jobs market; Apple appeals EU tax ruling; US dollar remains dominant; UST 10yr yield at 2.55%; oil stable, gold up; NZ$1 = 69.4 US¢, TWI-5 = 76.1

Russian ambassador to Turkey assassinated; IMF's leadership questioned; Yellen talks up jobs market; Apple appeals EU tax ruling; US dollar remains dominant; UST 10yr yield at 2.55%; oil stable, gold up; NZ$1 = 69.4 US¢, TWI-5 = 76.1

Here's my summary of the key events from overnight, with breaking news the Russian ambassador to Turkey has been shot dead.

An off-duty police officer reportedly attacked Andrei Karlov, while he was delivering a speech in an art gallery is the Turkish capital. Yelling "Don't forget Aleppo" as he shot, the attack's been made as Russian-backed Syrian forces fight for control of the eastern part of Aleppo. The conflict has triggered a devastating humanitarian crisis.

Also making headlines this morning, the IMF's chief Christine Lagarde has been convicted of negligence for a state payout she made while France's finance minister in 2008. Yet Lagarde has escaped punishment, as a French judge has cited her preoccupation with the global financial crisis at the time. The IMF's board will meet soon to consider what the verdict will mean for her leadership. 

Apple is appealing a European Union ruling, which has ordered it to repay US$14 billion of tax. The tech giant argues EU regulators ignored tax experts from Ireland, where its European headquarters were based and where it had set up a special tax arrangement with authorities. Apple claims it was a "convenient target" and the EU deliberately picked a method to maximize its penalty. 

In New York, the UST 10yr yield has dropped 5 bps since this time yesterday to 2.55%.

The US benchmark oil price remains at US$52 a barrel, while the Brent benchmark is stable at US$55.

A vote of confidence for the oil industry as prices pick up - BP is investing US$3.4 billion, buying stakes in gas-rich exploration areas off the coast of west Africa, and renewing a permit in Abu Dhabi. 

The gold price is continuing to regain some lost ground. It's up to US$1,140/oz.

The New Zealand dollar doesn't stand much of a chance against the US dollar, which is at a 14-year peak against a number of currencies. It's down to 69.4 US¢. The US dollar is expected to stay dominant as Trump promises fiscal stimulus and the Federal Reserve points its guns in a different direction to other central banks.

UPDATE: Fed Chair Janet Yellen has done another victory lap for the US labour market. In a speech just delivered at the University of Baltimore, she says graduates are entering the strongest jobs market in nearly a decade. She cites an unemployment rate of 4.6% - a pre-recession low - and wage growth for younger workers. Yet Yellen admits challenges remain, as the economy is growing more slowly than in past recoveries and productivity growth “has been disappointing”. Her speech has nudged the US dollar up a touch. 

The dollar is up to 95.7 AU¢, as Australia's bad news budget update puts its AAA credit rating at risk. The New Zealand dollar is down slightly to 66.5 euro cents and the TWI-5 is lower at 76.1.

If you want to catch up with all the local changes from Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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Three month US Treasury bills trade through the Fed imposed 50 bps RRP floor.

A T-bill rate below the RRP really doesn't make sense, at least to the theoretical view of it. If you are a bank or even a non-bank, since the RRP is open to institutions beyond the depository framework, why would you buy a 3-month bill yielding 49 bps when there was the RRP alternative where you could likewise "lend" to the Fed at 50 bps and remain in receipt of useful US Treasury collateral? The answer is structural inequities and imbalances that have been thought all along to be of no concern.

The shallow T-bill among other things suggests repo collateral problems.

Since the last week in August 2016, repo fails have not been less than $200 billion (both “to receive” and “to deliver”) in any week. Of those fifteen weeks (thru the week of December 7), they have been greater than $300 billion eight times, including each of the past four weeks going back to the week after the election (which does not propose the election as the cause). Fails have been above the $500 billion level three times, and each of those weeks corresponding with a whole lot of Chinese money market instability (which does propose more than the contours of causation within a global monetary system).

In the 31 weeks of 2015 prior to that week in August, repo fails were more than $200 billion only three times; the highest level of fails was a spike to $285 billion the first week last March just before the Chinese starting pegging CNY for as long as they could. You could say that the repo market has become “used to” a higher degree of instability for operation over the past two years, but it is much harder to make the same claim for money markets and general economic function globally. To economists, the two are unrelated; understanding both eurodollar operations as well as how they got that way reveals that not only are the two related, one does follow closely the other.

Repo fails are only one possible form of monetary instability, but they are emblematic both of the immediate problem as well as the disease of the whole system. This is not capitalism, full stop. You can add whatever other term you like in its place, I use financialism not just because of the preference it gives to financial considerations above all else, especially economy, but also because the word embodies the balance of transformation from property law to finance law and all that has gone with it. The largest such drawback has to be not just the depression since 2007, but more so the derived inability of those who are supposed to know better, who claim they know better, but clearly don’t know any better about what has actually happened all this time. Read more

Pensions and Interest Rates; It’s Not Your Father’s Bond Market
http://www.valuewalk.com/2016/12/pensions-interest-rates-not-fathers-bon...

Thanks for that last link Stephen. A really interesting read, even though Jeffrey Snider's writing style and the subject he deals with are almost, but not quite, entirely incomprehensible. I always knew "inflation" was a wealth tax but I hadn't cottoned on how money has been stolen from the populace by sniffling politicians and predatory bankers. Fascinating. I assumed it had happened in the Napoleonic Wars in order to defeat Napoleon.

Russia and Turkey. Conflict goes back a long long way and is some of the most savage and bloodiest warfare in recorded history. On a lighter side once in the House of Lords one old peer rose to question, "if Russia was to invade Turkey from behind, would Greece help?"

And today we get the result of the electoral college vote in the US. Meanwhile...

http://www.zerohedge.com/news/2016-12-19/%E2%80%9Cwe-don%E2%80%99t-word-...