RE: LeoThread 2026-02-01 19-59
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#askleo
Explain the pressures and stresses the Eurodollar system has been experiencing since 2016.
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**Since 2016, the Eurodollar system—offshore USD deposits (~$13T peak)—has faced structural decline and liquidity strains.[1]
Key pressures:**
• LIBOR phaseout (2023): Scandals eroded trust; futures transitioned to SOFR (secured, domestic), shrinking unsecured offshore liquidity.[1][2]
• Post-GFC regs (Basel III): Higher capital/reserve needs tightened $ funding; FX basis swaps widened from 2014.[3]
• Rate hikes (2022+): US rates >5% spiked EM debt costs; dollar strength pressured $10T+ non-USD debt.[4]
• Crises (2020 COVID): Funding squeezes hit EMs (e.g., Indonesia); Fed swaps eased but exposed vulnerabilities.[5]
Usage dropped consistently; uninsured risks amplify stress.[6]