Distinction Matter - Subscribed Feeds

(Key passages featured here, for anyone who thinks those of us speaking up for truth are somehow in sin. God forbid. Link to the whole thing at the end. Wishing you a blessed Feast of St. Catherine of Siena, Doctor of the Church. St. Catherine, pray for us, we need it! -nvp)

Dearest brothers and fathers in Christ sweet Jesus: I Catherine, servant and slave of the servants of Jesus Christ, write to you in His precious Blood: with desire to see you turn back to the true and most perfect light, leaving the deep shadows of blindness into which you are fallen. Then you shall be fathers to me; otherwise not. Yes, indeed, I call you fathers in so far as you shall leave death and turn back to life (for, as things go now, you are parted from the life of grace, limbs cut off from your head from which you drew life), when you shall stand united in faith, and in that perfect obedience to Pope Urban VI., in which those abide who have the light, and in light know the truth, and knowing it love it…

Oh, human blindness! Seest thou not, unfortunate man, that thou thinkest to love things firm and stable, joyous things, good and fair? and they are mutable, the sum of wretchedness, hideous, and without any goodness; not as they are created things in themselves, since all are created by God, who is perfectly good, but through the nature of him who possesses them intemperately. How mutable are the riches and honours of the world in him who possesses them without God, without the fear of Him! for to-day is he rich and great, and to-day he is poor. How hideous is our bodily life, that living we shed stench from every part of our body! Simply a sack of dung, the food for worms, the food of death! …

Oh, wretched man, the darkness of self-love does not let thee know this truth. For didst thou know it, thou wouldst choose any pain rather than guide thy life in this way; thou wouldst give thee to loving and desiring Him who Is; thou wouldst enjoy His truth in firmness, and wouldst not move about like a leaf in the wind; thou wouldst serve thy Creator, and wouldst love everything in Him, and apart from Him nothing. Oh, how will this blindness be reproved at the last moment in every rational being, and much the more in those whom God has taken from the filth of the world, and assigned to the greatest excellence that can be, having made them ministers of the Blood of the humble and spotless Lamb! Oh me, oh me! what have you come to by not having followed up your dignities with virtue? …

Now you have turned your backs, like poor mean knights; your shadow has made you afraid. You have divided you from the truth which strengthens us, and drawn close to falsehood, which weakens soul and body, depriving you of temporal and spiritual grace. What made you do this? The poison of self-love, which has infected the world. That is what has made you pillars lighter than straw. Flowers you who shed no perfume, but stench that makes the whole world reek! No lights you placed in a candlestick, that you might spread the faith; but, having hidden your light under the bushel of pride, and become not extenders, but contaminators of the faith, you shed darkness over yourselves and others. You should have been angels on earth, placed to release us from the devils of hell, and performing the office of angels, by bringing back the sheep into the obedience of Holy Church, and you have taken the office of devils. That evil which you have in yourselves you wish to infect us with, withdrawing us from obedience to Christ on earth, and leading us into obedience to antichrist, a member of the devil, as you are too, so long as you shall abide in this heresy.

Ah, foolish men, worthy of a thousand deaths! As blind, you do not see your own wrong, and have fallen into such confusion that you make of your own selves liars and idolaters…

https://www.virgosacrata.com/saint-catherine-of-siena-letter.html

Dear Readers, as you know my interpretation of the Ukrainian “peace negotiations” is substantially different from that of the official narrative.  I decided to ask experts in Russia for an explanation of what the Russian view of the “peace negotiations’ is.  Ivan Andrianov, the director of a strategic consulting firm, has obliged me with an answer.  Here it is:

Moscow’s Conditions for Peace: Between Diplomacy and Force

By Ivan Andrianov, Founder and CEO of IntellGlobe Solutions (https://igs.expert/), a strategic consulting firm specializing in geopolitical risk analysis, international security, and political forecasting. Editor-in-Chief of GEOFOR (https://geofor.ru/), an international analytical platform focused on global affairs.

Despite numerous statements, primarily coming from Western media and politicians, today it cannot be unequivocally stated that the Russian authorities are seriously considering the possibility of freezing the conflict with Ukraine along the current line of contact.  Russian politicians, as well as public and behind-the-scenes experts view such a scenario with extreme skepticism.

If we carefully study the Russian media field and the statements of officials everything is essentially reduced to the position set out by President Putin last June at the board meeting of the Ministry of Foreign Affairs of the Russian Federation.

It envisions clearing Ukrainian troops from the territories of the Donetsk and Luhansk People’s Republics (DPR and LPR), as well as the Kherson and Zaporozhye regions, which became part of Russia in 2022 after local referendums. Putin stressed that Ukrainian forces must withdraw beyond the administrative borders of those territories as recorded on maps of the former Ukrainian SSR at the time of the Soviet Union’s dissolution.

There have been no recent reinterpretations or statements from the Russian president that would indicate a shift in Moscow’s position. This remains consistent with the Kremlin’s reiterated assertions that it is prepared to engage in negotiations with the United States regarding a peace settlement in Ukraine, or even directly with Kyiv — and notably, without any preconditions. However, the negotiation process itself is inherently protracted, and its eventual outcome remains uncertain. 

The negotiations have been ongoing for several months, and it is evident that the Russian authorities continue to adhere to their core demands. There appears to be little reason to anticipate any fundamental shift in this position, and a number of factors – both direct and indirect – serve to reinforce this assessment.

To begin with, the map of Ukraine’s partition along the Dnieper – recently published on the basis of an interview with U.S. presidential envoy Kellogg – leaves part of the Kherson Region’s right bank under Kiev’s control and has caused considerable bewilderment within Russian diplomatic and expert circles. The same reaction is provoked by the idea of handing the Zaporozhye Nuclear Power Plant and adjacent territories – currently part of the Russian Federation – over to Kiev.

Beyond that, the Russian leadership clearly takes into account public and troop moods, which is strongly influenced by reports of war crimes against civilians in the temporarily occupied areas of Kursk Region that surfaced after their liberation, as well as regular shelling of civilian targets. Official information – highly rationed – together with private-channel reports has reinforced, in the military and, more importantly, in society, a sense of righteous anger and the desire to achieve total victory over the enemy.

Sociological surveys and reports from individuals – military experts, soldiers on leave, volunteers, and so on – returning from the combat zone point to this. It is also noted that the number of people wishing to sign contracts with the Armed Forces has risen markedly of late.

One must also remember the series of terrorist attacks periodically thwarted by Russian security services, as well as those, unfortunately, carried out. Kiev regime recently assassinated Lieutenant-General Yaroslav Moskalyk, Deputy head of the Main Operations Directorate of the General Staff. As the general left his home, a car parked opposite the entrance exploded. The Russian citizen who prepared the bomb was detained the next day and immediately brought to Moscow. During interrogation he testified that he had acted on instructions from Ukrainian intelligence, for whom he was an agent, and that the device was detonated via a cellular signal from Kiev.

It was officially announced that the vehicle had stood there for over a week, suggesting that, beyond the usual aim of terrorizing the public, this act was timed to coincide with another visit to Moscow by U.S. presidential envoy Witkoff, in order to complicate the forthcoming talks.

Notably, the secretary of the Verkhovna Rada’s National Security Committee, Mr. Kostenko, acknowledged Ukraine’s involvement in the assassination of a Russian general and further stated that any ceasefire should be used by Ukrainian special services to carry out new attacks against Russia’s political and military leadership (https://youtu.be/F0iT55Gwpic?si=nayoRMWS43Lly-EW).

In this context, the majority of experts agree that under such conditions, the likelihood of President Putin agreeing to any compromise involving the cession of territories formally enshrined as part of the Russian Federation is virtually nonexistent, as such a move would be met with extremely negative reactions both among the Russian public and within the armed forces.

Among other issues, Kursk Region has just been fully liberated and can no longer be used by Kiev as a bargaining chip. Russia, on the other hand, holds territories in Kharkov and Sumy regions that are not formally incorporated into Russia, and potentially in Dnepropetrovsk Region, from which, at various points, Russian troops are only two to five miles away and are still advancing. Some experts believe that, if necessary, these areas could be traded for something in negotiations with Kiev. At the same time, there have been no official statements – or even indirect indications – from the Russian leadership suggesting the possibility of such a scenario.

Overall, there remains deep skepticism within Russia regarding the prospects of reaching a genuine agreement through negotiations with Ukraine, even with U.S. mediation.

While welcoming White House efforts toward peace, experts note the limited ability of the Trump administration to compel Kyiv and its European sponsors not only to cease hostilities but even to make a decision to begin serious negotiations. Against the backdrop of Washington’s and Moscow’s efforts, EU countries continue to give Kyiv political and financial support and to supply weapons, military equipment, and ammunition – though in recent days there has been some shift in their rhetoric regarding the possibility of initiating a negotiating process.

It is generally noted that even if the Russian and U.S. sides reach a mutually acceptable agreement (a scenario considered quite likely in Russia), it is unlikely to be implemented because of Kiev’s provocative actions, carried out with the consent and support of Europeans – primarily the British, French, and Poles. Incidentally, the talks on Ukraine in London effectively failed.

In this regard, it is important to note that, according to several military experts, Kiev is currently finalizing preparations for a major provocation along the front line – something that Ukraine’s military leadership is, in fact, not attempting to conceal.

According to Ukrainian media and bloggers, a reserve force of about 50-70 thousand people have now been formed. Given Kiev’s previous operations of a similar nature, the version suggesting that these forces will be deployed not to reinforce front-line units, but rather to carry out a politically oriented provocation appears entirely plausible. Similar incidents have already taken place, including in Russia’s Kursk and Belgorod regions. It can be also stated with high confidence that it will be reinforced by foreign mercenaries (official Russian Defense Ministry figures indicate that nearly 2,000 Poles were killed and identified in fighting in Kursk Region this year alone, not counting citizens of other countries, total amount of the foreign mercenaries killed in the Region is about 5,000).

Ukrainians also report a shortage of tanks and other armored vehicles. As for drones and ammunition for artillery and multiple-launch rocket systems, these are still available in sufficient quantities.

Taking all of the above into account, the prevailing view in Russia is that the hot phase of the Special Military Operation is likely to continue in one form or another into current and even next year. Occasional forecasts that the operation might conclude this year are still seen as “overly optimistic” and incompatible with the balance of forces on the battlefield and with how the negotiation process is proceeding.

In practice, to maintain political stability and resilience, the Russian authorities must present the populace and the security sector with something that resembles victory in one form or another, as a capitulation of the opponent is not in prospect. The configuration of such a “victory” could include the following essential points: legal recognition of Crimea, de facto recognition of the four regions as part of Russia (Russians would likely pay little heed to the legal niceties), and the lifting of sanctions. Naturally, Moscow would not be satisfied with transferring the Zaporozhe NPP to Ukraine, even under U.S. control, nor with giving up the Kinburn Spit.

Overall, this aligns with Peskov’s statements that “in Trump’s understanding of the situation in Ukraine there are many elements that coincide with Russia’s position.” However, several issues remain. These include the part of Kherson Region on the right bank of the Dnieper with the city of Kherson, and also part of Zaporozhe Region with its administrative center. As it appears at this stage, Kiev categorically opposes transferring these territories to Moscow, creating a serious contradiction. Moreover, the Kremlin is sure to demand limits on the size of the Ukrainian army and a prohibition on any European or NATO military contingents being stationed in Ukraine.

Furthermore, even if some agreement is reached, it is unclear how it would be preserved after Donald Trump’s presidential term expires, especially if the Democrats return to power – something Moscow considers quite a likely scenario.

Moreover, there is currently no clear and reliable mechanism for monitoring the observance of any potential ceasefire. This concern is further reinforced by the previous attempt at a truce during the Easter period, which demonstrated that, even if the Kiev authorities expressed an intention to engage in a ceasefire, they exercised limited control over their military forces, who did not consistently comply with the orders issued. 

It will be interesting to see how the ceasefire is observed in May, especially since Kiev now has ample time to prepare.

Returning to Russian society, most experts agree that it expects the fulfillment of the demands articulated by President Putin prior to the launch of the Special Military Operation, namely:

• Demilitarization, that is, as far as we can judge now, a serious reduction in the size of the Ukrainian Armed Forces;

• Denazification, that is the complete dismantling of Ukrainian authority and its replacement by military or diplomatic means;

• Elimination of the NATO threat, which would presumably include recognition of the four new regions and the points mentioned above;

• Retention by Russia of the territories incorporated after the referendums;

• The lifting of sanctions remains a key expectation among both Russian society and business circles.

This is the minimum program, while the maximum would be victory over Ukraine in the classical sense of the word – that is, Kiev’s capitulation. The Kremlin surely understands this as well.

Regarding the ceasefires – which the Russian authorities have now initiated for the second time, effectively on a unilateral basis – they appear to serve several purposes. First, there is the humanitarian dimension. President Putin’s emphasis on humanitarian considerations is subject to both criticism and support: some believe in the sincerity of this approach, others do not; yet it remains a factor that is difficult to ignore, although a number of experts criticize such initiatives.

Second, it appears that Moscow is attempting to leave itself a fallback option if negotiations on Ukraine become completely deadlocked or fail altogether. The Kremlin remains open to a diplomatic resolution of the conflict, but if the proposed terms are deemed wholly unacceptable – and if temporary ceasefires are systematically violated by the Kyiv authorities – this could provide the Russian leadership with the necessary justification to withdraw from negotiations and intensify military operations on what it would argue are legally defensible grounds. Judging by the pressure reportedly being applied by the U.S. administration on President Zelensky, it seems that the White House is also aware of this dynamic.

Therefore, although the Russian authorities are not opposed to resolving the conflict by diplomatic means, Moscow today strongly doubts the realism of such a scenario, and the reason is not Trump himself or the work of his administration, but who will come to power afterward. And of course we must not forget that Kiev and the EU are doing everything today to ensure no agreements are reached, so it is logical to expect that even if an agreement is achieved, it will inevitably be derailed. Making major concessions in such a situation would, as it seems, be political suicide for Russian authorities. In any case, there are definite signals to that effect.

Some good things are being reported by way of rumor and wishful thinking, perhaps.

One commentator says this which I think is a good thing as they would be more of Pope Benedict’s school of thought of inner healing, clear teachings, beautiful liturgies, beautiful papacy and orthodoxy:

Prominent among these emeritus kingmakers are names like O'Malley, Ruini, Piacenza, Bagnasco, Cipriani, Antonelli, and Onaiyekan. They are there, talking to everyone, listening more than talking, and generating a kind of consensus that is not based on ideology, but on memory. They [the younger ones] are not looking for a new Pope with a program, but with solidity.

The Jesuit rag, America, has stated, and with a little anxiety, no doubt, that the buzz words (code words) in the pre-conclave discussions are “clarity, confusion and unity.” Obviously, the former Pope Francis never provided true clarity, he sowed confusion and undermined unity.” All of these things are the antithesis of what the papacy should do.

Even post-Catholic and Jesuit, Fr. James Martin, voices the concerns of those who want the LGBTQ+++ ideology enshrined in Catholic doctrine and practice. They are filled with anxiety that the next pope will reverse the processes towards a post-Catholic heretical new morality as it concerns sex and anything goes that the former Pope Francis initiated with loose talk and blessing same sex couples actively engaged in various forms of sodomy and other sexual disorders and gender dysphoria. Who is the Church to judge?

And I am reading that Cardinal Parolin is still considered a front runner. I think he will be a calming influence in the Vatican and the Church and could bring some healing in terms of the chaos the former Pope Francis caused. 

However, the Pillar reports this morning that a Chinese diocese has just named a new bishop while the Church has no pope to confirm it. 

This is what Parolin caused. This has angered many Asian bishops and clergy and laity. Pope Francis approved of this kind of thing.

So, I am not so sure Cardinal Parolin will be elected, but we’ll have to wait and see. 

As the world’s most exclusive club prepares to elect the new pope, they are in the midst of an immediate test of just how seriously they will take the issue of clerical sexual abuse due to a Peruvian cardinal who is participating in pre-conclave meetings despite abuse allegations against him.

Peruvian Cardinal Juan Luis Cipriani, 81, is not eligible to vote in a conclave due to his age, while in 2019 he was subject to restrictions on his ministry imposed by Pope Francis over allegations lodged a year prior that he had sexually assaulted an adolescent boy.

Those sanctions, which Cipriani accepted and signed off on just before turning 75, apparently barred him from the following: wearing his red cardinal robes and other symbols associated with the cardinalate, returning to Peru without permission, making public declarations, and participating in a future conclave while he was still of age to do so.

Cipriani has repeatedly denied the allegations, which went public in January 2025 when Spanish newspaper El Pais revealed that Cipriani’s ministry had been restricted after an apparent victim complained to the Vatican in 2018, and that another similar complaint was lodged in 2002, but had apparently come to nothing.

These restrictions were confirmed by Vatican spokesman Matteo Bruni, who in January said Cipriani in 2019 had “imposed a penal precept with some disciplinary measures” and which, Bruni added, “appear to still be in force.”

These measures, Bruni said, were “related to his public activity, place of residence and use of insignia”, and were “signed and accepted” by Cipriani himself.

Despite these restrictions, Cipriani has repeatedly violated them, traveling to Lima in January to receive a prestigious award from the city’s mayor, Rafael Lopez Aliaga, and issuing several public statements over the past two months denying the allegations against him, while accusing Pope Francis of undue process, and demanding that the Peruvian bishops rectify statements confirming the restrictions on his ministry.

He has also disobeyed the order not to use his cardinal insignia and symbols, showing up in his red cardinal robes to pay respects to Pope Francis on 24 April, while the late pontiff was lying in state, and at a Vespers service for the Pope held 27 April in the Basilica of St. Mary Major, where the body of Pope Francis is buried.

Cipriani has also been seen leaving the Vatican’s Paul VI audience hall, where pre-conclave general congregation meetings are taking place, with the gaggle of other cardinals present.

Vatican spokesman Matteo Bruni said the issue of clerical abuse was discussed by cardinals on 28 April as part of a discussion on the many challenges the Church faces.

When asked about Cipriani’s participation, Bruni said that the Vatican constitution governing conclave rules, Universi Dominici Gregis, made it clear that all cardinals without personal impediments such as illness were summoned to participate.

While the document does not include any specific rules barring prelates accused of sexual abuse from participating in a conclave or pre-conclave meetings, it does include provisions allowing cardinals to handle urgent matters as a collective body.

Point six of the constitution says, “should there be a problem which, in the view of the majority of the assembled Cardinals, cannot be postponed until another time, the College of Cardinals may act according to the majority opinion.”

The third paragraph of point seven in the document says: “During the time of the election, more important matters are, if necessary, dealt with by the assembly of the Cardinal electors.”

It thus falls to the cardinal electors, presumably under the leadership of the Dean of the College of Cardinals, Italian Giovanni Battista Re, to determine whether Cipriani ought to continue attending the general congregations.

Asked about Cipriani’s participation again during an April 29 briefing, Bruni did not respond to observations that Cipriani was disobeying orders from Pope Francis, but referred to his January statement in which he confirmed the restrictions on Cipriani’s ministry, and that they were still in effect.

The mushrooming controversy over Cipriani’s participation comes after another question of attendance at the conclave involving Italian Cardinal Angelo Becciu, who was stripped of his rights and duties as a cardinal by Pope Francis in 2020 for alleged financial crimes and found guilty and sanctioned for these crimes by the Vatican’s court in 2023.

Becciu had initially, when general congregations began, argued publicly that he was never banned from participating in a conclave; however, he has withdrawn after reportedly being shown documents signed by the Pope confirming it was his will that Becciu should not participate.

The question that the cardinals now face is what to do, if anything, about Cipriani, given the allegations against him and his blatant disobedience of the restrictions imposed on him by Pope Francis.

The Peruvian bishops earlier this year confirmed the existence of a penal precept against him, presumably incurring sanctions for disobedience, but it is unknown what these sanctions involve, and who might impose them during the sede vacante before a new pope is selected and assumes leadership of the Catholic Church.

Although Cipriani is not an elector, his presence at general congregations has caused alarm among victims and activists who believe his presence is an insult to survivors and that it is also hypocritical given the apparent concern over the clerical abuse scandals among the College of Cardinals.

Multiple victims, experts and advocacy groups have condemned his presence, with advocacy group Bishop Accountability saying on 28 April that Cipriani’s participation “reassures abusive bishops of their colleagues’ continuing support even as it sends a distressing message to abuse victims. It revives the haunting idea that the Church is safer for accused clergy than for children.”

Many observers note that on the whole, while Pope Francis made his share of mistakes over the clerical abuse issue, he ultimately tried to do the right thing, and decisions such as defrocking former cardinal and priest Theodore McCarrick and suppressing the Peru-based Sodalitium Christianae Vitae marked significant progress on this front.

The case of Cipriani marks the first real litmus test since the Francis papacy came to an end as to how the current body of cardinals will respond to the Church’s abuse crisis, and what sort of action can be expected when it comes to high-ranking, influential prelates who face allegations.

It will be especially noteworthy if a cardinal accused of and punished for financial crimes was forced out of the conclave, while a cardinal accused of and punished for sexual crimes against minors is not.

If paragraphs six and seven of Universi Dominici Gregis are applied in this case, the cardinals can collectively make a decision about his participation. Presently, they don’t appear to be doing that.

RELATED: Controversy erupts as sanctioned cardinal attends pre-conclave meetings

Photo: Peruvian cardinal Juan Luis Cipriani lifts a blessed host during the celebration of the Corpus Christi in Lima’s main square (CRIS BOURONCLE/AFP/GettyImages)

The post Cipriani controversy tests cardinals’ resolve on clerical abuse ahead of conclave first appeared on Catholic Herald.

The post Cipriani controversy tests cardinals’ resolve on clerical abuse ahead of conclave appeared first on Catholic Herald.

Above: a photo op with the Synod on Synodality. Source. The Scene: Several months have elapsed since the death of the pope. After days of debate over who might become the next pontiff, speculation has turned to when the conclave will be over. What is taking so long? Rumors abound: might there be fierce infighting among the cardinals? Might the churches in various geographic territories be…

Source

Our recent article, Swaps and Basis Trades Warn Of Mounting Liquidity Problems, touched on negative interest rate swap spreads as an omen of potential liquidity problems. To stay on the topic of liquidity, we didn’t provide much detail about swaps. Nor did we discuss their importance to the financial system. Accordingly, we ended the discussion as follows:

Given the complexity of interest rate swaps and their importance to the plumbing of the entire financial system, we will discuss them further in a coming article.

Shockingly, given that we thought readers would find interest rate swaps dull or wonky to most readers, we have received a few emails asking for more information. Given the importance of liquidity to all markets and how interest rate swap spreads are a good liquidity barometer, it's worth giving you that “coming article” now.  

The Interest Rate Swap Markets

For those who didn’t read our prior article, we share context about the size of the interest rate swap markets.

For a proper framework, the approximate total market cap of the U.S. stock market is $50 trillion, and the global stock market, including the U.S., is about double that. Furthermore, the global bond market is approximately $133 trillion.

As shown below, the notional value of all outstanding interest rate swaps is approximately $575 trillion or more than double the combined value of the global bond and stock markets!

What Are Interest Rate Swaps?

Interest rate swaps are derivative contracts in which two counterparties agree to swap a series of cash flows over a set schedule for a defined term.

Most commonly, one party agrees to make periodic payments at a fixed interest rate and, in return, receives floating-rate payments. The counterparty receives the fixed payments and pays the floating rate.

Dealers quote interest rate swaps as either the yield on the fixed rate side of the agreement or the difference between the fixed rate yield and that of an equivalent duration U.S. Treasury bond. The latter, which is more common, is called the swap spread.

The floating-rate leg is commonly based on the daily Secured Overnight Financing Rate (SOFR). SOFR, the recent replacement for LIBOR, is the interest rate banks pay or receive from each other to borrow or lend money overnight, with U.S. Treasury securities serving as collateral. Because US Treasury assets secure such overnight borrowing, SOFR is essentially a risk-free overnight interest rate. SOFR typically trades slightly below the Fed's targeted Fed Funds rate. Fed Funds are unsecured overnight loans between banks; thus, they involve some credit risk.   

It's worth sharing that there are many other types of swap contracts. Here are a few of the more complex agreements, courtesy of Grok.

Digging In Deeper

To better appreciate a “plain vanilla” interest rate swap contract, we analyze a hypothetical ten-year annual paying interest rate swap. As we were writing this article, the ten-year swap spread was trading at -26 bps. The swap rate was 4.14%, 26 basis points less than the ten-year UST (4.40%). 

Accordingly, the pay fixed side (payer) will pay 4.14% annually for ten years. In return, they receive the daily compounded SOFR rate. Conversely, the other counterparty, the receiver, will receive 4.14% annually and pay the daily compounded SOFR rate. Instead of payments being made by both counterparties, payments are netted out. Thus, only one party makes a payment at each payment interval.

The payment periods can be monthly, quarterly, semi-annually, or annually. Interest rate swaps can be tailored to the demands of both counterparties. This can include the amount and type of collateralization underlying the contract. Furthermore, it’s common to add basis points to the receiving side of the swap to offset credit concerns. For instance, the agreement may have a swap spread of -26 bps and the SOFR rate plus 12 bps.

When pricing a swap, the fixed rate is determined by calculating the forward value of the daily SOFR overnight rates over the entire swap term. As a result, both sides are entering into a contract based on the current market pricing of expected daily overnight rates for the next ten years.

The illustration and definition below are courtesy of Pimco:

At the time a swap contract is put into place, it is typically considered "at the money," meaning that the total value of fixed interest rate cash flows over the life of the swap is exactly equal to the expected value of floating interest rate cash flows.

Who Uses Swaps And Why?

Interest rate swaps are speculative vehicles and vital risk management tools. We share details of how and why some of the largest swap traders use them. However, plenty of other types of participants and users exist.

Speculators:

Unlike buying a bond with cash, an interest rate swap is a derivative contract. Thus it requires only a small amount of up-front cash or collateral. Accordingly, a speculator can effectively make a leveraged bet on interest rates, requiring little capital.

For example, an investor with $100 million can buy a ten-year bond. By doing so, they would forgo the money market yield on the cash but earn the bond return. Effectively, they will receive the bond's fixed rate payment and pay, via opportunity cost, the money market yield.

Alternatively, instead of using cash, the investor can enter a swap agreement to receive a ten-year fixed yield and pay the floating rate. Not only would the return profile versus the opportunity cost (money market rates) look like the cash-bond investment, but after posting a small amount of collateral, the speculator would still have most of the $100 million to invest in something else. They could also post the entire $100 million of cash as collateral and enter into a much larger interest rate swap agreement. Doing so would give the investor much more exposure to bond yields.

Due to the inherent leverage in swaps, many speculators prefer interest rate swaps over bonds. The benefit of leverage also helps explain why some investors buy swaps at a negative swap spread.

Corporate Treasurers:

Corporations use interest rate swaps to convert floating-rate debt payments into long-term fixed payments synthetically. For example, a company enters a pay-fixed rate/receive-floating-rate swap contract. Alongside the agreement they will issue floating-rate debt or a series of short-term bonds matching the floating-rate component of the swap.  

The floating-rate debt makes them a floating-leg payer, offsetting the receive floating portion of the swap. What's left is the pay-fixed leg of the swap. The series of transactions effectively transforms floating-rate debt into fixed-rate debt.

Since credit risk increases with time, most companies can borrow more cheaply and find better liquidity for shorter-maturity paper. Thus, a swap combined with a series of short-term debt issuances, or a floating-rate bond, allows them to take advantage of short-term market pricing yet lock in a fixed rate for an extended period.

Banks/Interest Rate Risk Management:

Banks are among the most active users of interest rate swaps. Their risk management teams constantly aim to match the duration of their fixed-rate assets (loans and fixed-income securities) with the duration of their debt and deposits. Given that banks tend to use 10x leverage or more, duration mismatches between assets and liabilities can introduce substantial interest rate risk.

For instance, a bank with a weighted average duration of five years on its assets and three years on its liabilities is running a two-year duration gap. To help shrink the gap, the bank could enter into a five-year pay-fixed and receive floating-rate swap. Paying the fixed rate is the equivalent of shorting the bond market. Thus, they are reducing the duration of their assets and, therefore, closing the duration gap. 

As an aside, while interest rate swaps help manage interest rate risk, Credit Default Swaps (CDS), a topic for another article, help banks and others manage credit risk.

Why Are There Negative Swap Spreads?

With an appreciation for interest rate swaps and some motivations driving the most prominent players to use them, let's discuss why swap spreads are currently negative. To reiterate, the swap spread is the difference between the longer-term fixed leg of the trade and an equivalent duration Treasury note or bond.

The graph below shows that the ten-year swap spread is at its most negative level in the last five years. Why should the pricing differ by that much if the credit risk and interest rate risk of interest rate swaps and U.S. Treasuries are very similar?

Negative Spread Narratives

Today, there are three popular narratives that we believe are the predominant forces accounting for the negative spread:

• Liquidity/Regulatory
• Deficits
• Speculators Seeking Duration

Liquidity

Banks must hold capital against bond holdings. Thus, when liquidity becomes scarce in volatile markets, they are more likely to buy or sell interest rate swaps versus bonds, as the exposure and impact on their income statements are similar, but the capital requirements are less onerous.

Moreover, it's often easier and less costly to make a large trade in the swaps market than in the bond market.

In Swaps And Basis Trades Warn Of Mounting Liquidity Problems we wrote: 

Banks are forced to sell Treasury securities to raise needed capital, i.e., increase their liquidity. Doing so creates a duration mismatch between their assets and liabilities. Therefore, to manage interest rate risks, they enter into interest rate swap agreements to maintain the duration of their assets. As the demand to receive the fixed rate mounts, the swap rate (rate on the fixed-rate leg of the swap) trades lower. Today, it sits below Treasury rates, thus at a negative spread to Treasuries.

Due to capital requirements, liquidity, and trading costs, paying a premium for swaps, i.e., a negative spread, can make sense.

Deficits

We asked a contact at a significant derivatives dealer why swap spreads were getting more negative and received the following email answer:

"Everyone thinks/knows that the fiscal deficit will get worse. Trump's election did nothing to dissuade that. Higher deficits…more U.S. Treasury issuance…higher U.S Treasury yields."

When asked about other factors, he opined that his bank thought 90% of the swap spread discount versus Treasury securities was deficit-related.

Essentially, our friend believes investors are concerned that higher deficits will result in more debt issuance. Therefore, investors are pushing yields on Treasury securities higher as they demand a "term premium" to protect them from the extra supply. Swap levels are not directly impacted by greater debt issuance.

Jeff Snyder's Opinion – Duration Buying

Next, we watched a YouTube video of Jeff Snyder, an expert on the interest rate swap markets. He states the following:

"All swaps tell us is that the market is strongly forecasting rates to go down and stay there. We have to fill in the blanks for what that might mean, and there is no one scenario which would fit. This could be a recession, but even that can lead to multiple different near-term outcomes which eventually converge in the future the swap market has projected. The global economy has already moved in the way swaps were pricing despite so many doubts - including many who said inflation would force rates forever higher."

Jeff argues that speculators are buying duration via the swap market. While the fixed rate on swaps is lower than similar duration U.S. Treasury yields, swap payers need little cash, as we noted earlier. Thus, the benefits of the leverage more than offset the lower yield. Furthermore, liquidity in the interest rate swap markets is plentiful.

Summary

Oftentimes, liquidity problems show up in the more popular stock and bond markets well after they expose themselves in other markets, such as interest rate swap agreements. As we graphed, interest rate swap spreads have declined into negative territory for over three years.

If liquidity were plentiful, and thus leverage cheap and easy to attain, why would someone agree to receive 26 basis points less via a swap than a cash bond? 

The post Interest Rate Swaps: Plumbing Of The Financial System appeared first on RIA.

Does anybody in the hierarchy still believe that not all dogs and people go to Heaven…at least immediately? Following the announcement of John Paul II’s death, apparently all Holy Fathers now go directly by courtesy line to “the home of the Father.” And there have already been murmurings of “santo subito” about Francis. In his funeral homily, Cardinal Re asked Francis to “bless the whole world…

Source

Following the passing of Pope Francis, I have been disturbed not by the ensuing commentary but by some of the callousness and cruelty that emerged from certain ideological camps. After I made a simple and respectful post on social media about his passing, I encountered a series of unhinged, dehumanizing responses. Some came from self-proclaimed Christians, including Catholics…

Source

One of the interesting things to happen after Pope Francis died is that the movie Conclave, which came out last year, has had millions of new viewers online.

The film directed by Edward Berger – and starring Ralph Fiennes, Stanley Tucci, John Lithgow and Isabella Rossellini – looks at the intrigue and infighting occurring during the election of a new pope.

Although the movie isn’t very accurate, it highlights the fact that conspiracy theories abound when a conclave is about to take place.

A conclave brings together the cardinals under 80 who are allowed to vote for a pope. Famously, they are mostly sealed in the Sistine Chapel, and if a pope is elected, white smoke will appear at the Vatican. If the pope isn’t elected, then black smoke is seen in the air. A cardinal needs a two-thirds majority to win, although the current regulations allow that to reduce to 50 percent plus-one after the process starts taking too long.

On Monday, it was announced the conclave would start on Wednesday, 7 May. Leading to new conspiracies arising.

Raymond Arroyo said on X that the “delayed start suggests that the cardinals are asserting their authority over the Vatican insiders who were hoping for an expedited conclave”.

Austen Ivereigh, famous for his work on Pope Francis, responded by saying, “What tosh.”

“Every cardinal I’ve spoken to says they need more time to get to know other. In the end they’re only starting one day later than regulations allowed, and four days before they had to. The conclave is expected to last the usual two days. Do not trust Arroyo’s fictions,” he said.

Then Ed Condon of The Pillar, and a canon lawyer, threw in his remarks.

“I’m seeing a lot of nonsense about May 7 being a ‘delayed start’ for the conclave and some kind of procedural power play. That’s just rubbish. UDG states ‘from the moment when the Apostolic See is lawfully vacant, fifteen full days must elapse before the conclave begins,’” he wrote on X.

However, Arroyo points out that Pope Benedict changed the law, stating that the conclave could begin earlier, if the voting cardinals had all arrived in Rome.

“I thought my recollections were correct. Benedict XVI DID amend the rules of conclave allowing the cardinals to move the start of the conclave up if all the electors are present. So the intention of some to start the conclave on May 4 or 5 was a possibility. But I am relieved they have more time to talk and get acquainted,” he wrote.

This comment was made on the day it was announced when the conclave was taking place: now journalists will be scouring the city of Rome – and the neighbouring towns – to see who is speaking to whom, which person is paying for the wine, and what plots are supposedly taking place.

Are the progressives on top? Will the conservatives stage a comeback? Will the Church see a second pontiff from outside Europe? These stories are usually made up, or at least “configured” with limited data.

This is not to say the cardinals are not speaking about who they want to be the next pope; of course they are. But Pope Francis was 88-years-old when died, so any real intrigue has been taking place for years, and anything taking place now is just adding in the details.

Most of the talks aimed at the “undecided” – and there are many cardinals unsure of who they want to succeed Francis – are taking place publicly, in the formal reflections given to the cardinals and the homilies at the Novemdiales Masses being said for the repose of the soul of Pope Francis.

So take the media hype with a grain of salt.

With that in mind, I will just add my two cents on why I think the conclave is starting on 7 May .

May 1 is one of the biggest holidays in Italy; the city of Rome shuts down. This year, it is on a Thursday, meaning that before the pontiff died, many Italians had already decided to take a vacation day on the Friday and Monday following – this gives them a five-day weekend while only using two vacation days.

Of course, Vatican employees and reporters had to cancel their days off, but other city workers – including many providing food and hotel supplies – aren’t going to be working. Tuesday, 6 May, will be a return to normality, but probably a slow return. A conclave start on 7 May was the only way the cardinals could ensure a suitable dinner that first night.

But again, I might just be pouring some salt on the story.

RELATED: Bishop Barron is right: Catholics will run a mile from ‘Conclave’

Photo: Religious dress in a store near the Vatican on April 28, 2025 in Rome, Italy. (Photo by Dan Kitwood/Getty Images)

The post Stories of intrigue and secret plots gather pace as conclave approaches first appeared on Catholic Herald.

The post Stories of intrigue and secret plots gather pace as conclave approaches appeared first on Catholic Herald.

Each day between now and the May 7 conclave to elect a successor to Pope Francis, we are running a profile of a different “papabile”, the Italian term for a man who could be pope. There’s no precise way to identity these contenders; it’s mostly a matter of weighing reputations, positions held and influence wielded over the years. There’s also certainly no guarantee one of these candidates will emerge wearing white; as an old bit of Roman wisdom has it, “He who enters a conclave as a pope exits as a cardinal.” But these profiles will feature the leading names drawing buzz in Rome right now, at least making it very likely that they will get a look. Knowing who these men are also suggests issues and qualities other cardinals see as desirable heading into the election.

It’s one measure of how young Luis Antonio “Chito” Tagle was when he burst onto the scene as a cardinal in 2012 that he was a contender for the papacy in 2013 but seen as far too young, and now 12 years later he’s again a serious possibility but in some circles his age, 67, still counts against him.

Given that the last two popes were elected at the ages of 78 and 76, one understands the reaction, but that’s not stopping a wide swath of the chattering classes from hailing the Filipino prelate – who reportedly prefers to be called by his nickname “Chito” rather than by his clerical title – as tanto papabile, meaning a highly serious candidate.

Paradoxically, however, as often as Tagle is touted for the papacy by media outlets, external commentators and ardent fans, he’ll at the same time be dismissed by an insider, insisting that he lacks the gravitas for the office and that his Vatican career has had uneven results.

No matter how you slice it, though, the prospect of the “Asian Francis” taking the reins of the Catholic Church is an intriguing prospect.

Born in Manila in 1957, Tagle went to seminary in Quezon City and later did his doctoral work at The Catholic University of America in Washington. He also studied in Rome before returning to the Philippines to serve as a pastor and teacher.

Tagle’s doctoral dissertation at Catholic University, written under Fr. Joseph Komonchak, was a favorable treatment of the development of episcopal collegiality at the Second Vatican Council. Moreover, Tagle served for 15 years on the editorial board of the Bologna, Italy-based “History of Vatican II” project founded by Giuseppe Alberigo, criticised by some conservatives for an overly progressive reading of the council.

From the beginning, Tagle was seen as a rising star in the Asian church, evidenced by his appointment in 1997 to the Vatican’s main doctrinal advisory body, the International Theological Commission. (The story goes that when then-Cardinal Joseph Ratzinger introduced Tagle to Pope John Paul II as a new member, Ratzinger jokingly assured the pope that the youthful-seeming Filipino had, in fact, received his first Communion.)

Tagle was named bishop of the Diocese of Imus in 2001, where he became famous for not owning a car and taking the bus to work every day, describing it as a way to combat the isolation that sometimes comes with high office. He was also known for inviting beggars outside the cathedral to come in and eat with him. One woman was quoted describing a time she went looking for her blind, out-of-work, alcoholic husband, suspecting she might track him down in a local bar, only to find that he was lunching with the bishop.

Here’s another typical story. Not long after Tagle arrived in Imus, a small chapel located in a run-down neighborhood was waiting for a priest to say Mass at around 4 a.m. for a group mostly made up of day laborers. Eventually, a youngish cleric showed up on a cheap bicycle, wearing simple clothes and ready to start the Mass. An astonished member of the congregation realised it was the new bishop and apologised that they hadn’t prepared a better welcome. Tagle said it was no problem; he got word late the night before that the priest was sick and decided to say the Mass himself.

Much the same reputation followed Tagle to Manila, where he also became known for a broadly centred approach to matters of policy. He took strong positions against the Philippines’ Reproductive Health Bill, which included promotion of birth control. Yet his towering social concern was defence of the poor, and he also displayed a strong environmental streak.

There’s no doubt of Tagle’s charisma and ability to move crowds. He’s also a very 21st-century prelate, a sort of Cardinal-Influencer with a vast social media following – he’s got an active X account and a Facebook page, where he can be seen, among other things, swaying and gyrating to traditional Filipino dances.

Recently the right-wing LifeSite News dug up an old video of Tagle crooning the John Lennon classic “Imagine”, blasting him for singing what it termed an atheist anthem. (For the record, the clip does not actually include him singing the key line, “imagine there’s no heaven/it’s easy if you try/no hell below us/and above us only sky.”) The reaction illustrates that for every person charmed by such scenes, there’s someone else, possibly including among Tagle’s fellow cardinals, who finds them unbecoming.

In December 2019, Pope Francis named Tagle to head the Congregation for the Evangelisation of Peoples, effectively the Vatican’s missionary department. Tagle and then-Cardinal Jorge Mario Bergoglio had gotten to know one another at the 2005 Synod of Bishops on the Eucharist, and clearly the Pope wanted the charismatic Filipino cardinal in the mix of his administration.

At around the same time, Tagle had been elected president of Caritas Internationalism, the Rome-based federation of Catholic charities around the world. Taken together, the two roles seemed to position him to be the de facto leader of the Church across the developing world in the name of the Pope.

Alas, things didn’t quite work out that way. Many observers found his tenure at the congregation, now the Dicastery for the Evangelisation of Peoples, to be uninspired, and his oversight of Caritas led to an actual meltdown in 2022 when he was removed as president and the entire leadership team basically fired.

What’s the case for Tagle as pope?

To begin with, he’s an effective communicator and evangelist at a time when everyone agrees that mission, meaning attracting people to the faith, has to be a top priority for the next pope. His simple, natural style, coupled with his gift for playing to crowds and stirring both laughter and tears in almost equal measure, would make him an immediate star on the global stage.

In addition, Tagle would also put a face and a voice on the dynamism of the Catholic Church across the developing world, including in Asia, which with 23 cardinal electors will be an important force in this conclave. At a time when almost three-quarters of the 1.3 – 1.4 billion Catholics in the world live outside the West, at least some cardinals might find the idea of an Asian pope attractive.

The fact that Tagle is of Chinese descent could be an asset in terms of the Vatican-China relationship, though it may also be of concern to some of the other Asian cardinals already a bit leery of Chinese hegemony in the region.

The case against?

To put it bluntly, there are a number of observers in the Church, including not a few cardinals, who privately believe that Tagle simply isn’t ready for prime time. They regard his public persona as superficial, and behind the scenes they say he’s had six years now to prove he can do the heavy lifting of real leadership in the Vatican without much to show for it.

That’s a special concern in a time when most cardinals feel the next pope has to be a strong governor, capable among other things of addressing the severe financial crisis facing the Vatican in the form of unfunded pension obligations and other deficits. If Tagle couldn’t effectively run Caritas, they may wonder, what hope does he have with the entire Vatican to oversee?

In addition, more conservative cardinals probably also don’t care for Tagle’s theology and politics, which they find a bit too much left-of-centre. Basically, the indictment for this group would be that a vote for Tagle is really a vote for Pope Francis round two, only expressed in Tagalog rather than the Porteño dialect of Argentine Spanish.

Those concerns may be amplified by the prospect that, at 67, one can easily imagine him sitting on the Throne of Peter for twenty years, which may strike some observers as simply too long for comfort.

Whether Tagle actually has a serious shot at the papacy remains to be seen. Merely contemplating the prospect, however, all by itself, is an education in the riotous global diversity of Catholicism on the early 21st century.

RELATED: Cardinal Müller warns Church risks split if ‘orthodox’ pope not chosen

Photo: Cardinal Luis Antonio Tagle. (Credit: Vatican Media, via Crux.)

The post Papabile of the Day: Cardinal ‘Chito’ Tagle first appeared on Catholic Herald.

The post Papabile of the Day: Cardinal ‘Chito’ Tagle appeared first on Catholic Herald.