Portuguese 5Y bond yields just broke to Euro-era record levels at over 22.5% taking then up to the same levels at which Greece traded just four short months ago. Ironically, Bloomberg notes that:
- *ECB SAID TO BE BUYING PORTUGUESE GOVERNMENT BONDS TODAY
which appears to be wholly focused on the short-end, as the long-end is blowing out. It also seems that many want to talk about the CDS blowing out but as we have seen time and again with Portugal (since its bond market is less liquid than the already thin CDS market), bonds are underperforming notably as real money exits in a hurry. While comments are plenty that Portugal is smaller and is not Greece, they have (relatively speaking) notable maturities within the next few months (EUR 10bn by May2012) that will not be able to roll in the private markets and then a large lump of over EUR 10bn in June.
There is a reason why we mock the IIF's perpetual optimism that a deal will be done any. minute. now at every possible opportunity. Especially when after all of last week, we kept hearing over and over from every source imaginable just how "guaranteed" a deal is before today's Euro Council meeting began. Well, surprise, surprise, the red carpet clownshow is on, and there is no deal. And it gets worse. According to Bloomberg, European leaders won’t finalize Greece’s second aid program today because talks with banks over debt reduction aren’t completed, German Chancellor Angela Merkel said. Leaders are also awaiting an assessment of Greece’s current needs and the status of its economic reforms, Merkel told reporters before a European Union summit in Brussels today. Said otherwise, that 150 pip surge in the EURUSD, which as was said was very transitory, has faded. Even more amusing, Stolper is once again out of the money on both his latest EURUSD call, and his Sunday long USD call. Simply stunning.
For better or worse, all of last year had Merkel and Sarkozy on the same page. Saying whatever it took to calm markets. They didn’t really spend a whole lot of time worrying about their own citizens. With the elections coming up, expect more negative and potentially confusing headlines to come out of Europe. Does Germany really want to control the Greek budget process? Sarkozy wants to “unilaterally” impose a financial transaction tax in France by August. That is the problem, what the politicians have to say to appease the voters is not always what the financial markets want to hear. The EU continues to try and perpetrate the myth that Greece is unique and that Portugal is different. Portugal has the benefit of being smaller, but they are next in line for principal write-downs (or whatever they are calling haircuts now).
For months now we have been following US naval developments and deployments in the Arabian Sea, which serve one purpose and one purpose only - to demonstrate US military strength in the Straits of Hormuz region and to keep Iranian 'offensive passions' subdued. Yet never has the US had a total of three aircraft carrier groups in the vicinity, always topping out at 2 in the Bahrain-based Fifth Fleet, most recently these being the CVN-70 Vinson and CVN 72 Lincoln, with a third boat present merely until a rotation in or out of the theater of operations was complete. That is about to change, and with it the prevailing price of Brent, which we are confident is about to take a new step wise price higher as the US makes it all too clear what the endgame is, because as Naval Today reports, the "US navy to deploy third carrier group to Persian Gulf", probably the CVN-77 George H.W. Bush which departed Norfolk two weeks ago according to the most recent naval update, or any other Norfolk-stationed aircraft carrier: there is a wide selection to chose from.
The clown procession begins. Watch as the head Euro-clowns give their canned remarks that all is well, and that a grand resolution will come any minute now. In the meantime, Brussels caterers rejoice at the thought of going public to a higher valuation than FaceBook.
While the number is likely influenced by the Chinese Lunar New Year, property consultant Shanghai UWin Real Estate Information Services Co. released an update on the Chinese new home sales market which is, to say the least troubling. Specifically, according to UWin, Shanghai new home prices fell 40.96% in the week ended January 29, compared to the previous week, to 16,144 yuan/square meter. If correct, it means that local homeowner violence is about to come back with a vengeance, as happened back in October when property developer office were stormed by angry mobs of home purchasers who saw an implosion in the indicated values of their purchases. Furthermore, not only has the market stalled, but it appears to be frozen, with just 4,400 square meters of new transactions closing, or an 89.21% drop on the week. And while the holiday has an impact, the volume is 36% of the 7 year average for Chinese holidays, so there is more in play here than just a seasonal grind. So just like the Baltic Dry where everyone is expecting a surge "any minute now" that the Chinese new year is over, nervous China bulls will have this new vertical to keep track of and make sure that it is merely a blip, as the alternative is a full blown Chinese housing bubble collapse.
The week has started with a general risk averse tone as market participants remain somewhat disappointed in the progression of the Greek bond swap talks in spite of Venizelos, the Greek finance minister, suggesting that a compromise can be struck this week. The latest article writes that Troika believes Greece will need EUR 145bln of public money from the Eurozone bailout rather than the EUR 130bln originally planned. This however, has been swiftly dismissed by German lawmakers. In terms of the European equity market it is the banking stocks which have taken the brunt of the selling pressure which in turn has remained a supporting factor for higher prices in European fixed income futures. Meanwhile in the short end, Euribor, is trading higher following the release of the daily fixes which resumed a trend of sizeable declines in the 3-month fix. In other news, Italy came to market and raised EUR 7.5bln across four different BTP lines with decent demand and a fall in average yields paid. As such the Italian10yr spread over bunds has tightened from the morning’s highs with unconfirmed market talk suggesting that the ECB were also checking rates being noted by several desks. Looking ahead the main focus will likely remain on any updates regarding Greece as various European officials meet once again in Brussels. Aside from that, highlights come in the form of US personal income and spending for December with PCE data released at the same time.
With a Greek default imminent, and this time ISDA having no chance to kill CDS as a hedging mechanism as the trigger event will be more than present, investors have once again jumped at the opportunity to close lucrative basis trade opportunities, as a result sending all of Europe broadly red in spread terms. Notable: Portugal CDS, which contrary to media reports elsewhere has been trading points up front for a few weeks now, just hit a record 40 pts up. And what is worse is that the 5/10s, which should be inverted for a country as distressed as this, isn't.
Xinhua, the official press agency of the government of the People's Republic of China reports that a "gold rush" swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began. Data released by China's Beijing Municipal Commission of Commerce shows a 49.7% increase in sales volume for precious metals jewelry and bullion during the week-long holiday (over last year), which lasted from January 22 to 28 over that of last year's Spring Festival. One of Beijing's best-known gold retailers, Caibai, saw sales of gold and silver jewelry and bullion rose 57.6% during the week long New Years holiday according to data released by the Ministry of Commerce (MOC) on Saturday, Other jewelry stores across the country also saw sales boom during the period, with customers favoring New Year themed gold bars and ingots and other types of Dragon themed jewelries. During the week-long holiday, which lasted from January 22 to 28, the sales volume in just one gold retailer, Caibaiand Guohua, another of Beijing's top gold retailers, reached about 600 million yuan (nearly $100 million). Caibai began selling gold bars as investment items during the 2008 Beijing Olympic Games, but the trend of buying gold or silver bars during the Spring Festival has taken off in the past two years.
Brussels may be striking, but its caterers sure are as busy as possible: with another informal meeting (which is a euphemism for useless) of the European Council members set to begin in under an hour, and with nothing out of the IIF negotiations contrary to expectations, look for the market to sell off at 7pm CET as Europe announces that the confusion is just as palpable as any time during 2011.
- Euro-Region Debt Sales Top $29B This Week (Bloomberg)
- Greek Fury at Plan for EU Budget Control (FT)
- Greek "football players too poor to play", leagues running out of money, may file for bankruptcy (Spiegel)
- After insider trading scandal, Einhorn wins the battle: St. Joe Pares Back Its Florida Vision (WSJ)
- China Signals Limited Loosening as PBOC Bucks Forecast (Bloomberg)
- China's Wen: Govt Debt Risk "Controllable", Sets Reforms (Reuters)
- IMF Reviews China Currency's Value (WSJ)
- Watching, watching, watching: Japan PM Noda: To Respond To FX Moves "Appropriately" (WSJ)
- Cameron to Nod Through EU Treaty (FT)
- Gingrich Backer Sheldon Adelson Faces Questions About Chinese Business Affairs (Observer)
3 Months After The MF Global Bankruptcy, We Find That $1.2 Billion (Or More) In Client Money Has "Vaporized"Submitted by Tyler Durden on 01/30/2012 - 00:58
On the three month bankruptcy anniversary of the company whose rehypothecation gimmicks will one day be seen as a harbinger of everything that is broken with the multi-trillion ponzi system, but not just yet despite loud warnings otherwise, we are getting close to a final verdict of where the $1.2 billion (and possibly more as originally predicted by Zero Hedge - see below) in commingled client money may have gone. Note the use of the passive voice because using the active, as in money that MF Global executives stole from clients, is prohibited in a legal system in which nobody goes to jail for something as modest as $1.2 billion in theft. That verdict? "Vaporized." No really (and yes, in the passive voice of course). From the WSJ: "As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, said a person close to the investigation." Uh huh... Because money simply vaporizes. Which means one of two things: i) the "vaporization" is merely the phrase that so called investigators use to avoid the far more troubling sounding "stolen" as it would imply guilt, something which the former NJ governor and Goldman CEO (and not to mention JP Morgan which most likely was on the receiving end of the $1.2 billion + transaction) will, under guidance from counsel, sternly disagree with, or ii) the capital markets are such an unprecedented and manipulated fraud, that nobody has any clue at any moment, where any client money is, and that any residual capital still "invested" in mythical representations of "assets", which are likely rehypothecated so many times, that not even Bank of America's robosigning division would have a clue where to start unraveling, will promptly be converted into tangible manifestations of capital. So when someone asks what happened to stock market volume, and to investor confidence in the "stock market" feel free to use just that phrase: "it vaporized."
Because our political system is corrupted by corporate lobbyists, it leaves the people with few choices. Those who do not wish for a violent revolution are left with the one alternative of taking control of their own money. Money can be anything two parties in a transaction choose it to be. Precious metals is one good choice. Converting ones savings from Federal Reserve Notes into precious metals is not some kooky survivalist ploy. It is empowering a person to vote against the immoral monetary system. Hoarding food is not a kooky survivalist ploy, it is hedging against an immoral banker tax. We all have the moral obligation not to pay the banker tax. Refuse to deposit your funds into a money center bank. Support efforts to end the Federal Reserve System.