Bund Plunge-Protection-Team To The Rescue (Again)

If there is one thing more faith-in-central-planning-destroying than a drop in equity prices, it is a collapse in bond prices. Last week, when Bunds (and Treasuries) collapsed (with 10Y Bund yields spiking up to 75bps), there was a sudden appearance of a deep-pocketed buyer of last resort that rescued bond yields lower (and squeezed stock prices higher). Today, after overnight carnage, Bunds (and Treasuries) are once again mysteriously aggressively bid into the US open...

Markets In Turmoil - When Carry Unwinds

When risk-free assets, with de minimus regulatory capital requirements move like penny stocks, firms are forced to do something about economic risk capital - either derisk (sell assets), or increase capital (delever carry). The ongoing carnage in the world's bond market is creating just such a self-fulfilling problem for risk-assets everywhere (despite simpleton hopes that bond-selling means stock-buying - it doesn't as the marginal buyer is all repo/carry funded and not 'real' cash being rotated). Everywhere one looks, financial markets are turmoiling...

'The Crash" Will Not Be Caused By An Event...

When people think about crashes, they tend to think about an eventas if some massive, grotesque, red, scaly, fire-breathing, razor-toothed catalyst should be obvious beforehand. But we know from history that that’s not the way it works...

Central Planning + HFT = Global Bond Crash

"What most traders have said though is that liquidity is awful. Big moves are possible on relatively low or average volumes. What has become increasingly clear over the last couple of years is that the combination of high money liquidity (ZIRP and QE) and low trading liquidity (regulation and bank capital constraints) creates air pockets. The former encourages investors to move in a similar (positive) direction until overheating occurs with the latter then creating problems when they want to collectively lighten up. However that this is increasingly spreading up the top of the capital structure is a worry. It’s also a worry that these events are occurring in relatively upbeat markets. "

Frontrunning: May 12

  • Bonds Extend Global Rout as Europe Stocks Slide, Dollar Weakens (BBG)
  • Verizon Communications to Buy AOL for $4.4 Billion (BBG)
  • Fresh Nepal earthquake kills dozens, triggers panic (Reuters)
  • Sen. Shelby to Unveil Legislation Heightening Fed Scrutiny (WSJ)
  • Bill Gross: The Amount of Money I'll Give Away 'Is Staggering, Even to Me' (BBG)
  • U.S. rejects notion that Gulf rulers snubbing Obama summit (Reuters)... what about AIIB?
  • In Asia, Debt Market Gets Tougher (WSJ)
  • Iran’s Mahan airline defies sanctions in shadowy aircraft deal (FT)

Here We Go Again: Verizon To Buy AOL Marking Another Tech Bubble Top

The last time AOL was involved in a mega merger was January 2000, when AOL acquired Time Warner for $182 billion in what was the mega deal of the last tech bubble, creating a $350 billion behemoth. Fast forward 15 years and here is AOL again in yet another period-defining if far, far smaller transaction once again, when moments ago Verizon announced that it would acquire AOL for $50/share, a deal value of $4 .4billion. And with that the golden age of digital (and in many cases robotic) content, has now been top-ticked.

 

Global Bond Rout Returns With A Vengeance; 10Y Treasury Tumbles Under Key Support; Futures Pounded

It all started again in Asia, although not in China where the berserker mania bid for stocks has returned and the SHCOMP is now up nearly 5% in the past two days following the PBOC's latest easing, but in Japan where once again the massively illiquid JGB market, of which the BOJ owns roughly a third as of this moment, is going through yet another shock period (if not quite VaR yet) with last night's 10 Year JGB auction seeing the lowest Bid to Cover since 2009. This was the beginning, and promptly thereafter bond yields around the globe spiked once more, with 10-year Treasury yields climbing to a five-month high, as the global rout in debt markets deepened. The biggest casualty so far is the Bund, which having retraced some of the flash crash losses from two weeks ago is once again in panic selling mode, and while not having taken out the recent 0.8% flash crash wides, traded just shy of 0.75% this morning.

Controlling Copper & Silver Prices

There is an unwarranted assumption that market prices are always right, and represent "fair value". In the case of commodities, particularly metals, this is not necessarily true, because regulated financial markets make it too easy for government agencies and large banks to game the system.

China Could Hold Oil Market To Ransom, Tops US As World's Largest Importer

For the first time in history, China overtook the US as the world’s biggest importer of crude oil in April, as The FT reports, representing the culmination of a seismic shift in global energy flows over the past decade. The jump in China imports last month was partly down to higher shipments from Iran, who "may be offering more discounts on its oil as part of an effort to increase ties with Chinese oil companies," according to consultancy Energy Aspects. "Iran is keen to secure more Chinese investment." But as OilPrice.com's Jim Hinton warns this shift means that China could hold the oil markets to ransom... And that means that oil futures are tied intimately in with China and the future of the South China Sea.

Demographic Devastation: Italy's Birth Rate Drops To 150 Year Low

Italian women would "like to have more [children], but the conditions just aren't good enough," laments one new mother as CBS News reports, official figures show that in 2014 there were fewer babies born in Italy than at any time since 1861. "Nowadays people don't want to raise their child in poverty," but Pope Francis had a different opinion, as The Guardian reported, "a society with a greedy generation, that doesn't want to surround itself with children, that considers them above all worrisome, a weight, a risk, is a depressed society."

Japanese Govt Bonds Are Crashing After Weakest Auction Since Lehman

Today's 10Y JGB auction saw the lowest bid-to-cover ratio since Feb 2009 at just 2.24x with a notable tail of 1.1bps (the widest since March) as it appears once again, the total dissolution of liquidity from the largest bond market in the world has left the BoJ and Ministry of Finance losing control. The reaction is dramatic with 5Y through 30Y yields up 5-8bps (10Y +8bps at 47.6bps - the biggest absolute jump in yields in 2 years) leaving 30Y yields at 2-month highs above 1.49% and 10Y yields at 6-month highs.

This Is What Happened To Tinder's Predecessor

Before there was Tinder, which just won a student the Ira Sohn contest for best write up for its "underappreciated valuation" in IAC, there was Adult Friend Finder, aka FriendFinder networks, a website whose sole purposes was finding, to put it bluntly, a fuck buddy. Here is a quick remind what happened to Tinder's predecessor.

War Threat Rises As Economy Declines, Warns Paul Craig Roberts

As the years have passed without Washington hearing, Russia and China have finally realized that their choice is vassalage or war. Had there been any intelligent, qualified people in the National Security Council, the State Department, or the Pentagon, Washington would have been warned away from the neocon policy of sowing distrust. But with only neocon hubris present in the government, Washington made the mistake that could be fateful for humanity.

Almost Half Of US States Are Officially Broke

At least 22 states are facing budget shortfalls thanks to a combination of fiscal mismanagement and falling oil prices. The negative impact on the public sector has been dramatic suggesting that in the event of a sustained economic downturn, citizens' patience for austerity could wear thin leading to political instability and social unrest. 

How Wal-Mart Makes An Instant 65,724% Profit Selling... California Water

Wal-Mart is facing questions tonight after CBS13 learns the company draws its bottled water from a Sacramento water district during California’s drought. "Sacramento sells water to a bottler, DS Services of America, at 99 cents for every 748 gallons - the same rate as other commercial and residential customers. That water is then bottled and sold at Walmart for 88 cents per gallon, meaning that $1 of water from Sacramento turns into $658.24 for Walmart and DS Services."

China's Banks Obscure Credit Risk, Face "Insolvency" In Property Downturn, Fitch Says

As data on non-performing loans at Chinese banks shows the biggest sequential increase on record in Q1, Fitch wonders if perhaps the data actually obscures a far larger problem. Official figures on China's NPLs are obscured by a number of factors and may be grossly understated the ratings agency suggests. Furthermore, Fitch says "a protracted downturn in property markets could threaten the solvency of Chinese banks, given their modest loss-absorption capacity."