Consensus – Greek crisis still festers but the big funding rollover deadline is still more than a month away. Nevertheless, stocks will dance to the Euro tune. Have a great weekend and stay very nimble. - Art Cashin
Total. Soap. Opera. Rumors of a Moody's Upgrade to AAAAA+++ vastly exaggerated
Fitch Ratings-London-09 April 2010: Fitch Ratings has today downgraded Greece's Long-term foreign and local currency Issuer Default Ratings to 'BBB-' from 'BBB+'. The Outlook is Negative. The agency has simultaneously affirmed Greece's Country Ceiling at 'AAA' and the Short-term foreign currency IDR at 'F2'.
Even as the carry trade just went ballistic, with the yen last seen buying a 10 gallon vat of vaseline at your nearest corner drugstore, stocks are not in triple digit gain mode yet. We are giving it a few seconds for the Ph.D. to recalibrate their upward bias models. In other news, FX traders - with this kind of volatility, we hope you are sitting near a defibrilator.
Gold is accelerating its move in the upchannel as it seeks to recapture early December record highs of $1,226 quite soon. When a Greek bailout is announced over the weekend, we fully expect a massive spike in Gold as the EMU experiment is pronounced dead and buried. In the meantime, with Liberty 33 unwilling to risk a, gasp, downprint...ever... the overnight ramp job could not be any less obvious.
- China failed bond auction - Zero Hedge, Greek 3 Months at 21% - Zero Hedge, the entire US financial system is broke - Zero Hedge, yet we have this "Stocks Advance on Speculation of Greek Bailout; Yen Weakens" (Bloomberg)
- No seriously - you give a rat's ass about more news after the preceding?
- China may post trade deficit, undermining yuan case (Bloomberg)
- As Greek bond rates soar, bankruptcy looms (NYT)
- The wax melts (Economist)
- Balkans scared of Greek default - Belgrade, yes Belgrade, is terrified of what Greek royal flush will mean (Die Presse)
- The risk premiums for Greek government bonds are higher than ever, ratings agencies are sounding the alarm, and the EU is worried. Only Greece itself is convinced: "We are not broke." (Focus)
- Spain combines Greece and Subprime 2.0 (Infokrieger)
If this information is correct, it is all over. Bloomberg calculates the yield on the Greek 3 Month as determined by the bid, or where investors are willing to buy it, based on BVAL sources at 21.3%. In all honesty the bid/offer market in the 3 Month are all over the place. HDAT gives it as 99.650x99.840, BVAL is at 99.470x99.773. The HDAT bid implies a yield of 14.049%, which is still game over for Greece. Another way to see the carnage is the Greek CDS curve: 3M-5Y is at -185 bps!
- China central bank adviser: conditions are right to return the yuan to a managed-float regimen.
- China may post first trade deficit in six years, undermining Yuan critics.
- Euro gains against Yen, credit risk drops as Trichet calms Greece concerns.
- Most Asian markets are higher, with coal stocks giving Australia’s S&P/ASX 200 a lift.
- Ambac Q4 net income at $558.1M vs. net loss of $2.34B in the same period a year earlier.
- AMD to book one-time, non-cash gain of $325M on deconsolidation of GlobalFoundries Inc.
- Apple steps up rivalry with Google, to add own advertising system to iPhone.
RANsquawk 9th April Morning Briefing - Stocks, Bonds, FX etc.
Evidence That Primary Dealers Have Collectively Engaged In Repo 105 And Qtr-End Book Cooking Type Schemes For YearsSubmitted by Tyler Durden on 04/09/2010 - 02:58
The WSJ has compiled some data that gives us hope about the future of the MSM journalistic model (and makes us blush for not having thought of it first). In sorting through PD weekly repo holdings, the WSJ has observed a pattern in which End Of Quarter positions tend to be among the lowest of any reported during the quarter. The WSJ study goes back 5 quarters. Zero Hedge has performed a comparable analysis (incidentally we were looking at Primary Dealer holdings just 3 hours earlier) and we present the preliminary results. They are stunning, and we are scratching our heads how this glaring observation could have been missed, not just by us but by everyone else as well. In a nutshell, in the past 9 quarters, beginning with Q1 2008 or about the time Bear failed and things started going downhill fast, the Primary Dealers (a set of banks that as everyone knows includes Goldman, BofA, JPM, and included Lehman and Bear), in 8 of the these quarters closed out quarters at the lowest level of net asset holdings! Whether this is by Repo 105-type transactions, or via BofA type "roll" trades as discussed in detail in the WSJ, is irrelevant: the simple purpose of this phenomenon was to make balance sheet leverage more palatable and easily presentable: the lower the asset base, the less the equity required to satisfy regulatory leverage ratios. How nobody has observed this scheme previously is simply stunning, and a real testament to the PD's collective ability to keep this crucial data to the distribution list of a select few.
With everyone focused on the US bond market, it was of course inevitable that the failed bond auction would occur not here, but in that other great liquidity pump and Keynesian playground: China. Market News reports that the Chinese Ministry of Finance was unable to sell all of its planned issuance of 91- and 273- day bills. The bond failures were attributed to increasing concerns of monetary tightening which, of course, would impact short-term rates and make investors skittish about locking up capital. Although being unable to fill a 3 Month order book is stunning - Chinese bond vigilantes are now officially on the prowl, and their (in)action guarantees either a hike, or much more serious liquidity withdrawal over the next 91 days, which would spell doom for stocks which trade now only on the combined efforts of the PBoC and the Fed to drown the world in colored pieces of paper. Throw in the unpredictable events of CNY revaluation, and the training wheels of the biggest reliquification experiment are about to come off. We caution readers not to be surprised if in light of these failed auctions, any overtures toward a CNY hike are indefinitely postponed.
Someone had to do it. So we applaud Jason Hommel of Silver Stock Report for submitting the first official complaint to the United States Department of Justice over the recent revalations of unprecedented manipulation and fraud in the silver (and gold) market. The named party - none other than JPMorgan Chase & Co.
Primary Dealers See $31 Billion In Liquidation Proceeds In Last Week Of March, Sell Multiyear Record Amount Of Sub-3 Year CouponsSubmitted by Tyler Durden on 04/09/2010 - 00:29
In the last week of March, Primary Dealers dumped bonds en masse. After hitting a 2010 high in Coupon positions in the week ended March 24, the ensuing week saw the biggest outflow in Coupons in over two years. The total amount of cash raised with proceeds from Bill, Coupon and Agency sales generated a 2010 record in inflows of $31 billion, even as MBS holdings increased to a year high of $49 billion, a $6 billion increase for the week: nothing to goose the MBS market as QE is ending - after all the Fed has to call in a favor or two sometimes. The biggest selling occurred in the 1-3 Year range, which means almost exclusively 2 Year bonds. In other words Primary Dealers, at least in the last week of March, were aggressively preparing for curve flattening. The source of funds for the stock purchasing in the first week of April is thus no longer surprising: PDs sold USTs, and bought stocks. The higher yield in Coupons in turn are attracting foreign (primarily Chinese investors - note the 10 Year auction), and Household based investors, even as stocks surge to massively overbought 20x+ multiples.
Guest Post: The Andean Nightfly Pamphlet - A West Side Story Of Post-Baby-Boom Doom, Oil And Power Being Shifted (On A Platter) To The BRICSubmitted by Tyler Durden on 04/08/2010 - 23:13
Quite a ride in the Andean cordillera last night. Flooded Inca roads yielded fresh new bumps which in turn shook the gringo tourist, and synapses went to work. Pondering the idiocy of being born in the 1970s and what not. And taking action as per global warming. Sold my coat to an asshole who still believes in winter. The jerk! I've knocked down the garage and I'm growing broccoli. If you want to cheer up today, stop reading this and snort a line of pollen.
We the famous people of the West are in a bad shape. No matter how rosy the media put it; current state of affairs is feverish like 1937 (at best). The last 50 years of all-out complications from geopolitics to socio-economics seem impossible to digest. Our situation would compare to Mike Tyson after a sex change: same but different, with a totally erratic output. And probably dangerous.
In late February 2010, Romania, Azerbaijan, and Georgia finalized an agreement on the direct export of Azerbaijani natural gas to Romania. This has profound ramifications for halting Turkey’s ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures. The new agreement calls for transporting the Azerbaijani gas via pipelines to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea. From there, the liquified gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta. From Constanta, the gas will be distributed through the Romanian pipeline system. “In five years’ time, Romania will become an energy hub in its geographical region thanks to this project,” predicted Tudor Serban, the Secretary of State for Romania’s Ministry of Economy, Commerce, and Business Milieu.
All you ever wanted to know, and much more, on the opposite of the perspective espoused by David Rosenberg and other deflationists, who believe that Japan is a case study of what to expect in bond yields. 110 pages chock full of information for the bond wonks out there, and a great starting point for anyone who wishes to refute the steepener argument.