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Germany Issues 2Y Note At Record Low Yield Of -7bps

Germany sold EUR 3.34 billion 2-year notes to a desparate-for-collateral, safe-haven-seeking, ECB QE-front-running, deflation-pricing market (with exceptional demand - an elevated 2.26x bid-to-cover) for a stunning -0.07% yield... an all-time record low yield issuance for Germany. We have nothing to add...



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Bond Yields Slide As Core CPI Weakest In Over 4 Years

Following yesterday's stagnant PPI, today's CPI is a shocker. Core CPI rose a mere 0.01% MoM - its weakest gain since Jan 2010. The 'weakness' was driven by energy (-2.6%), airline fares (-4.7%), clothing (-0.2%), and used car prices (-0.3%) tumbling. The headline CPI dropped 0.2% MoM (against a 0.0% expectation) - its biggest drop since March 2013. The 1.7% YoY gain (missing expectations) is the weakest rise since March 2014.



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Hilsenrath Backs Away From His "Considerable Time" Prediction

Yesterday's exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath's 'confirmation' that Yellen will keep the uber-dovish phrase "considerable time" in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical "I just know" statement, it was a "best guess," as he concluded, "will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon." It appears the sell-side disagrees with him on the language...



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How FedEx Just Beat EPS By A Whopping 14 Cents

"During the quarter, the company acquired 5.3 million shares of FedEx  common stock. As of August 31, 2014, no shares remained under the existing share repurchase authorizations. Share repurchases benefited  earnings in the quarter by $0.15 per diluted share."



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Frontrunning: September 17

  • -0.07%: Germany Secures Record Low Funding Cost at Bond Auction (WSJ)
  • Pentagon Sees Possible Role for U.S. Ground Forces Against Islamic State Militants (WSJ)
  • China Joins ECB in Adding Stimulus as Fed Scales Back (BBG)
  • Stealthy or Normal? Analysts Diverge on PBOC’s Action (BBG)
  • Sony Forecasts Massive $2B Loss as Smartphones Lag (AP)
  • Islamic State campaign tests Obama's commitment to Mideast allies (Reuters)
  • Brent Crude Rebounds as Libya’s Sharara Oilfield Shut (BBG)
  • Market calm over Scottish vote at odds with disaster warnings (Reuters)


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Futures Unchanged Hours Ahead Of Janet Yellen, As Chinese Liquidity Lifts All Global Boats

It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.



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Janet Yellen Trolls America's Poor: Tells Them It Is Important To Get Rich

The Fed Chairman has some words of encouragement for the tens of millions of Americans who live at or below the poverty level, including that threatened with extinction class, affectionately known as "the middle." Her message? Build assets, or said otherwise...  get rich.



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Can The Petrodollar Survive Low Interest Rates?

The Fed consistently managed the Fed Funds rates to keep oil prices steady, even when it required mid-teens interest rates and back-to-back recessions in 1980-1982. Since US Fed Funds rates were managed to preserve US creditors’ and oil exporters’ purchasing power in oil terms, the system proved acceptable to most nations. While the Petrodollar arrangement worked well for nearly thirty years, the arrangement began to wobble beginning around 2002-04...



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How Banks Continue FX Rigging Right Under The SEC's Noses

The good news is that the rigging of the FX markets - now conspiracy fact, not conspiracy theory - has, according to Bloomberg, forced the world’s biggest banks to overhaul how they trade currencies to regain the trust of customers and preempt regulators’ efforts to force changes on an industry tarnished by allegations of manipulation with the "modernization of processes that probably should have been brought in 15 or 20 years ago." However, the FX market is far from 'clean' as Bloomberg notes, while banks can limit access to details about client orders on their computer systems, they can’t keep employees from talking to one another. Some traders also are still communicating with clients and counterparts at other firms via Snapchat, circumventing their company’s controls right under the nose of the SEC. As one trader commented, "these [reform] changes look like fig leaves."



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This Seems To Be Going Well...

This is a trend that has outlasted three Presidents and six Congresses. It’s not about a single politician, or even ALL the politicians. It’s about the system itself.



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Washington's Bait-And-Switch: NATO Armed Kiev Under Cover Of Ceasefire

Just over ten days ago, as the pro-independence forces in east Ukraine were on the march with significant gains on the battlefield, a ceasefire was signed in Minsk, Belarus. It turns out to be a grotesque sleight of hand, with Kiev receiving guarantees at the September 5, NATO summit in Wales that NATO members would provide the military equipment to finish the pro-independence forces in the east after the ceasefire gave time to re-group a badly beaten, largely conscript Ukrainian army.



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What's The "Best" Way To Make A 10% Return?

Aside from the "sure thing" of buying the Alibaba IPO, achieving a 10% yield return in the new normal world requires leverage and excess risk-taking. To compare the risk/reward of various assets, Citi accounts for haircuts and leverage costs of the typical investor and finds an investors needs a 1.9x leverage in the S&P 500, 8.1x leverage in Treasuries, and 2.3x leverage in high-yield to achieve (based on historical norms) the required return. However, after accounting for downside risks, high-yield cash and leveraged loans both top the S&P 500 as the best way to meet a 10% bogey yield.



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Subprime Is Back With A Vengeance

This is where our economies are perverted. It’s the final excesses and steps of a broke society. It’s madness to the power of infinity. The only thing that’s certain is that in the end, your money will all be gone. That’s how Mario Draghi ‘saves’ the EU for a few more weeks, and that’s how the big boys of finance squeeze more from what little you have left (which is already much less than you think). A world headed for nowhere.



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4 C’s That Could Change The Financial World As We Know It, Again

Those 4 C’s are: Confirmation, Crisis, Contagion, Catastrophe.



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