Money flows are becoming increasingly disconnected from fundamental price movements.
Too much mal-invested, Fed-fueled, hope-driven "if we build it, they will buy it" inventory... and not enough actual demand. This has never, ever, ended well in the past - so why is this time different?
The relatively few leaders (aka, “generals”) that had been propping up the indexes are being systematically taken out.
AL JUBEIR SAYS U.S. PROPOSED GROUND FORCE DEPLOYMENT: SPA
SAUDI FORCE WOULD FIGHT AS PART OF U.S.-LED COALITION: SPA
SAUDI MINISTER SAYS SENDING GROUND FORCE UNDER DISCUSSION: SPA
SAUDI ARABIA READY TO SEND SPECIAL FORCE TO FIGHT IS IN SYRIA
Just ten days ago, in the aftermath of the BOJ's -0.1% NIRP announcement, we reported that after one year of NIRP had pushed the total number of government bonds with negative yields to a staggering $3 trillion, that number nearly doubled overnight to $5.5 trillion. Overnight in a historic event, the latest consequence of the BOJ losing control, the yield on Japan's 10Y JGB dropped below zero for the first time, in the process joining Switzerland as the only other country (for now) with a NIRPing benchmark 10Y treasury.
With Deutsche Bank credit risk exploding and stock price collapsing to record lows, despite the CEO's "rock solid" affirmations, there is only one way to know just how real a crisis this is... when government officials issue 'denials'.
Moments ago, in response to DB's open querry on Twitter whether the Dax is "overreacting", we highlighted DB's soaring CDS and asked if perhaps the market was not underreacting. Minutes later the market opined, by sending DB stock to new all time lows.
When it rains it pours...
WTI keeps dead-cat-bouncing thanks to the algos and crashing thanks to reality. This morning's reality check on the overnight ramp comes courtesy of a double-whammy from Goldman ("wouldn't be surprised to see WTI in the teens") and The IEA which increased its estimate of excess-supply drastically. This has dragged WTI back below $30 once again and where oil goes, stocks go...
The ECB's "whatever it takes" ponzi strategy of keeping the dream alive in Europe's financial system has finally been caught as rapid collapse in the banking system is contagiously spreading to peripheral sovereigns once again. Portugal risk spreads are up 120bps in the last 3 weeks and Spain and Italy are soaring over 35 and 50bps respectively as the almost self-dealing nature of banks buying "risk-free" EU bonds and repoing for cash via The ECB comes home to roost...
"You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position. On Monday, we took advantage of this strength to reassure the market of our capacity and commitment to pay coupons to investors who hold our Additional Tier 1 capital. This type of instrument has been the subject of recent market concern."
Or, said otherwise, "Deutsche Bank is fine." And the selling has resumed...
We now expect the March package to include a larger deposit rate cut of 20bp, taking it to -0.5%
We now expect another package after that, possibly as early as June
We expect this second package to take the deposit rate to -0.7% and to extent QE until end-2017
Our forecast change is motivated by risk management amidst low inflation, rather than a macro forecast change
- Investors dump stocks (Reuters)
- Global Bond Rally Near `Panic' Level With Japan Yield Below Zero (BBG)
- Global Growth Fears Hit Bank Stocks (WSJ)
- GOP Race for Second in New Hampshire Intensifies (WSJ)
- N.H. Primary: Where Each 2016 Candidate Needs to Place to Build Momentum (WSJ)