Archive - Aug 21, 2013

With Carney due to step up QE even moar, following the path of least resistance in the mind of a central banker, we can't help but wonder why it would be that UK financial services firms paid an "unsually high" amount of bonuses in April - even as the top rate sof income tax was cut from 50% to 45% that month. As Bloomberg notes, bonus payments in finance were 1.3 billion pounds in April compared with 600 million pounds a year earlier; begging the question of whether these British bankers know something we don't and want their money now?

First it was China whose affair with "tapering" was short and sweet, and after the banking system nearly chocked in June on the PBOC's telegraphed tightening, the central bank has once again released the spigots with reverse repos galore. Then overnight, fighting a collapsing market, it was India's turn to "flip-flop" on its recent tightening drives, when in an attempt to stop the Rupee's implosion, the central bank announced it would purchase $1.2 billion in long-term bonds, along with other measures, in its first QE-like foray to stabilize markets. And while it did manage to prevent another rout to the bond and stock markets, with the 10 Year bond yield falling below 9% and the Bombay Stock exchange bank index jumping more than 5%, the currency initially pushed higher only to tumble to a fresh record low of 64.59 as foreign investors continue to pull out capital. Such concerns will not be ameliorated by what is now seen as outright confusion by the RBI which is tightening one day, easing the next, and generally unsure what it wants to focus on: inflation, rates, equities, a functioning banking sector or last but not least, the currency.

Overnight, it wasn't Egypt but Syria that woke up to the latest massacre, this time in a chemical weapons-induced slaughter when more than 200 people were killed shortly after 3 am local time, in what would be by far the worst reported use of chemical arms in the two-year-old civil war. Naturally, Syrian activists promptly accused the President al-Assad of conducting the attack that killed numerous women and children even though it was their chemicial weapons warehouse in the Damascus area that was uncovered just over a month ago. Not surprisingly the state TV and Syrian emissaries abroad promptly denied any responsibility for the attack. And, as on previous occasions, the traditional narrative of penning this wholesale murder of civilians on the ruling administration leaves much to be desired. So much so that even experts are now wondering if it wasn't merely the latest provocation attempt by the US (and Al-Qaeda) -supported rebels to push public opinion further against Assad and permit the greenlighting of an eventual military escalation.

• Obamacare, tepid U.S. growth fuel part-time hiring (Reuters)
• Cameron was behind UK attempt to halt Snowden reports (Reuters), Britain defends detention of journalist's partner (Reuters)
• Goldman Options Error Shows Peril Persists One Year After Knight (BBG)
• China expresses 'shock' as Japan's nuclear crisis deepens  (Reuters)
• Inquiry into China insurance firm rattles industry (Caixin)
• Cheaper rivals eat into Apple’s China tablet share (FT)
• Exporting fast food: Subway Targets Europe With as Many as 1,000 New Outlets in 2014 (BBG)
• Reserve Bank of India boosts liquidity to ease pressure on banks (FT)
• Justice Department Plans New Crisis-Related Cases (WSJ) - Holder doing his cutest attempt to pretend the TBTProsecute aren't
• Syrian Opposition Alleges Gas Attack, Which Government Denies (WSJ)

The Rupee has taken a severe hammering and has lost 44% of its value in the past two years. It was at its lowest point yesterday against the Dollar.

More of the same downward drift this overnight trading session, with early Asian outflows coupled with a fresh record low in the Indian currency, driven in part by reports the Fukushima leak severity had been raised from Level 1 to Level 3, which however subsequently reversed following a weakening in the JPY and pushed the Nikkei from a steep early drop to a modest green close. China was unchanged even as Fan Jianping, chief economist at the State Information Center, said that a new reasonable range for China’s growth is 7%-9%, Xinhua said and ongoing liquidity additions by the PBOC. In Europe, newsflow was dominated early on by a Suddeutsche report that the third Greek bailout would be likely financed in part by EU budget as the reality that nothing is fixed in Europe slowly returns and fears that the latent and non-existent OMT will eventually have to be used. US futures have seen a modest risk off bias in part driven by concerns what today's key event, the FOMC minutes due out at 2 pm, would reveal (if anything new). Also on deck are Existing home sales at 10:00 am which expect a slight pick up to 5.15 million from a 5.08 million prior print.  Moments ago the latest weekly MBA Mortgage Applications number came out and, to nobody surprise, it posted the last weekly decline, dropping another 4.6% with conventional refis dropping for the 10th consecutive week.

Since February, there has been at least one silver contract in backwardation and since May 31, the September contract has been backwardated. But that has now come to an end.