Archive - May 12, 2015

Earlier today, there was once again a massive scarcity of 3 Year underlying paper, when as the SMRA charts below show, the bond was trading the most negative in repo it has been since September: at a -1.68% rate, everyone was rushing to short ahead of today's 3 Year auction. And with the latest tumble in rates, absolutely, everyone was convinced shorting today's 3 Year auction would be easy money. And then the central banks showed up, in the form of a whopping 52.7% in Indirect Bid takedown in the just concluded auction of $24 billion in 3 Years, which also was the highest indirect bid since December 2009.

Amid festering global conflict, the Pope patiently explains the arms trade to a room full of school children. "This is serious. Some powerful people make their living with the production of arms and sell them to one country for them to use against another country.”

In the last 5 days, a little-known paper company from Canada (that we have discussed previously) has seen its stock soar over 74% to 15 month highs...

At the core, a healthy housing market is one where owner-occupied buyers dominate the bulk of home sales. That is simply not the case. This is how you have well paid tech workers in San Francisco cramming into a 2-bedroom apartment like a clown car simply to get by. One thing that is certain from the overall trend is that larger investors are pulling back from the market dramatically.

The Iranian Navy is escorting Yemen-bound ships which Tehran says are carrying humanitarian aid for those caught in the crossfire between the Houthis and the Saudis. Given 'coalition' suspicions surrounding the possibility that Iran is arming militiamen, expect the US to be very interested in inspecting the aid vessels, setting the stage for a possible "accident" off the war-torn country's coast.

As Barclays recently noted, there is a complete decoupling between futures and physical markets for crude oil and nowhere is that more evident than the high volume spike in crude that just happened after Saudi Arabia boosted crude production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. growth showed signs of slowing.

"impressive" manic-depressive?

The most notable aspect of today's JOLTs data was that March layoffs in the Midwest region, aka Texas and the various other shale-heavy regions, saw terminations soar to 455K from 340K, the biggest monthly total in layoffs for the region since June 2011, and the largest monthly jump since August of 2013.

Greece tapped emergency reserves in its holding account at the IMF in order to make a 750 million euro payment to the Fund on Monday meaning that, as predicted, the IMF is now paying itself. Athens has one month to replenish the account. Meanwhile, the Fund has indicated it wants no part of another Greek bailout. And just to confirm how terminal the situation for Greece is, MarketNews just reported that Greece now has a paltry €90 million in cash reserves left. The end of the world's most drawn out tragicomedy is finally nigh.

Police have launched a manhunt for a 45-year-old man from Crete who is suspected of robbing 540,000 euros from the security firm at which he worked.

Central banks ease, cajole, fluff up their feathers and push markets to where they don’t belong. Markets try to reprice themselves closer to normalcy (sanity). Central banks see their main equity index fall and panic. Central bank pushes more chips in and everyone has to cover. Central banks declare victory. Smart investor sells. It is so utterly appropriate that in the definition of infinite loop on Wiki it is pointed out that a synonym is “unproductive loop."

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...

At last check Patriot Coal had around 4000 employees. Those soon to be former employees will soon require yet another massive seasonal adjustment by the BLS to be "adjusted" out, because moments ago the second largest coal miner east of the Mississippi and the second largest producer of thermal coal in the eastern US filed Chapter 11 bankruptcy.