Archive - May 7, 2015 - Story

Last week we revealed that the Swiss National Bank is the proud owner of an equity portofilio that sums to $100 billion, or around 15% of Switzerland's GDP. Courtesy of the bank's latest SEC filing, we now know just what the Swiss were buying in Q1...

"Those who might want to borrow are no longer creditworthy due to excessive debt and/or stagnant income, or those who qualify to borrow more are not interested in borrowing more at any interest rate: they are done with debt." The Fed can push interest rates down and make it easy for banks to loan more money, but it can't (yet) force us to borrow money we don't want or need.

But just two days ago everything was awesome after the biggest inventory draw since 2014: Einhorn didn't know what he was talking about, the energy sector's 28x Fwd P/E was 'fine' and oil prices were on their way back to levels that save the US Shale industry... now, not so much...

If there is one thing more worrisome for the world's central planners than a stock sell-off, it is a bond rout 'proving' that they have lost control. The overnight carnage across global bond markets appears to have triggered someone (or someones) to step in - in dramatic size - to rescue bonds and save the world once again.

It would appear America's transformation into a "Big Brother" police state is not endorsed by every branch of the government after all.

Greek FinMin Varoufakis and German FinMin Schaeuble are cross-talking again this morning:

*GREECE'S VAROUFAKIS SAYS 'GREXIT' IS 'NOT AN ISSUE' (well the market & ECB thinks it is)
*SCHAEUBLE SAYS EXPECTATIONS FOR EUROGROUP MEETING NOT VERY HIGH (oh ok)

As next week's meeting and deadlines loom, hope is running high today in Greece... even though Schaeuble warns "don't expect spectacular Eurogroup results."

"... part of the problem today is that over the last 15-20 years, capitalism has been propped up every time it’s about to go through one of the cyclical creative destruction phases. Compounded up that's left us with a big mess to clear up across the globe and a lot of sub optimal resource allocation. So across a lot of the Western World we're left with too much debt, too much inequality, low real wage growth, limited conventional tools to help the economy to de-lever, QE and ZIRP and a political backlash against the mainstream."

Initial jobless claims rose very modestly from last week's 15-year low levels and hovers at a stunning 262k - indicating everything is as awesome as it can possibly be. Which is odd... because as Challenger-Gray notes, April saw the biggest rise in job cuts since 2011 (and the worst YoY increase for April in at least a decade). Job cuts were concentrated in the energy sector on an unprecedented scale.

Overnight "manic-selling" in global bond markets (and turmoil in stock markets) has been met - suddenly - this morning by "panic-buying" as mysteriously liquid buyers lift stocks back into the green and send bond yields plunging (right after Euronext breaks)... As one trader noted, the market is in a mode of “high volatility with no dealer liquidity and easy excuses."

"A 10% correction from the high projects to 1890 on the S&P. Those shall be our targets to the downside and all the while we shall argue that the bull market is still in effect and that at the most severe we are to be neutral of shares until such time as those targets are high or until such time as there is a clear indication that the correction has run its course and has turned for the better."

• Fed’s Yellen: Stock Valuations ‘Generally Are Quite High’ (WSJ)
• Britain's dead-heat election 'down to the wire' on polling day (Reuters)
• European Markets Roiled by U.S. Fed Chief Janet Yellen’s Comments (WSJ)
• Stocks Drop With German Bonds to Extend $2 Trillion Global Loss (BBG)
• Oil heads toward 2015 highs despite ample supply (Reuters)
• Wary of bond 'cliff,' Fed plans cautious cuts to portfolio (Reuters)
• Saudi Arabia mulling land operations on Yemen border (Reuters)

BOND SELLOFF DEEPENS; GERMAN 10-YR YIELD JUMPS 17 BPS TO 0.76%
SPANISH 10-YEAR BOND YIELD CLIMBS TO 2%; HIGHEST SINCE NOV. 24
ITALIAN 10-YEAR BOND YIELD CLIMBS ABOVE 2%; 1ST TIME THIS YEAR
10Y TREASURY YIELD CLIMBS 6BPS TO 2.31%, HIGHEST SINCE DEC. 8
U.K. 10-YR BOND YIELD CLIMBS 8 BPS TO 2.06%; MOST SINCE NOV. 24
JAPAN 10Y YIELD UP 7.5 BPS, SET FOR BIGGEST RISE SINCE MAY 2013