Despite last night's disappointingly weak China re-open (notably less than US ADRs had implied), it appears everyone and their pet rabbit levered up as China margin-buying rose CNY21bn - the most in 2 months. It appears China's housing market also disappointed hope-strewn expectations as Golden Week home sales slowed dramatically YoY (blamed on weather). All is not well in the liquidioty stress department as despite ongoing injections, o/n HIBOR spiked 240bps overnight. China stocks are mixed at the open as PBOC strengthens the Yuan fix for the 5th day in a row to 2 month highs. Concerns are also growing in China's corporate bond market where bubble flows have greatly rotated from stocks to drive yields on risky firms to record lows.
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UPDATE: Stocks are now soaring after we noted the initial reaction...
A decidedly dovish FOMC Minutes, warning that the economy is not ready for rate-hikes, has driven rate-hike odds to their lows once again. December and January odds are now below 50% and markets are reacting with bond, crude, and bullion buying, dollar selling and stocks uncertainty.
FOMC Minutes Confirm Economy Not Ready For Rate-Hike This Year, Worried About Inflation, "Global Risk"Submitted by Tyler Durden on 10/08/2015 14:04 -0400
Given the tumble and stock save since September's infamous "chickening out" FOMC Meeting, investors hope today's minutes will provide some color on just how close Janet and her merry men were to pulling the trigger:
- *FED OFFICIALS SAID `PRUDENT' TO WAIT FOR CLARITY ON OUTLOOK
- *FOMC MINUTES: MOST PARTICIPANTS SEE LIFTOFF CONDITIONS MET THIS YR
- *FOMC MINUTES: ALL BUT ONE MEMBER SAID ECON COND DIDN'T WARRANT HIKE
With all the blame pinned on global turmoil (which has now "calmed" apparently) the S&P 500 has roundtripped to unchanged post-FOMC and given these minutes which suggest this was not a close-call at all. However, this was before the Sept payrolls data.
Pre-FOMC Minutes: S&P Futs 1988.25, 10Y 2.095%, Gold $1145, EUR 1.1285
If you’re a fan of dovish policymakers who are committed to Keynesian insanity, you can always count on Minneapolis Fed chief Narayana Kocherlakota who is out today with the latest hint that NIRP is coming to America.
Following two stellar auctions earlier this week, when both the 3 and 10 Year showed substantial demand, and in the case of the latter a near record surge in foreign central bank takedown, today's final 30Year auction went without a glitch as the Treasury sold $13 billion in the RN0 reopening, which priced at 2.914%, through the When Issued 2.917%, lower than the 2.98% in September, and virtually unchanged from the yield the 30Y paid at the last auction of 2014. In other words, just like stocks, so the long end of the curve has gone exactly nowhere in 2015.
Bill Gross Sues PIMCO "Cabal" Over Ouster, Seeks "Hundreds Of Millions", Blames El-Erian - Full ComplaintSubmitted by Tyler Durden on 10/08/2015 11:14 -0400
“Driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency, a cabal of Pimco managing directors plotted to drive founder Bill Gross out of Pimco in order to take, without compensation, Gross’s percentage ownership in the profitability of Pimco."
HSBC Asks If "US Is Turning European, Or Is It Japanese" As It Cuts 10 Year Forecast From 2.8% to 1.5%Submitted by Tyler Durden on 10/08/2015 09:53 -0400
As more and more "reputable" analysts realize that the 30 Year bull market in Treasury isn't going anywhere, another firm jumped on the "more easing" bandwagon overnight, when HSBC's Steven Major slashed his target yield on 10Y Treasurys for 2015 and 2016, from 2.4% and 2.8% to 2.1% and 1.5% respectively. The reason: more easing of course, or rather expectations for further ECB monetary easing which will help U.S. curve to perform.
ECB Will Again "Frontload" Bond Purchases Ahead Of The Winter, No Advance Leak To Hedge Funds This TimeSubmitted by Tyler Durden on 10/08/2015 07:56 -0400
Moments ago, as part of its quite stale and otherwise irrelevant minutes of its September 2-3 governing council meeting, the ECB did precisely the same, announcing that as part of its ongoing open-ended QE program (which the ECB expects will be implemented fully by September 2016 "or beyond") it would frontload purchases between September and November because, you guessed it, volatility once again declines in December.
It was supposed to be the day China's triumphantly returned to the markets from its Golden Holiday week off, and with global stocks soaring over 5% in the past 7 days, hopes were that the Shanghai Composite would close at least that much higher and then some, especially with the "National Team" cheerleading on the side and arresting any sellers. Sure enough, in early trading Chinese futures did seem willing to go with the script, and then everything fell apart when a weak Shanghai Composite open tried to stage a feeble rebound into mid-session, and then closed near the day lows even as the PBOC injected another CNY120 bn via reverse repo earlier.
"I Would Say Don't Worry" Says Chinese Central Banker As Indian Central Banker Says "World Economy Is Looking Grim"Submitted by Tyler Durden on 10/07/2015 20:17 -0400
"I would say, don't worry" said Yi Gang, deputy governor of the People's Bank of China, after the International Monetary Fund warned of risks in China's economic challenges.
"The world economy is looking grim" - said Raghuram Rajan, Indian central bank governor and former chief economist of the International Monetary Fund.
If you think this sounds like some kind of conspiracy theory, consider that France just banned any transaction over €1,000 Euros from using physical cash. Spain has already banned transactions over €2,500. Uruguay has banned transactions over $5,000. And on and on.
"They're Converging To Dire Levels!": SocGen's Edwards Delivers Critical Warning On Inflation ExpectationsSubmitted by Tyler Durden on 10/07/2015 18:00 -0400
"The collapse in inflation expectations tells us that the market believes the central banks, despite their monetary profligacy, are failing to prevent the western economies from turning Japanese, and thus at risk of repeating their devastating slide into outright deflation in the 1990s."
And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."
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