In his latest communication with the outside world, Gundlach said that gold prices are likely to reach $1400 an ounce "as investors lose faith in central banks", Reuters reported. "The evidence that negative rates are harmful and not helpful has piled up to the point that the 'In Central Banks We Trust' mantra has finally been laid bare as a hoax,"
Unfortunately, we remain stuck in the cleanup phase so long as economists and their ability to direct policy continue to suggest the Great Recession was anything other than systemic revelation along these lines; a permanent rift between what was and what can be. It is and was never about oil; only now that oil projects volatility into the dying days of eurodollar leverage.
Bottom line, our conversations with investors suggest yields in the 20 – 25% context could be attractive enough to draw in marginal capital – although several investors noted that is reasonable for triple C risk excluding commodities. In short, we're not there yet.
Remember it was the BOJ that stepped in October of 2014 at 1970, and again in October of 2015 at 1970 again. The Japanese bought Yellen a year of time, and gave her a market of 2070 to hike rates. Now that the market has fallen back to the August low, it is the BOJ who has turned their monetary policy to negative rates. What does this tell the market? That after attempting to pump it twice above 1970, with the market at 1870 they have switched to negative rates. Sign of desperation? So far the market is not buying it.
NIRP is coming to the US. This is just the start of a much larger strategy of declaring War on Cash.
Because so much is riding on what so few decide,once the faith in the Central Banks fail, the chances of us getting out of this diminish every second...
2Y yields crashed 10bps overnight - the biggest plunge in yields since September's FOMC fold on rate-hikes. The rest of the Treasury bond complex also saw yields crash with 10Y flash-crashing 20bps - amid collapsing liquidity - at its deepest. Then - as if by magic - a sudden crazed Yen seller appeared and lifted all risk boats (and bond yields) "off the lows." One wonders how long this 'intervention' will last...
"Whatever it takes" is not enough, it would appear as the fragility and interconnectedness forced upon the European banking/sovereign finance ponzi has rapidly come home to roost for Draghi and his followers. Peripheral bond risk has flipped from "hold your nose" buys to panic sells with Portugal risk exploding 200bps in the last week. As the European banking system's credit risk rises 2012-crisis-like, it seems belief in a bigger bazooka is fading fast.
"Worse than Lehman" is how one European bond market trader described the carnage this week as the brief respite that ECB monetization and debt-buyback rumors provided yesterday have morphed into utter destruction this morning. European (and US) banks are a sea of contagious red with Deutsche Bank the tip of the collapse spear. Credit risk on Deutsche has exploded this morning with Sub CDS trading up 85bps to a record high 540bps... eerily reminiscent of the pre-Lehman bankruptcy week in 2008.
Time to panic now?
The currency wars continue unabated as does the developed world's experiment with negative rates as the Riksbank moves further into NIRP, cutting the repo rate by 15 bps to -0.50%. "Uncertainty regarding global developments is still high, with low inflation and several central banks pursuing more expansionary monetary policy [and] Swedish monetary policy must relate to this," the bank said.
EU regulators have joined their counterparts in the US and Britain in probing the SSA market where banks may have colluded on price quotes. The big question is whether Deutsche Bank, which is struggling to reassure a nervous market, will find itself in the European Commission's crosshairs.
In May 2015, Warwick's European Distressed & Special Situations Credit Fund liquidated after investors submitted redemption requests amounting to 90% of the fund’s assets. But something unexpected happened" "the problem" as HFA writes, is that "the fund’s remaining assets — encompassing debt and equity positions in Fitness First, New Gulf Resources, Oasis Holdings and Punch Taverns — are too illiquid to be sold."