European and Asian stocks were modestly in the green, with U.S. futures higher, before a critical procedural vote on a Republican health-care bill to repeal Obamacare, while Janet Yellen is set to speak in Washington at 8:45am.
On Thursday, the ECB will hold its fourth tender under the TLTRO-II (Targeted Long-Term Refinancing Operations) programme. A large take-up is expected. A poll published by Reuters had a median forecast of EUR 125bn net borrowing, with estimates as high as EUR 300bn. From a rates perspective, what matters is whether these funds will trigger flows into the bond or swap markets as banks set up carry trades.
During the so-called Chinese Banking Liquidity Crisis of 2013, the relative cost of funds for non-bank institutions spiked to 100bps. So, the fact that the 'shadow banking' liquidity premium has exploded to almost 250 points - by far a record - in the last few days should indicate just how stressed Chinese money markets are.
"What's going on in the US now is a culture clash. They don't just dislike each other and disagree on politics; they can no longer even have a conversation. They hate each other on a visceral gut level. They have totally different world views. I've never seen anything like this in my lifetime. There hasn't been anything like this since the War Between the States, which shouldn't be called "The Civil War," because it wasn't a civil war. "
The total value of student loans in America today is LARGER than the total value of subprime loans at the peak of the financial bubble. And just like the subprime mortgages, many student loans are in default.
The Long Bond has erased all its losses for March as 30Y yields drop back below 3.00% for the first time since Feb 28th. Given the massively over-extended length of shorts, there seems plnety of room for yields to fall further...
Global stocks tumbled amid growing doubts President Trump will be able to deliver on a promise of tax cuts that has powered stocks markets to record highs pushed shares lower on Wednesday and drove investors to seek safety in government debt, gold and the yen. As DB put it: "Warning! US equities can occasionally go down as well as up a lot."
"Markets are waking up to the reality of the Trump hangover, which is going to mean a renewed focus on all the complacencies we’ve let build up in recent months. No surprise the mood has gone more than a little bit Risk Off." - Bill Blain
As is customary virtually every time the Chinese central bank commences some form of tightening, overnight China’s central bank injected hundreds of billions of yuan into the financial system after some smaller lenders failed to repay borrowings in the interbank market, according to traders cited by Bloomberg.
The last 5 days have seen the biggest crash in Puerto Rico muni bonds since June 2015 when the Governor declared debts "unpayable." As Bloomberg notes, investor speculation about the scale of the losses Puerto Rico will foist on bondholders caused the price of the island’s most active bond to continue to slide in the heaviest trading in nearly four months.