Bond

Bernanke Shocker: "No Rate Normalization During My Lifetime"

Forget all the talk about "dots", "6 months", or any other prognostication from the Fed's new leadership about what will happen in the near and not so near future. For the real answer prepare to shelve out the usual fee of $250,000 for an hour with the Chairsatan, or read Reuters' account of what others who have done so, have learned. The answer is a stunner. "At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "Shocking when he said this," the guest scribbled in his notes. "Is that really true?" he scribbled at another point, according to the notes reviewed by Reuters."

"Mysterious" VIX-Seller Ramps S&P To Unchanged On The Week

For the 4th day in a row, selling pressure in US equities climaxed as Europe closed. The big buying-panic today though was sparked with about an hour to go as VIX was pummeled lower and stocks levitated to save all kinds of key technical levels - (S&P unch, Nasdaq green on the week, S&P back above its 50DMA, Russell off its 7-month lows). Trouble with all that exuberance... bonds, the USD, commodities, JPY carry, and credit weren't buying it. The USD rose 0.2% for the 2nd week in a row (led by 0.5% weakness in the EUR) and JPY strengthened. Commodities all closed higher on the week, led by oil and copper (+2%) with WTI over $102. Treasuries sold off modestly into the late-day buying scramble in stocks but ended the week 10bps lower in yield (biggest weekly drop in 2mo, lowest in 6mo). VIX plunged back to almost 12 with its biggest daily drop in a month. T-Bonds and Bullion are both +7.2% YTD, S&P +1.6% YTD, Russell 2000 -5%YTD.

 

Three Market Factors Which Citi Says Are Worse Now Than In 2007

"You’re picking up pennies on a train track. You are not getting paid much but you are sure that there will be a very negative surprise at some point. The risk / reward profile is as bad as ’07." - Portfolio manager speaking to Citigroup

Sell Italian Bonds But US Treasury Bulls Beware, Warns BofA

The combination of deteriorating European assets (topping European bank stocks and vulnerable peripheral debt) and poor price action (the impulsive break of 6m wedge support at 1.3685) augurs for further EURUSD weakness, warns BofAML's Macneil Curry, but it is Italian bond futures that broke a long-term uptrend and "it's time to sell the bounce in BTPs." While 30Y and 10Y US Treasuries are in medium term bull trends, he warns they are approaching a 'basing zone' - bond bulls ("if there are any" he jokes) beware.

UMich Confidence Tumbles, Misses By Most In 8 Years

After April's confidence-inspiring reflexive rebound (thanks to hope for the future more than current perceptions) back near post-crisis highs, it seems the less-than-frigid-weather and record-er highs in stocks were not enough to maintain the status quo enhancing exuberance. UMich confidence dropped and missed expectations by the most since June 2006. Maybe its fears of El Nino? Maybe its concerns at the bond market signals? Or maybe - the reality is that the average joe is not as cock-a-hoop as the man-on-the-TV says he should be. Economic conditions dropped to their lowest since November. Higher highs in stocks and lower highs in confidence - not what the Fed wants.

The Indian Election Is Over: The Full Summary

Congress party President Sonia Gandhi concedes defeat after coalition led by Narendra Modi’s opposition Bharatiya Janata Party sweeps Indian election.
BJP bloc leads in 335 seats and Congress-led bloc in 59, according to NDTV tally of count as of 4:39 p.m. in Mumbai.
BJP alone set to cross majority mark of 272 seats from 543 up for grabs: Election Commission data
“India has won,” Modi says on Twitter
BJP poised for biggest victory for any single Indian party in 30 years on pledge to revive growth, improve governance
Congress heading for wost-ever performance after graft scandals, economic slowdown, elevated inflation

Frontrunning: May 16

  • Bank of England sees 'no housing bubble' (Independent)
  • ‘If the euro falls, Europe falls’ (FT)
  • India's pro-business Modi storms to historic election win (Reuters)
  • Global Growth Worries Climb (WSJ)
  • Bitcoin Foundation hit by resignations over new director (Reuters)
  • Blackstone Goes All In After the Flop (WSJ)
  • SAC's Steinberg loses bid for insider trading acquittal (Reuters)
  • Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
  • Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
  • U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
  • Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)

Yen Carry Slide Drags Futures To Lows

The perfectly expected if completely irrational overnight ramp in various Yen carry pairs tried, and failed, and both the USDJPY and EURJPY were tumbling to overnight lows as we go to print. This is happening despite a rout in India in which Narendra Modi's opposition block is poised for the biggest Indian election win in 30 years, with his BJP party currently leading in 332 of 543 seat - an outcome that is seen as very pro business (and seemingly pro asset bubbles: the INR soared and the Sensex was up as much as 6% in intraday trading before paring virtually all gains following what many say was RBI intervention). And while the Nikkei (down 200 points) did not help the mood this move was mostly in response to yesterday's US selling, which means as usual the culprit for lack of algo risk-taking overnight has been the Yen carry, which moments ago hit intraday lows, and is increasingly flirting with the 101 level (after which double digits, and Abe's second resignation, come very quickly).

When The Head Of The European Central Bank Lies To Zero Hedge On The Record: Presenting Europe's "Plan Z"

We are happy to report that Zero Hedge is the first media outlet that Mario Draghi has very publicly, officially, and on the record, lied to. Because as we learned overnight, Europe most certainly had a "plan in place so that the markets don't basically collapse." Only it wasn't as Margio Draghi called it, Plan B. It was a different letter of the alphabet. Thanks to the FT's Peter Spiegel we now know that just over a year ago, in order to preserve the myth that Europe's power echelons are so "confident" with the Eurozone staying together they did not even consider a break up as a potential outcome, Draghi explicitly and on the record lied.

Presenting Europe's Plan Z.

Russia Dumps 20% Of Its Treasury Holdings As Mystery "Belgium" Buyer Adds Another Whopping $40 Billion

Moments ago the May TIC numbers did come out, and as expected, Russia indeed dumped a record $26 billion, or some 20% of all of its holdings, bringing its post-March total to just over $100 billion - the lowest since the Lehman crisis. But as shocking as this largely pre-telegraphed dump was, it pales in comparison with what we first observed, is the country that has quietly and quite rapidly become the third largest holder of US paper: Belgium.

European Bonds Tumble Most In 15 Months, Stocks Slammed

The one-way street in European peripheral bond yields/spreads... is over. Today saw Italian, Spanish, and Portuguese bond spreads smashed higher by the most in over 15 months. European stock markets all tumbled too with the FTSE-100 down over 3.5% and Portugal down 2.8%. Greece's retroactive tax idea (quickly denied) drove Greek stocks into the red for the year and slammed the new GGB issue lower. Europe's credit markets cratered wider and Europe's VIX burst back over 17.

30Y Yield Tumbles To Fresh 11-Month Lows As Europe's Bond Bonanza Breaks

30Y US Treasury yields have retraced more than 50% of the Taper Tantrum and weak data this morning once again pressures yields to new lows. 10Y now trades 2.5009%, 30Y breaks to fresh 11-month lows at 3.31% as the yield curve is flattening notably once again. European peripheral bonds are having their worst day in a year (as we noted earlier) and US and European equity markets are stumbling.