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The Great Disconnect - Central-Bank-Driven "Markets" Have Nothing To Do With Economics

Having painted themselves into an impossible corner of junk Keynesian economics, they are now clueless about how to get out. So its time to recognize that there has been a monetary regime change. The Fed might well have been your friend since March 2009 or even for the last several decades. But stranded on the zero bound and smothered by a $22 trillion collective balance sheet, the central banks of the world are now fast becoming your fiend.

Global Bond Rout Sends Futures Tumbling, Bund Has Sharpest Weekly Selloff In History

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

The Complete UK Election Preview

The UK General Election will be held tomorrow. The polls close at 10 pm. We should have a pretty clear picture of the overall seat count by 5 to 6 am on Friday morning. The result, as SocGen notes, is almost certain to be a hung parliament. Then the fun will really start. However, at the macro level the implications of the election may be less pronounced than many anticipate. Monetary policy has been de-politicised through the BoE’s independence, the formation of a coalition government is likely to involve convergence towards centrist positions, and a minority administration that pursues policies outside the mainstream would be unlikely to survive given its fragile parliamentary basis. In either case, the political system is unlikely to deliver radically different macroeconomic outcomes.

Violent Moves Continue In European Bond Market; Equity Futures Rebound With Oil At Fresh 2015 Highs

This is how DB summarizes what has been the primary feature of capital markets this week - the huge move in European bond yields: "On April 17th, 10-year Bunds traded below 0.05% intra-day. Two and a half weeks later and yesterday saw bunds close around 1000% higher than those yield lows at 0.516% after rising +6.2bps on the day." Right out of the European open today, the government bond selloff accelerated with the 10Y Bund reaching as wide as 0.595% with the periphery following closely behind when at 9:30am CET sharp, just as the selloff seemed to be getting out of control, it reversed and out of nowhere and a furious buying wave pushed the Bund and most peripheral bonds unchanged or tighter on the day! Strange, to say the least. Also, illiquid.

Crowning A New Bond King: Vanguard Fund Overtakes PIMCO For Bond Throne

No one stays on top forever, and to be sure, when Bill Gross' long reign at the top of the fixed income universe finally came to a sudden and rather unceremonious end last October, the race to lay claim to the inevitable outflows from PIMCO's Total Return Fund was on. Now, a winner has emerged — and it's not Jeff Gundlach.

"Nor Any Drop To Drink," Citi Maps The Liquidity Paradox

"From the BIS to BlackRock, and Jamie Dimon to Jose Vinals, everyone seems to be talking about market liquidity," Citi's Matt King writes, before taking an in-depth look at just how broken the 'markets' truly are. To summarize: no depth in the Treasury market, a duration mismatched powder keg in "long-term" mutual funds thanks to the fact that ZIRP has destroyed money market yields causing investors to find a new 'cash substitute,' and a magically shrinking repo market in the wake of new regulations ironically meant to promote stability.

US Shale Sector Crashes After David Einhorn Repeats What Everyone Knows Already

Greenlight's David Einhorn has come out swinging at the Fed-fueled fracking frenzy and, after pointing out facts that are extremely widely known, and have been explained innumerable times here, sent Shale stocks tumbling... led by the so-called "MotherFracker" - Pioneer Natural Resources... Einhorn concludes, "Either way the frackers are fracked."

Buyback Bonanza, Margin Madness Behind US Equity Rally

Morgan Stanley breaks down the buyback-equity rally relationship while WSJ flags "big borrowing" by both corporations and investors. In short: corporate debt issuance is at record levels and so are buybacks, stock prices, and margin accounts. When the cycle finally turns, look out below. 

Key Events In The Coming Week

Quickly looking at the potential market moving events this week, US payrolls on Friday will be the clear focus. In terms of expectations, our US colleagues are expecting a +225k print which matches the current Bloomberg consensus, while they expect the unemployment rate to drop one-tenth to 5.4%. Elsewhere, Thursday’s UK Election will be closely followed while Greece will once again be front and center.

Futures Levitate Following Worst Chinese Mfg PMI In One Year, Brent At 2015 Highs; Bund Slide Continues

The best news for stocks is twofold: volumes continue to be lethargic with both the UK (May Day bank holiday) and Japan closed until Thursday (Golden Week), while the bulk of the S&P500 has now exited the stock buyback quiet period. As such, ignore record equity outflows - all the matters is that corporate CFOs, flush with brand news bond issuance cash, will tell their favorite Wall Street trading desk to buy stocks at just the right inflection point sending the market surging just as shorts once again test the downtrend and the 50 DMA.

Legal Corruption In The US: Meet The 1% Of The 1% Who Drive American Politics

"In the 2014 elections, 31,976 donors - equal to roughly one percent of one percent of the total population of the United States - accounted for an astounding $1.18 billion in disclosed political contributions at the federal level. Those big givers - what we have termed the Political One Percent of the One Percent - have a massively outsized impact on federal campaigns.They’re mostly male, tend to be city-dwellers and often work in finance. Slightly more of them skew Republican than Democratic. A small subset - barely five dozen — earned the (even more) rarefied distinction of giving more than $1 million each. And a minute cluster of three individuals contributed more than $10 million apiece."

Guest Post: What's Really Burning In Baltimore - 50 Years Of Liberal Welfare State Policies

It is the police department created and controlled for decades by Democratic progressive politicians that has committed the atrocities against the people who have been electing these progressives year after year. Baltimore has a corrupt, reckless, out of control police department enabled by a crooked and incompetent Baltimore politicians. It doesn’t take a village to raze, burn, and loot a village. It just takes 50 years of liberal economic and social policies.

16 Signs That The Economy Has Stalled Out And The Next Economic Downturn Is Here

The past few years have been a period of relative stability for the U.S. economy.  A lot of people have been lulled into a false sense of security during that time.  These people have become convinced that our problems have been fixed.  But they haven’t been fixed at all.  In fact, our problems are far, far worse than they were just prior to the last financial crisis. Don’t let this next recession take you by surprise.