European stocks halted two days of declines, with the Stoxx 600 fractionally in the green and Italy’s bonds climbing after Monte Paschi requested a bailout and Italy pledged to provide support for its other ailing lenders. S&P futures were little changed among extremely thin volumes while Chinese stocks dropped amid concerns on higher borrowing costs.
Japan's Ministry of Finance said Thursday that it plans to sell Y154.0 trillion of government bonds in fiscal 2017, a steep 5%, or Y8.2 trillion drop, from an initial Y162.2 trillion for the current fiscal year, as demand for debt is falling amid continued very low to negative interest rates. The reduction of 10-year bonds is the first since fiscal 1998.
On Tuesday, the SEC announced that Morgan Stanley will be fined $7.5 million to settle civil charges that it violated customer protection rules, when it used trades involving customer cash to lower its borrowing costs within its "Delta One" desk, in a transaction that can only be described as quite intricate.
With the Yuan at its weakest against the Dollar since May 2008, it's becoming harder and harder (and more and more expensive) for China to hide/defend its devaluation strategy (CNH down over 13% since the 'one-off' Aug 2015 devaluation)... "It’s not normal for this to be taking place.” Simply put, the rate spikes and contorted yield curves are symptoms of a dysfunctional, manipulated market.
One day after China's regulator halted trading in bond futures for the first time ever, Beijing suffered another catalytic bond-market event overnight when it failed to sell all the Treasury Bills on auction Friday, for the first time in almost 18 months, as bids fell short of minimum requirements.
This morning the world awakes to a charred landscape in which markets are frantically rushing to catch up to a suddenly hawkish Fed which not only hiked for the second time in a decade but, as per yesterday's Fed statement and Yellen press conference, realizes it has been behind the curve all along,
As expected, in addition to raising the Fed Funds rate by 25 bps, the Fed similarly noted that it would revise the mechanics behind its reverse repo operations, raising the rate it charges on reverse repos by 25 bps to 0.5%, the actual means by which the Fed will hike rates for most market participants. Here is the statement that the Fed released regarding the change in overnight reverse repos.
European stocks slipped from an 11 month high, Asian stocks and S&P futures were flat as caution pervades global markets before the Federal Reserve’s expected interest-rate hike on Wednesday. Treasuries slipped, after reaching the highest level in more than two years. Oil in New York slid to near $52 a barrel after API showed a build in inventories, and currencies of commodity-exporting nations fell. Gold headed for its biggest gain in a week.
Interest rates on U.S. fixed-rate mortgages rose to their highest levels in more than two years, sending weekly home loan application activity to its weakest since early January according to the MBA and the braoder US housing market reeling.
"Has monetary policy robbed savers to pay borrowers? Has the MPC been Robin Hood in reverse? In a word, no." said BOE governor Mark Carney, which was surprising because in a study earlier this year, the BIS found that monetary policy has done precisely that.