Carry Trade

Global Stocks Plunge; US Futures, Oil Slide As Brexit Fears "Jolt Markets"

Right now it is all about the immediate fate of the UK, and as Bloomberg explains the "jolted markets" and overnight plunge in global risk assets, "growing anxiety over the prospect of the U.K. exiting the European Union dominated financial markets, sending global stocks down for a third day and the British pound to an eight-week low while boosting demand for havens such as the yen and gold."

Goldman Prepares To Turn Bearish On Oil Again; Boosts 2016 Bond Default Target By 25%

"After a quiet Jan/Feb, E&P bankruptcies picked up steam in late 1Q ahead of spring borrowing base redeterminations. By our math, about $30bn of par value debt has defaulted in the HY E&P space YTD, representing about a 17% default rate. On the back of our bottom up analysis we are now raising our full year default forecast to 21% from 17% previously."

Bill Gross Explains Why He Is Now Shorting Credit

"For over 40 years, asset returns and alpha generation from penthouse investment managers have been materially aided by declines in interest rates, trade globalization, and an enormous expansion of credit – that is debt. Those trends are coming to an end.... A repeat performance is not only unlikely, it  is impossible unless you are a friend of Elon Musk and you’ve got the gumption to blast off  for Mars. Planet Earth does not offer such opportunities."

Why USDJPY Matters (Or The Carry Collapse Cometh)

The yen’s strength may be tripping up U.S. stocks as the collape of the BoJ-inspired carry trade pressures leverage and risk-taking around the world. As Bloomberg notes, in the last 10 instances the yen rallied at least 1 percent against the dollar, the Standard & Poor’s 500 Index lost 0.8 percent on average, the most since at least 2008.

The Global Bubble Has Burst - "Will Tear At The Threads Of Society"

Over time, Bubble Economies become increasingly vulnerable to economic stagnation, Credit degradation and asset price busts. Bubbles are fueled by Credit excesses that distort risk perceptions and resource allocation. Credit and asset price inflation will incentivize speculation, another key dynamic ensuring misallocation and malinvestment. In the end, Bubbles redistribute and destroy wealth. Major Bubbles will tear at the threads of society.

Triffin's Paradox Revisited: Crunch-Time For The U.S. Dollar & The Global Economy

While all eyes on fixated on global stock markets as the measure of "prosperity" and "growth" (or is it hubris?), the larger force at work beneath the dovish cooing of central bankers is foreign exchange. The reality is that we're one panic away from foreign-exchange markets ripping free of central bank manipulation.

Yen Carry Trade Snaps After 4 Week Bill Prices Deep Below Fed Funds

Moments ago the US Treasury priced its 4 Week Bill auction, which was unique in that at just $35 billion, was not only $10 billion lower than a month ago, but was the lowest since October 15. This may or may not explain why after last week's curious auction yield of 0.20%, or 5 bps below the effective Fed Funds floor, today's auction showed an even more dramatic scramble for short term liquidity, when the government sold 4 Week Bills at a rate of 0.185%, or 6.5 bps below the rate charged by the Fed!

Yelling "Stay" In A Burning Theater - 'Simple' Janet Does It Again

The longer the Fed perpetuates today’s massive 24X bubble with soporific open mouth interventions like Yellen’s pathetic speech last week, the more violent and traumatic the risk asset implosion will ultimately be. You would think our monetary politburo might at least notice that after trading in no man’s land between 1870 and 2130 on the S&P 500 for the past 700 days, the casino is positioned exactly where it stood in 2007 and 2000. Simple Janet has attained a new milestone as a public menace with her speech to the Economic Club of New York. It amounted to yelling “stay” in a burning theater!

Stockman Slams "Simple Janet"'s Incoherent Babble

We now have an absolutely clear idea of why the Fed is impaled on its own petard. At the end of the day, managed rates will prove to be the ultimate destroyer of capitalism. They transform financial markets from organizers and allocators of real capital and the savings of producers and workers into gambling casinos which fuel massive speculative bubbles.