The bond market may have gotten so fragmented in recent months that even Bloomberg was amazed at how little trading volume it necessary to make a price impact, the amount of bond traders (and certainly salesmen), and certainly their bonuses, appeared to only go up. "Appeared" being the key word, however, because as Bloomberg reports, "the average number of dealers providing prices for European corporate bonds dropped to a low of 3.2 per trade last month, down from 8.8 in 2009, according to data compiled by Morgan Stanley."
With talk that Greek banks have hit their emergency lending limit with the ECB (which has prompted a teleconference this morning among ECB polcy-makers), it seems the newly-found position of negotiating strength for Greece (perhaps encouraged by China or Russia behind the scenes) has prompted more demands:
- GREECE'S SYRIZA CHIEF ECONOMIST JOHN MILIOS PROPOSES OVERALL EURO ZONE DEBT OVERHANG REDUCTION BY ECB
- ECB COULD BUY ALL EURO ZONE DEBT MATURING IN 2016-2020 AND ALL INTEREST PAYMENTS-SYRIZA'S MILIOS
- ECB WOULD FOOT THE BILL NOW, BUT BY 2040 IT WOULD BE ABLE TO ERASE ALL LOSSES THROUGH PROFIT RETENTION-MILIOS
Roughly translated - "Get back to work, Mr.Draghi" and monetize all of Europe's debt. With negative net issuance (i.e. central banks already monetizing over 100% of 2015's expected issuance) already here, this demand merely pushes the 'independent' monetary policymakers to enable more fiscal profligacy.
"There are signs that underlying inflation has bottomed out, but the situation abroad is now more uncertain and this increases the risk that inflation will not rise sufficiently fast. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points, to -0.10 per cent, and to adjust the repo-rate path down somewhat. At the same time, the interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy are being restored to the repo rate +/- 0.10 percentage point. Moreover, the Riksbank will buy government bonds for the sum of SEK 10 billion. These measures and the readiness to do more at short notice underline that the Riksbank' is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation."
Putin's Top Security Advisor: "Current US Approach Leads To Inevitable Confrontation With Russia And China"Submitted by Tyler Durden on 02/11/2015 21:00 -0500
The current US approach will lead to inevitable confrontation with Russia and China.... Beginning with the global financial crisis in 2008, the U.S. decided to recover at the expense of others, including with the help of military adventurism and the destruction of full governments, employing the theory of ‘managed chaos.'
The nascent global political awakening against corrupt politicians, large corporations and central banks is growing louder. In the last few years we have seen the rise of Syriza in Greece, Podemos in Spain and even Bepe Grillo’s Five Star Movement in Italy. And now an upstart anti-corruption party won a smashing victory in elections to install a state government in India’s capital, dealing a huge blow to Prime Minister Narendra Modi’s Hindu nationalist party.
As expected following yesterday's scorching 3 Year bond auction in which Indirect, aka official foreign, demand soared to the highest in 5 years, today the trend of relentless demand from abroad for US yields continued, when the Treasury sold $21 billion in 10 Year paper, which not only priced 1.4 bps though the When Issued 2.014%, hitting the high yield precisely at 2.000%, but saw the highest Indirect Bid, of 59.5%, since December of 2011.
All Out War Pt 3: Contrary to Central Bank Rhetoric, the Danish Krone Peg's as Fragile As Glass, May Throw Banks Into Turmoil!Submitted by Reggie Middleton on 02/11/2015 08:22 -0500
Exactly as I warned 3 wks ago, Nordic countries are facing pressure. Here's strong evidence of a krone break, havoc to ensue in global banks, how to monetize when skittish brokers pull access & leverage.
It is very difficult for governments to control the progress of a monetary union break-up because the example of one country exiting will create a precedent in the eyes of other members of the monetary union. The transmission channel is not government bonds, nor equities, not currency markets, but banks. In the event of a Greek exit from the euro, the loss in the real value of Greek bank deposits would encourage bank depositors in other countries to withdraw their funds.
The process can be very rapid indeed.
‘Coin bars’ is a bullion industry term referring to bars that were made by melting gold coins in a process that did not refine the gold nor remove the other metals or metal alloys that were in the coins. The molten metal was just recast directly into bar form. Because it’s a concept critical to the FRBNY stored gold, the concept of US Assay Office / Mint gold bar ‘Melts’ is also highlighted below. Melts are batches of gold bars, usually between 18 and 22 bars, that when produced, were stamped with a melt number and a fineness, but were weight-listed as one unit. The US Assay Office produced both 0.995 fine gold bars and coin bars as Melts. The gold bars in a Melt are usually stored together unless that melt has been ‘broken’.
The Jefferson Airplane sang about truth and lies nearly 50 years ago.
“When the truth is found to be lies
And all the joy within you dies…”
Restating their insight to make it relevant to our global delusions about real money – gold and silver – and the much less real money we call dollars, euros, pounds, yen and so forth:
When the truths we want to believe are clearly lies,
Then CONFIDENCE in our currency dies…
The politicians of Europe are plunging into a form of ideological fratricide as they battle over Greece. Accordingly, all the combatants - the German, Greek and other national politicians and the apparatchiks of Brussels and Frankfurt - are fundamentally on the wrong path, albeit for different reasons. Yet by collectively indulging in the sum of all statist errors they may ultimately do a service. Namely, discredit and destroy the whole bailout state and central bank driven financialization model that threatens political democracy and capitalist prosperity in Europe - and the rest of the world, too.
While not quite as brisk as last month's 3 Year auction, today's just concluded sale of $24 billion in 3 Year paper was very solid for one more month, with the High Yield pricing at 1.05%, an impressive 1.1 bps through the When Issued, even as the yield jumped from January's 0.926%. The Bid to Cover, perhaps reflecting the extra pick of 12 bps in yield, rose ever so little, increasing from 3.330 to 3.345. But it was the internals where as usual the action was, with the recent trend of collapsing Direct demand not disappointing, and in January only 7.2% of the final takedown when to Directs: the lowest since April 2012. The offset: a surge in the Indirects, typically foreign central banks, which ended up with 48.9% of the paper - the most since May of 2010!
Feel like trading FX has become next to impossible, with massive, gaping bid-ask spreads, strange "tractor beams", completely unexpected stop loss runs, and - of course - central banks behind every corner? Don't worry you are not alone. According to Bloomberg, that's precisely the case as "it hasn’t been this difficult to trade currencies since the collapse of Lehman Brothers Holdings Inc. shook markets worldwide."As for the reason why, well: take a guess.