If there was any doubt that Brexit was "relevant" then the surges in European peripheral bond risk, despite massive bond-buying by The ECB, should send shivers up and down the status quo huggers that are shrugging the referendum decision off because "central banks will provide liquidity." However, it's not just The UK that EU officials need to worry about, as The Globalist notes, Germany will have to change its policies if it wants to avoid exit of other countries from the eurozone.
Futures on the S&P 500 slipped 0.3%, as U.S. equities are on track to extend losses for a sixth day. Europe's Stoxx 600 fell to a four-month low, sliding 1% for its sixth decline in seven days, and U.S. crude retreated for a sixth day in the longest losing streak since February. Bond yields sank to records in Germany, Australia after Japan as Federal Reserve Chair Janet Yellen said next week’s U.K. vote on European Union membership was a factor in the decision to hold interest rates steady. The Yen surged more than 2% as the Bank of Japan refrained from adding any new stimulus,
First The Telegraph, then The Sun, and today The Spectator all came out on the "Leave" side of the Brexit debate. However, perhaps even more shocking to the establishment is the CIO of a major bank's asset management arm dismissing the apparent carnage that Cameron, Obama, and Osborne have declared imminent, warning that, "many articles on the Brexit vote overstate its risks and consequences." As JPM's Michael Cembalest adds, the reality is "hardly the stuff that economic calamity is made of." As The Spectator concludes, "the history of the last two centuries can be summed up in two words: democracy matters."
"Yellen sounds like she doesn't have confidence anymore. She is backing away from any forecast. She is simply saying, 'I really don’t want to forecast anymore.' We are done with this forecasting game. The subtext is that 'we've been so wrong forecasting the data, we should stop'."
"We’re following the European model which is to maintain the status quo: Don’t let competition damage or disrupt existing businesses. The politics of fairness create anti competitiveness...What we really need is the politics of hope: Let’s figure out how to make it easier to start a business."
"Central banks are losing control and they don't know what to do ... just like the Republican establishment and Donald Trump.... The Fed is confused and their confusion spills into investor psychology," said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine. "The Fed changes its tone so frequently, it seems every other week the message is different. They’ve turned into the 'Zombie Fed.' They say the meeting this week is 'live,' but investors all know it isn't at all."
Ah, the good old days, when a simple, completely empty promise to do whatever it takes could move the world. It was fun being a central banker back in the good old days--back then playing Master of the Universe was wondrously good fun. Now--not so fun.
"... until Governments/central banks change policy, yields are likely stay at ultra low levels due to secular stagnation type themes and the overwhelming amount of QE hoovering up bonds. However it still reflects a broken financial system."