ECB Preview: What Wall Street Thinks Mario Draghi Will Say Tomorrow

While expectations are low from Thursday's ECB meeting,  it may ultimately boil down to Draghi’s communication about asset purchases. Any hint of QE tapering would spur a large-scale sell-off in the rates market, according to most Wall Street strategists. Here is what else the sellside thinks will happen.

"The System Simply Isn't Working" - Hugh Hendry Warns Of 1930s-Style "Dramatic Fulcrum Point" In Europe

"...we have the precedent from a much earlier time (the 1930s) when the defection of just one member from a currency union caused the system to unwind rapidly. And we can clearly sense the seeds of another popular political revolt in other member countries; a flurry of upcoming elections and referendums provides an immediate catalyst...We believe we are approaching a dramatic fulcrum point in public opinion in Europe."

Equity Convexity Is Back "In Play" - A Reminder Of How We Got Here

The market continues to “buy into” growing long-term narrative that CBs are shifting from notional “flow” of QE purchases to yield targeting / curve steepening goals and desire for more fiscal policy.  To anybody being intellectually honest, this should be interpreted in the long-term as “a path to tightening.”  Long-end weakens, curves steepen.

BofA Stunned By Record VIX Roundtrip; Fears "Fragile Market"

In recent months, BofA notes that the speed of mean reversion in the VIX has been particularly striking by historical standards. Since the end of QE3, VIX spikes have had very little persistence, generating low cumulative volatility relative to the previous 25 years, underscoring BofA's thesis of a fragile market that features rapid jumps from states of calm to states of stress and back.

Here Is The Catalyst That Could Unleash A "Violent Rally In Risk" Today

After years of seeing the Fed operate within this “reflexivity conundrum. the markets have already spoken (meaning already financially tightened enough) to a point where the Fed ONCE AGAIN has to back away from their “hiking threat.”  Back to “none and done,” which will likely merit a pretty violent rally in risk and reversal in rates."

"It's Never Different This Time" PIMCO Warns "The Tides Of Risk Will Flow Eventually"

The old Wall Street expression is “They don’t ring a bell at the top.” This snarky adage is usually employed by those saddened financial managers who ride a successful investment to a peak and then watch in horror as it reverses course to a level below their cost basis. A pity this notion is misguided, since the market frequently “rings the bell.” It is just that most market participants are not listening. Perhaps they should be listening now.

Insanity, Oddities, And Dark Clouds In Credit-Land

Distortions in financial markets keep growing, as central banks all over the world are desperately intensifying monetary pumping. What is currently happening in various bond markets as a result of this and other interventions is simply jaw-dropping insanity. It is not so much that it defies rational explanation – in fact, all of these moves can be explained. What makes the situation so troubling is the fact that investors seem to be oblivious to the enormous risks they are taking.  They are sitting on a powder keg.

Central Banks Are In A Lose-Lose Situation: Low-Rate-Policy "Has Rendered The System Profoundly Fragile"

"...abandoning the low interest rate policy would likely trigger a severe recession... but, continuing this policy would distort and corrode the economic structure even more, which would jeopardize the business model of pension funds, insurers and banks, and further inflate the real estate and stock market bubbles. The low interest rate policy has rendered the system profoundly fragile, with central banks virtually in a lose-lose situation."