There's trouble brewing in the leveraged loan market as cracks continue to show in post-crisis CLOs. As we reported late last month, the number of CLO 2.0 deals’ equity tranches currently having NAV below zero has risen to 453. Given that, we weren't terribly surprised to learn that 6 CLO 2.0s are failing their interest diversion tests and another 20 are within a point of hitting their triggers.
"There is a concern that this competitive devaluations channel (the first link) may have broken down (to a large extent) because of the collapse in global trade. Global growth today is generating much less trade growth than in the past (chart below). As a result, currency adjustment is not enough to spur growth significantly because global trade is increasingly less important to the overall makeup of GDP. This raises the possibility that the currency war is largely futile."
Efforts to make sense of why various FX crosses trade like they do these days are complicated immeasurably by the ongoing global currency wars and an EM complex that's plagued by fear of a strong USD and a long list of idiosyncratic domestic factors. For those interested in a 30,000 foot view of what's overvalued and what's not, here's Deutsche Bank's take.
Activist Hedge Fund Starboard, Expert On Salt Content Of Pasta Water, Now Wants To Overthrow Yahoo's BoardSubmitted by Tyler Durden on 03/24/2016 08:27 -0400
A year and a half after Starboard proposed that the only thing Oliver Garden needs to attract new clients is to change the salt content of its pasta water, the activist fund has just unleashed a campaign seeking to overthrow the entire board of Yahoo, because the fund which clearly was a nutritional expert in late 2014, now thinks that its 1.7% in YHOO stock hodlings entitle it to the intimate knowledge of just how to "fix" Yahoo. Perhaps, the thinking goes, all it takes for people to start using Yahoo again is a new board?
Following yesterday's dollar spike which, which topped the longest rally in the greenback in one month, the prevailing trade overnight has been more of the same, and in the last session of this holiday shortened week we have seen the USD rise for the fifth consecutive day on concerns the suddenly hawkish Fed (at least as long as the S&P is above 2000) may hike sooner than expected, which in turn has pressured WTI below $39 earlier in the session, and leading to weakness across virtually all global risk assets.
The latest to join in the skepticism rally is none other than Goldman Sachs strategist Christian Mueller-Glissmann who in the latest "Global Opportunity Asset Locator" report, writes that the "relief rally across risky assets might fade over the near term", warns that "sharp declines in oil prices are likely to weigh on risky assets again", suggests to go to "reduce risk allocation", warns against holding US HY bonds as "the risk/reward is least favourable if oil prices reverse course" and "go to cash" ahead of "expected elevated volatility."
This morning's Brussels suicide attacks have led to risk-off sentiment across European asset classes, with Bunds higher and equities firmly in the red, although if the Paris terrorist attacks of November are any indication, today's tragic events may be just the catalyst the S&P500 needs to surge back to all time highs. FX markets have also been dominated by events in Brussels, with USD and JPY strengthening, while EUR and GBP softening throughout the European morning.
In a worryingly coincidentally timed move, Moody's has put Desutche Bank on review for downgrade, citing "execution challenges" in its new strategic plan. The worrying aspect comes from the fact the timing is entirely fitting with the ratings downgrade that started the last and most painful down-leg in Lehman's collapse...
"Buyback blackout period starts Monday. An increasing number of S&P 500 companies will enter into their blackout period starting next week, about a month before the earnings season kicks into high gear in the third week of April." This is taking place as institutional clients have been aggressively dumping stocks for the past seven weeks, while corporations have been soaking up all this liquidating activity. Should the selling continue for yet another week, who will soak up the selling this time?
Approximately 50 tonnes of BCV gold has been exported from Venezuela to Switzerland within the first 10 weeks of 2016. How much longer can this outflow continue? This gold is being exported by the BCV in order to participate in swaps (or maybe even outright sales) in order to provide external financing to the Venezuelan Government. The fact that the gold is being picked up by Brinks Switzerland suggests it is being brought to a Swiss gold refinery. The main reason gold is sent to Switzerland is so that it can be refined or recast.
But don't be alarmed. Deutsche Bank says you have nothing to be concerned about...
If it looks like a crash, smells like a crash, acts like a crash, is it a recovery? Here's the hard hitting evidence that you just won't find anywhere else. Just don't shoot the messenger! BoomBustBlog style research is back with a vengence.
"We're in a bear market — we can't get away from it," warned CNBC's Jim Cramer on February 5th, exclaiming that "the stock market is not working." A month later - following a 13%, almost irrepressible ramp in stocks - Cramer has changed his tune, explaining last night that "signs of a massive rally could be coming." We wonder, with contrarianism like this (combined with his confidence that "Deutsche Bank is not systemic"), is Cramer the new Gartman?
- Dow's Freakish Bounce Makes Investors Whole, Can't Erase Doubts (BBG)
- R.I.P. Dollar Rally as Dovish Fed Spurs Worst Slump Since 2011 (BBG)
- Global Currencies Soar, Defying Central Bankers (WSJ)
- Oil hits 2016 high above $42 on production and demand outlook (Reuters)
- The U.S. Is Exporting Its Oil Everywhere (BBG)
- Hillary Clinton’s Allies Launch Plan to Undercut Donald Trump Now (WSJ)
When it comes to the "here and now", which in the Fed's centrally-planned market is driven almost excusively by momentum ignition algos, complacency indeed rules (VIX 13). But even the merest glimpse into the near future, or rather how the present environment may disconnect with what may happen tomorrow, or next week, or, as the case may be, in three months, institutional investors are more concerned than ever before. But is this a confirmation that the US stock market is about to have a new "Deutsche Bank" moment?