Eurozone

"Deliberately Overblown" Brexit Fears Backfire

As the June 23rd BREXIT (the UK-wide referendum to leave the EU) vote draws near, the polls indicate a close result. Those urging a vote for the UK to remain inside the EU are suggesting increasingly dire economic consequences that would follow a yes vote by the British people to leave. Voices from London, Brussels, and Washington have all put immense pressure on British voters to bend to the will of the elites. To listen to their commentary one would think that apocalypse was just around the corner. But is there any substance to their warnings?

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."

Mario Draghi Is Now Buying Junk Bonds

A few days after the ECB unexpectedly announced its CSPP, or corporate bond buying program which based on its definition was limited to investment grade, non-financial debt, we explained "Why The ECB Will Be Forced To Buy Junk Bonds", saying that "the EU corporate sector’s penchant for bond buybacks may ultimately force Draghi further down the ratings ladder lest the ECB should end up entangled tender offers or else end up without enough debt to monetize." This was confirmed on the very first day of the ECB's bond purchases.

With Daily Record Lows, Here Is A Chart OF German Bund Yields Since 1977

Two stunning statistics: according to Commerzbank almost two-thirds of all German sovereign debt outstanding now yields below minus-0.4%, which makes it ineligible for central-bank purchases. Additionally, as DB adds, Bund yield across the whole curve has gone negative for the first time.

Deutsche Bank's Shocking ECB Rant: Warns Of Social Unrest And Another Great Depression

"In the 1920s the Reichsbank thought it could have 2,000 printing presses running day and night to finance government spending without creating inflation. Around the same time the Federal Reserve allowed more than a third of US deposits to be destroyed via bank failures, in the belief that banking crises where self-correcting. The Great Depression followed.... Today the behaviour of the European Central Bank suggests that it too has gone awry."

Next Banking Scandal Explodes in Spain

The Spanish investment group Blackbird claims that Banco Popular bank is offering customers dirt-cheap loans or refinancing deals, at an interest rate of just 2.5%, as long as they use some of the funds to purchase the bank’s new shares. 

Futures Levitate To Session Highs As ECB Enters The Bond Market; Crude Hits $51

In an overnight session dominated by the latest political developments out of the US where Hillary Clinton officially claimed the democratic nomination, the financial newsflow focused on China's trade data, where exports fell 4.1% from a year earlier, in line with expectations, but imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014, driven entire by soaring "imports" from Hong Kong - aka capital outflows - which soared by 243% y/y.  The other main news was the official launch of the ECB's corporate bond buying, which helped drive government bonds yields in German to new record lows, and the average yields on investment-grade corporate debt below 1%.

Would New All-Time Highs Negate The Bear Market?

... it is not uncommon for the markets to briefly make new “all-time” highs during a correction process as emotional sentiment runs ahead of fundamental and economic deterioration.

Frontrunning: June 7

  • Soothing Fed sounds send stocks to five-week high (Reuters)
  • Clinton reaches magic number in fight for Democratic nomination (Reuters)
  • Euro-Area Economy Grows Faster as Consumption Gathers Pace (BBG)
  • Trump unyielding on Hispanic judge uproar (Reuters)
  • European Firms Find ‘Increasingly Hostile’ Environment in China (WSJ)
  • China tells U.S. to play constructive South China Sea role (Reuters)

"Rising" Rates Hit New Lows

Despite ubiquitous calls and expectations for rising interest rates, yields on the long bond closed the week at a 52-week low.