Foreign Central Banks

Celebrating 45 Years Of Phony Money

In the pre-1971 economy, it was Main Street that produced wealth and accumulated real dollars. After 1971, it was Wall Street that controlled access to the new counterfeit money – and made sure it captured much of it. The new system gave the feds the “flexibility” they were looking for. But it completely changed the nature of our money and our economy.

 

Alan "Bubbles" Greenspan Returns To Gold

The former Fed chairman says he believes another debt crisis is inevitable. He believes it will lead to high levels of inflation. His solution? Gold: “Now if we went back on the gold standard and we adhered to the actual structure of the gold standard as it exists let’s say, prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the U.S., and that was a golden period of the gold standard.

 

The Reason For The Relentless Scramble For US Corporate Debt In One Chart

While the $5.9tr US IG corporate bond market represents only 12% of that global market, it is now responsible for 33.0% of its total (effective) yield payment. In other words, nearly one in three (global) dollars paid out in the global IG broad market is paid to investors in the US IG corporate bond market.

Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

There was a reason why we warned readers two days ago that "The World's Central Bankers Are Gathering At The BIS' Basel Tower Ahead Of The Brexit Result": simply enough, it was to facilitate an immediate response when a worst-cased Brexit vote hit. And that is precisely what has happened today in the aftermath of the historic British decision to exit the EU.  It started, as one would expect, with Mark Carney who said the Bank of England is ready to pump billions of pounds into the financial system as he stands at the front line of Britain’s defense against a Brexit-provoked market crisis.

Near Record Foreign Buyers Carry Blistering 30Y Auction At Lowest Yield Since January 2015

Just like yesterday all concerns about potential auction weakness promptly melted away when the resulted printed just after 1pm Eastern, when the High Yield was revealed at 2.475%, stopping through the When Issued by 0.7 bps (the May auction tailed by 0.8 bps), and the lowest 30Y auction yield since January 2015, which was just 0.5bps lower.

Treasuries Slump After Foreign Buyers Flee From Mediocre, Tailing 2 Year Auction

One look at today's repo market levels before today's 3 Year auction would have suggested that just because 3 Year paper was trading special in repo, that we would be primed for another short squeeze. However, that did not happen. Instead, and contrary to last month's stellar 3 Year auction, moments ago the US Treasury reported that today's auction printed at a high yield of 0.93%, tailing the When Issued 0.928% by 0.2 bps.

Another Blistering Auction: Foreign Central Banks Just Can't Get Enough Of 5Y Paper

Following yesterday's surprisingly strong 2 Year auction, the US Treasury pulled off another blistering auction when moments ago it sold $34 billion in 5 year paper (Cusip R77), at a high yield of 1.395%, stopping through the when issued by 0.8 bps, a surprising outcome following two consecutive tailing auctions, with a Bid to Cover of 2.60, the highest since November 2014. Incidentally, the yield of 1.395% was lower than last month's 1.41% when June rate hike odds were in the single digits.

Yuuuge 10Y Auction: Whopping Demand For US Paper, Record Foreign Central Bank Demand

If yesterday's 3Y auction was impressive, and stopped well through the When Issued, today's 10Y was an absolute blockbuster, stopping a whopping 2 bps through the 1.73% When Issued - the biggest stop through since September 2013 - on a yield of 1.71%, the lowest yield since December 2012. The internals were just as astounding, with a whopping 73.5% Indirect take down, the highest on record, and with Directs inline with recent historical averages of 11.8%, this meant that the Dealers were left holding the second lowest on record as foreign central banks scrambled to bid up as much of the paper as they could.

"It Has Been A While Since We’ve Had A Profitable Quarter To Report" - Einhorn's First Quarter Letter

"It has been a while since we’ve had a profitable quarter to report. Though we would like to make it a habit, trying to manage for quarterly  results is really not our philosophy. We think one of our advantages is the ability to be more patient than others, especially as investment horizons appear to be getting shorter.... the Fed’s “data dependency” doesn’t appear to relate to employment, which continues to improve, or core inflation, which is now running above its 2% target. We believe the increasingly adventurous monetary policy is bullish for gold."

Blistering Demand For 30Y Paper: Indirects Second Highest Ever

The final auction of the week confirms that something is seriously amiss with the market. On one hand, there remains a substantial (short covering) bid to risk assets; on the other buyers just can't get enough of safe paper issued by the government: we saw it in the strong 3Y, the stronger 10Y and now we just got a blistering 30Y which not only priced 2 bps through the When Issued, not only saw a jump in the Bid to Cover from 2.327 to 2.402, the highest since December, but also had an Indirect takedown of 65.1%, the second highest on record and just shy of the 66.0% in September of 2015.

Jump In Demand For 10 Year Paper In Strong, "Stopping-Through" Auction

Yesterday's strong 3Y auction was a harbinger. Despite the relentless risk on rally, moments ago the US Treasury had no problems to sell $20 billion in 10 Year paper which priced at a high yield of 1.765% (98.5% allotted), stopping through 1.6 bps through the 1.781% When Issued, the biggest gap since last spring, and well below March's 1.895%. The bid to cover jumped from last month's 2.49, rising to 2.75, well above the 6 month average, and the highest since January.

Indirect Bidders Surge In Strong 3 Year Auction

One month ago, when the Treasury sold 3 Year paper the reception was rather lukewarm when ahead of the March FOMC there was some concern that the Fed may actually hike. Now that any speculation of a rate hike has been shelved indefinitely, there was no problem for the US Treasury to sell this month's batch of 3 Year paper. With the WI trading at 0.894% at 1pm, the high yield printed 0.890%, stopping 0.4 bps through the When Issued.