Rating Agency

Shanghai Limits Individual Purchases Of Risky Bonds As China Overtakes US As Biggest Corporate Borrower

With China's shadow banking system's collateral chain's collapsing amid government crackdowns on the ponzi, the 'desperate for liquidity' borrowers have increasingly turned to global capital markets' suckers to fund the next malinvestment. As China's currency becomes more internationalized and yields around the world collapse (thanks to central bank largesse), demand from investors has driven, for the first time ever, the Chinese corporate bond market has overtaken the United States as the world's biggest. As S&P warns, this is raising global credit risk as "as much as 10% of global corporate debt is exposed to the risk of a contraction in China's informal banking sector," or around $4-$5 trillion, "causing overall corporate risk to increase globally," and it's not expected to slow anytime soon. It appears the authorities are starting to recognize the bubble as they plan to 'limit individuals' purchases of risky bonds'.

Stock Ramp Algos Confused On "Lack Of Tuesday", Cautious On Upcoming Fed Announcement

Since it's not Tuesday (the only day that matters for stocks, of course), call it opposite, or rather stop hunt take out, day. First, it was the BOJ which, as we warned previously, would disappoint and not boost QE (sorry SocGen which had expected an increase in monetization today, and now expects nothing more from the BOJ until year end), which sent the USDJPY sliding, only to see the pair make up all the BOJ announcement losses and then some; and then it was Europe, where first German retail sales cratered, printing at -1.9%, down from 2.0% and on expectations of a 1.7% print, and then Eurozone inflation once again missed estimates, and while rising from the abysmal 0.5% in March printed at only 0.7% - hardly the runaway inflation stuff Draghi is praying for. What happened then: EURUSD tumbled then promptly rebounded a la the flash crash, and at last check was trading near the high of the day.

Furious Russia, Downgraded To Just Above Junk By S&P, Proposes "Scorched Earth" Retaliation Against NATO Countries

  • Russia should withdraw all assets, accounts in dollars, euros from NATO countries to neutral ones
  • Russia should start selling NATO member sovereign bonds before Russia’s foreign-currency accounts are frozen
  • Central bank should reduce dollar assets, sell sovereign bonds of countries that support sanctions
  • Russia should limit commercial banks’ FX assets to prevent speculation on ruble, capital outflows
  • Central bank should increase money supply so that state cos., banks may refinance foreign loans
  • Russia should use national currencies in trade with customs Union members, other non-dollar, non-euro partners

Sleepy Holiday Market Prepares For Scripted, Daily Low-Volume Levitation

It has been a largely event-free weekend except, of course, for the previously reported re-escalation in Ukraine following what was a lethal shooting in the east Ukraine city of Slavyansk blamed on Ukraine's Right Front, which has made a mockery, as expected, of the Geneva Ukraine de-escalation announcement from last Thursday. Overnight in Asia, Japan reported its largest ever trade deficit, providing yet more evidence that Abenomics has been an abysmal failure: all we are waiting for now is confirmation that basic Japanese wages have fallen yet again, which would make nearly 2 years in a row of declines. Still, the USDJPY, gamed as usual by HFT algos for which FX is now the last respite as the equity market crackdown gets louder, is doing its best to ramp from the overnight lows and ahead of the traditional US market open surge, as a result equity futures are modestly higher.

Moody's Puts Russia On Downgrade Review; Cites Event Risk, Investor Sentiment, And Weakening Economy

Hot on the heels of what S&P said was not a "politically motivated" shift to rating watch, Moody's (who did not downgrade the USA and are not currently in a lawsuit over such terrible misrepresentations) has decided now is the time to put Russia on rating downgrade watch. The decision was triggered by 3 key factors: the weakening of Russia's economic strength, potential shifts in investor sentiment, and susceptibility to event risk. Full report below...

Frontrunning: March 25

  • Putin Threatened With More Sanctions as Russia Out of G-8 (BBG)
  • China Faces ‘Mini Crisis’ on Debt Defaults, Ex-PBOC Adviser Says (BBG)
  • Don't laugh too hard: Obama to propose ending NSA bulk collection of phone records (Reuters)
  • SEC Is Probing Dealings by Banks and Companies in Loan Securities (WSJ)
  • Japan GPIF asset review not aimed at supporting domestic stocks (Reuters)
  • Chinese families clash with police, slam Malaysia over lost plane (Reuters)
  • Russian Capital Flight Surges in First Quarter, Fueled by Ukraine Crisis (WSJ)
  • Democrats ditch Nate Silver after data whiz predicts dismal midterm outcome (DN)
  • China’s Urbanization Loses Momentum as Growth Slows (BBG)

Bounce In Chinese Equities Pushes US Futures Higher

Once again there has been little fundamental news or economic data this morning in Europe with price action largely driven by expiring option contracts. In terms of key events, Putin says Russia should refrain from retaliating against US sanctions for now even as Bank Rossiya discovered Visa and MasterCard have stopped servicing its cards, and as Putin further added he would have his salary sent to the sanctioned bank - the farce will go on. Continuing the amusing "rating agency" news following yesterday's policy warning by S&P and Fitch on Russian debt (was that a phone call from Geithner... or directly from Obama), Fitch affirmed United States at AAA; outlook revised to stable from negative, adding that the US has greater debt tolerance than AAA peers. Perhaps thje most notable move was in Chinese stocks which rallied overnight after major domestic banks said to have stopped selling trust products which were blamed for encouraging reckless borrowing and diluted credit standards. Speculation of further stimulus and the potential introduction of single stock futures also helped the Shanghai Comp mark its biggest gain of 2014 closing up 2.7%.

Risk On Mood Tapers Ahead Of Putin Speech

Has the market done it again? Two weeks ago, Putin's first speech of the Ukraine conflict was taken by the USDJPY algos - which seemingly need to take a remedial class in Real Politik - as a conciliatory step, and words like "blinking" at the West were used when describing Putin, leading to a market surge. Promptly thereafter Russia seized Crimea and is now on the verge of formally annexing it. Over the weekend, we had the exact same misreading of the situation, when the Crimean referendum, whose purpose is to give Russia the green light to enter the country, was actually misinterpreted as a risk on event, not realizing that all the Russian apparatus needed to get a green light for further incursions into Ukraine or other neighboring countries was just the market surge the algos orchestrated. Anyway, yesterday's risk on, zero volume euphoria has been tapered overnight, with the USDJPY sliding from nearly 102.00 to just above 101.30 dragging futures with it, in advance of Putin's speech to parliament, in which he is expected to provide clarity on the Russian response to US sanctions, as well as formulate the nation's further strategy vis-a-vis Crimea and the Ukraine.

GoldCore's picture

The move towards "bail-ins" and away from government "bailouts" continues to evolve and yesterday credit rating agency, Standard and Poor's  (S&P) warned that this could lead to credit ratings for European banks being slashed by one or two notches. It is important that one owns physical coins and bars, legally in your name, outside the banking system. Paper or electronic forms of gold investment should be avoided as they could be subject to bail-ins.

Ocwen, Dubbed "Next Generation Subprime Lender" By Moodys, Is Focus Of NY State Regulator

Ocwen Financial, dubbed by Moody's as poised to become the "next generation" of subprime lenders, has come under considerably pressure this morning amid news that NY State regulators are investigating the firm for "conflicts of interest"...

  • *NY DEPT FINL SERVICES FINDS POTENTIAL CONFLICTS OF INTEREST
  • *NY CITES REVIEW OF OCWEN'S MORTGAGE SERVICING PRACTICES
  • *NY SEEKS INFO ON FINL INTEREST OF OCWEN EXECS IN AFFILIATED COS

It is the Mortgage Servicing Rights (MSRs) that has Moody's the most-concerned as the volumes required may force Ocwen (and others) to shift their business model to ever lower quality loans.

Equities Supported By Optimism Of Positive ECB Surprise

Today the lingering problems of the "emerging" world and concerns about the Fed's tapering take a back seat to what the European Central Bank may do, which ranges from nothing, to a rate cut (which sends deposit rates negative), to outright, unsterilized QE - we will find out shortly: with 61 out of the 66 economists polled by Bloomberg looking for no rate changes from the ECB today it virtually assures a surprise . However, despite - or perhaps in spite of - various disappointing news overnight, most notably German factory orders which missed -0.5% on expectations of a +0.2% print, down from 2.4%, the USDJPY has been supported which as everyone knows by now, is all that matters, even if it was unable to push the Nikkei 225 higher for the second day in a row and the Japanese correction persists.

Geithner Warned S&P Chairman US Would Retaliate For Downgrade

 

S&P filed a declaration of McGraw yesterday in federal court in Santa Ana, California, as part of a request to force the U.S. to hand over potential evidence the company says will support its claim that the government filed a fraud lawsuit against it last year in retaliation for its downgrade of the U.S. debt two years earlier. In his court statement, McGraw said Geithner called him on Aug. 8, 2011, after S&P was the only credit ratings company to downgrade the U.S. debt. Geithner, McGraw said, told him that S&P would be held accountable for the downgrade. Government officials have said the downgrade was based on an error by S&P. “S&P’s conduct would be looked at very carefully,” Geithner told McGraw according to the filing. “Such behavior would not occur, he said, without a response from the government."