Yen

JGB Carnage Sparks Contagion Across Global Bond Market

Disappointing fiscal stimulus, loss of faith in The BoJ, and increasingly headless-chicken policymakers has sparked a sudden and severe rush for the exits from Japan's government bond markets. 10Y JGB yields exploded from -30bps to almost 0bps in the last 4 days - the biggest crash in prices in over 3 years. This bloodbath is roiling the rest of the global developed bond market with Bund yield spiking (+12bps in last 2 days, almost back to 0), Swiss, UK, and Danish bonds are all blowing out, and Treasury yields up 14bps since Friday alone.

Why Japan's "Massive" ¥28 Trillion Fiscal Stimulus Plan Was A Disappointment

Last week, when details of Japan's "massive" JPY28 trillion stimulus plan emerged, we pointed out the "minor" snag that assured the plan would be a disappointment: only about JPY7 trillion of this amount would be in the form of new spending. Overnight, Japan finally revealed the full plan, and as expected it was met with significant disappointment by the market, which sent the Yen soaring to new multi-week highs and saw Japanese bond yields surging .

Frontrunning: August 2

  • European shares hit two-week lows, yen rises as Japan backs stimulus (Reuters)
  • Australia Rejoins Global Disinflation Fight With Record Low Rate (BBG)
  • Japan Cabinet Approves $274 Billion Stimulus Package (WSJ)
  • Yen Surges to Three-Week High as Japan Stimulus Underwhelms (BBG)
  • Warren Buffett Takes On Donald Trump at Hillary Clinton Rally in Nebraska (WSJ)

Global Shares Slide As Japan Stimulus Disappoints, RBA Underwhelems, Italy Bank Fears Return

European stocks slid to a two-week low amid mixed earnings, as bank stocks extended yesterday’s decline as fears that Italy is not "fixed" have reemerged, not helped by an adverse market reaction to a disappointing Japanese fiscal stimulus announcement, while the AUD first dropped but then jumped after the RBA's priced in rate cut was announced, seen as underwhelming.

Japanese Government Bonds Are Crashing

Ahead of tonight's 10Y JGB auction and reportedly the unleashing of Abe's fiscal stimulus, it appears the world's investors are losing faith in the Bank of Japan's buying power and the MoF's credibility as Japanese government bonds are collapsing for the 3rd day in a row. With the biggest crash in prices (JGB Futures) since May 2013 (back to 5 month lows), yield across the entire JGB curve are exploding higher since Kuroda punted last week and questioned monetary policy effectiveness.

Euro Stocks Reverse Early Gains Dragged Lower By Slumping Banks; US Futures Flat; Crude Slides

Following last Friday's shocking weak US GDP print, Asian stocks jumped to an 11 month high on reduced prospects of a near-term rate hike, while the region also digested mostly encouraging in conflicting Chinese PMI data. European bank stocks initially rose following the release of the 2016 stress test then declined, tempering gains in global equity indexes, amid investor skepticism over the usefulness of stress-test results and weaker oil prices.

Goldman Turns Outright Bearish: Says To "Sell" Stocks Over Next 3 Months

For those who believe that Goldman is just another incarnation of Dennis Gartman and are still bearish, you may want to close out any remaining short positions because moments ago, Goldman just released a new report in which the firm has gone outright bearish, with a "tactical downgrade to equities for the next 3 months."

From Reflation To Redistribution: The "War On Inequality" Looms

The bigger picture narrative, according to BofAML's Michael Hartnett, is that the policy baton is passing from Monetary to Fiscal stimulus in 2016/17. Simply put, central bank rate cuts are ending; and new policies to address the populist desire for a "War on Inequality" are emerging. This 'fiscal flip' - as Hartnett describes it - means rotation from 'deflation' to 'inflation' assets... from 'financial' to 'real' assets.

USDJPY Plunges Back To Post-BoJ Lows, Gold Jumps After GDP

After the illiquid chaos of the last 24 hours, USDJPY is now pressing lower (Yen stronger) once again (under 103) after the gravely disappointing GDP data. Gold, and silver, are jumping higher and bond yields tumbling...

Frontrunning: July 29

  • Yen, bond yields rise as Bank of Japan action underwhelms (Reuters); Bank of Japan Takes Modest Easing Action (WSJ)
  • Hong Kong shares end lower as BOJ disappointment sweeps Asia (Reuters)
  • Accepting White House nomination, Clinton offers 'clear-eyed' vision (Reuters)
  • Two Conventions, Two Distinct World Views (WSJ)
  • Democrats Emphasize American Exceptionalism at Convention (BBG)
  • Clinton’s Image Among Democrats at a Historic Low (WSJ)