Yield Curve

Most "Priced In" Policy Since 2011 - Why Draghi Better Not Disappoint

Mario Draghi better put up or shut up at the next ECB meeting as the market is more-than-pricing-in a very significant deposit rate cut (deeper into NIRP). In fact, at -56bps, 2Y German bond yields are the most "priced in" since 2011 (and bear in mind he disappointed in December).

Japan Braces For A "Turbulent, Volatile" 10-Year Auction With First Ever Negative Yield On Deck

"We expect the10y JGB auction on the 1st to be a new issue with a 0.1% coupon, but auction yields are likely to go into negative territory. We do not expect the bank sector to buy, and demand from dealers and foreign investors is unlikely to provide sufficient support. We expect the auction to be turbulent given investors are also unlikely to short futures and the possibility of a tail. "

Treasury Yield Curve Collapses To Flattest Since Nov 2007

With the short-end underperforming today, the US Treasury yield curve is flattening once again. The spread between 2Y and 10Y yields has plunged to 93bps today - the lowest level since November 2007 - suggesting US financials have not seen the wost of it yet...

"Has Everyone Lost Their Freaking Minds?"

It’s getting weird and the market is having a tough time figuring out what to take seriously, what to ignore, what to laugh nervously about and what to just laugh at. Are serious economists actually have a debate about whether it is a good idea to just print up cash and pass it out? Is that really monetary policy? Are governments really talking about banning actual currency, the very money created by that government? Money that depends, oh by the way, solely on people’s trust that the government will stand behind the money they are about to outlaw? Has everyone lost their freaking minds?

Kuroda's NIRP Backlash - Japanese Interbank Lending Crashes

Not only has the Yen strengthened and stocks collapsed since BoJ's Kuroda descended into NIRP lunacy but, in a dramatic shift that threatens the entire transmission mechanism of negative-rate stimulus, Japanese banks (whether fearing counterparty risk or already over-burdened) have almost entirely stopped lending to one another. Confusion reigns everywhere in Japanese markets with short-term interest-rate swap spreads surging and bond market volatility spiking to 3 year highs (dragging gold with it).

G-20 Needs To "Man Up" Or Risk Sparking Market Chaos, Citi Warns

“Keeping the previous language would be very disappointing and would be viewed as either complacent or reflecting policy paralysis. [They need to] man up and tell member countries that monetary policy should be accompanied by fiscal expansion.”

"There Will Be Hyperinflation" Japanese Lawmaker Warns "Kuroda Got It Wrong" With NIRP

Following The Bank of Japan's voyage into NIRP never-never-land, the market has sent a clear signal of its displeasure and now a growing number of Japanese officials (and former officials) are questioning Kuroda and Abe's Peter-Pan-ic dream that 'they' can fly. Having called for sub-zero rates more than two decades ago, Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, warns "The BOJ is trapped," now that QQE efforts have flattened the yield curve, since "if the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE." But it is Fujimaki's parting comment that should have most concerned, "Japan has ballooning debt and the BOJ is financing debt, that’s the problem... it will bust and there will be hyperinflation."

Why The Keynesian Market Wreckers Are Now Coming For Your Ben Franklins

Larry Summers is a pretentious Keynesian fool, but we refer to him as the Great Thinker’s Vicar on Earth for a reason. To wit, every time the latest experiment in Keynesian intervention fails - as 84 months of ZIRP and massive QE clearly have - he can be counted on to trot out a new angle on why still another interventionist experiment or state sponsored financial fraud is just the ticket. Right now he is leading the charge for the greatest stroke of foolishness yet conceived.

"Perma-bears" 2 - BofA Economist 0

"Capital markets seem to be pricing in a 50% or higher probability of a US recession. Our rates team has developed an adjusted yield curve measure that signals a 68% probability of recession."

What The Smart Money Is Most Worried About: Here Are The Four Brand New "Tail Risks"

How things have changed in the subsequent month. As the chart below shows, the biggest investor fear in February had nothing to do with a Chinese recession or an EM Debt crisis, and everything to do with the dreaded "R" word right inside the gold ole' US of A. In fact, four of the top "tail risks" are brand news, and in addition to a US recession include energy debt defaults, quantitative failure and a topic we have been covering since mid-2015, China's relentlessly encroaching capital controls.