This page has been archived and commenting is disabled.
It's Central Banker Appreciation Day
Today is one on those rare days in which everyone stops pretending fundamentals matter, and admits every market uptick is purely a function of what side of the bed Bernanke wakes up on, how loudly Kuroda sneezes, or how much coffee Mark Carney has had before lunch, but more importantly: that all "risk" is in the hands of a few good central-planners. Following last night's uneventful Bank of Japan meeting, in which Kuroda announced no changes to the "full speed ahead" policy of inflation or bust(ed bank sector following soaring JGB yields) and which pushed the Nikkei225 to surge above the DJIA closing at 15,627, today it is Bernanke's turn not once but twice, when he first takes the chair in the Joint Economic Committee's "Economic Outlook" hearing at 10 am, followed by the May 1 minutes release at 2pm (which may or may not have been previously leaked like last month). As a reminder, Politico reported last night that Ben Bernanke had previously met in secret with Darrell Issa and other lawmakers "to discuss the central bank’s efforts to stimulate the economy and how it could exit this strategy in the future, according to people who attended the meeting." And since we know how important transparency is to Bernanke and the Congress, "Participants in the meeting declined to disclose specifically what Bernanke told lawmakers beyond saying there was discussion about the Fed’s bond buying programs and other issues." But as long as Mr. Issa, the wealthiest man in the House, has his advance marching orders, all is well.
Just in case there is still any doubt that the Fed is just as clueless as everyone else in this uncharted territory, Bill Dudley appeared minutes ago on Bloomberg TV with the following key observations:
- Says QE tapering possible by autumn if economy improves, speaking in interview on Bloomberg TV. Or, if it doesn't as it won't as it is the Fed that is preventing growth, then impossible
- Says Fed wants to make sure markets don’t overreact to taper
- Says Fed hasn’t decided yet on tapering timing, steps
- Says he is “very much in sync” with Bernanke on policy
- Says fiscal drag obscuring stronger economic fundamentals
- Sees lot of real positive things underneath the surface
- Says economy not quite at “self-reinforcing” stage yet
- Says 2%-2.5% growth “pretty good” given fiscal restraint
- Says he’s “not very nervous” about slower inflation rate
And so on.
In other, irrelevant but still notable news, UK retail sales plunged -1.3% and -1.4% ex autos, on expectations of a +0.1% print for both, while the BOE announced it had voted 6-3 to keep QE unchanged. This will certainly change once Mark Carney takes the helm in just under two months.
And in somewhat strange news, Russia pulled a 33.6 billion ruble bond auction of 2019 OFZ bonds with a yield of 6.33%-6.38% due to lack of bids. A failed bond auction in this carry chasing environment? Surely this can't happen, and if it did, there is something more than meets the eye. Oh well, let's just ignore it as it does not fit the narrative of all is well, as confirmed by the EURCHF passing 1.26 for the first time in years, following rumblings out of the SNB's Jordan about a possible negative deposit rate. Wait, did we say "all is well" - we meant all is centrally-planned.
The remainder of the key events summarized in bulletin format courtesy of Bloomberg:
- Treasuries little changed before Bernanke speaks on economic outlook, Fed releases May 1 meeting minutes; NY Fed’s Bill Dudley said policy makers will know in three to four months whether economy is healthy enough for QE to be tapered.
- Dudley cited “tug-of-war between the fiscal drag and the improving economy” in an interview with Bloomberg TV; said that his views and Bernanke’s were “very much in sync”
- The Bank of Japan pledged to adjust its unprecedented stimulus program as needed after a jump in bond yields that highlighted risks linked to policy makers’ campaign to revive the world’s third-largest economy
- BoJ maintained pledge to double monetary base in two years; link to statement
- BoE Governor Mervyn King was defeated for a fourth month in his bid to expand stimulus as the majority of officials cautioned against the danger of stoking inflation expectations
- U.K. retail sales fell 1.3% in April (est. +0.1%), led by drop in food sales
- CHF weakened through 1.26 vs EUR for first time in two years; SNB President Thomas Jordan yesterday said a shift of the cap on the franc and negative interest rates are among steps the central bank could take to prevent a tightening of monetary conditions
- Government bonds should be excluded from the EU’s planned financial-transaction tax because the levy would drive up sovereign borrowing costs, a panel of European debt-management officials said
- Apple Inc.’s bonds have lost $280.6m of market value since buyers snapped up $17b of the iPhone maker’s debt last month, declining as yields climb from record lows.
SocGen recaps the already noted key highlights, only better:
Fed chairman Bernanke's testimony before the Joint Economic Committee last year (7/6/12) produced no fireworks, with the exception of gold. A run of open and closing prices for that day reads as follows: EUR/USD 1.2559/1.2566, USD/JPY 79.13/79.60, UST 10y 1.6541%/1.6388%, gold $1,634/$1,592, S&P 1,316/1,314. What on earth is all the fuss about today, if you are really keen sell JPY and gold. But that's no rocket science and corresponds neatly with the view any USD bull has today, and there quite a few. Except that the last leg of the dollar rally has not been led by speculative accounts (see chart). Does that mean the rally is running out of steam and a dovish Bernanke reignites risk on and a weaker USD?
Strategically our secular view for a stronger USD has not changed, but the question is whether Bernanke calls for a short-term tactical switch after a 3.7% rally in the USD this month. The currency is by no means technically overbought and bright prospect of additional gains are unchanged over a 6 to12 month time horizon based on our expectations that the Fed will start tapering bond purchases later this year (Q3). However, planning ahead for stimulus exit is not the same as pledging to exit and for Bernanke (and other FOMC voters), the bar is likely to be pretty high before steps are undertaken to dial back from the current purchase rate of $85bn per month.
The FOMC minutes could include an updated guidance of how a roadmap would look once the Fed decides the time has come to take its foot off the monetary accelerator. Speculation has been building steadily since the start of the year but is only a few weeks since FOMC voters and non-voters alike have stepped up the rhetoric with some calling for tapering at soon as the June meeting. We believe Bernanke will stick to the last FOMC statement to allow the central bank maximum flexibility, and in doing so, keep bullish conditions intact for risk assets. Watch the 2.00% level in UST 10y.
It has not been a one-way street for the USD and UST yields despite speculation that 2013 could be a watershed for Fed policy. There have been a few bumps along the road which caused the USD and UST yields to give back some of the early 2013 gains, notably in March and April. In contrast, the equity and credit markets have been on a planet of their own, supported by concerted central bank efforts to support global demand. The S&P gave up 2.8% in February and 3.8% in April over one-week periods but other than that it's been fairly smooth sailing. With inflation subdued and the labour market still not satisfactory, Bernanke will be careful not to spoil the party.
* * *
And DB's recap of the past 24 hours.
Central banks are also the key focus over the next 24 hours with the Fed minutes and Bernanke speaking later. However as I type the BoJ have just concluded their latest policy meeting by reaffirming their target to double the monetary base over two years and the inflation target of 2%. In terms of the economic outlook, the BoJ said that exports and business fixed investment have stopped weakening amid improving consumer sentiment. The central bank added that indicators are suggesting a rise in inflation expectations. There was no reference made to the recent JGB volatility which was probably behind the 4bp sell-off in 10yr JGB yields (to 0.895%) in the minutes following the BoJ’s statement. We will probably get more on this at Governor Kuroda’s post-meeting press conference scheduled for 7:30am London time today. USDJPY is steady at 102.5 following the announcement.
Returning to the Fed, relatively dovish comments from the NY Fed’s Dudley and St Louis Fed’s Bullard, both FOMC voters, helped put a floor on risk assets yesterday. Starting with Bullard, who is not generally known for his dovishness, remarked that the Fed should “continue with the present QE program” because it is the best available option for policy makers to boost growth. Bullard added that he doesn’t see a good case for QE tapering unless inflation risks pick up. On the topic of IOER, Bullard said that he advocates negative interest rates arguing that paying interest on excess reserves was “mildly counterproductive”. Dudley backed up some of those comments about the pace of easing but stressed that QE should be largely data-dependent.
In terms of the market reaction, the S&P500 was trading near a session low of -0.1% yesterday, but rallied as Bullard and Dudley spoke to close at another record high of 1669.16 (+0.17%). Sectorally, healthcare (+1.1%), consumer discretionary (+0.5%) and financials (+0.2%) enjoyed the best of the gains. The latter was buoyed by news that JPMorgan’s Jamie Dimon had survived a proposal to split his role of CEO and Chairman. The proposal to split the roles drew only 32% of votes this year, was down from 40% last year, which helped propel JPM’s stock to a 1.4% gain yesterday. Better than expected earnings from Home Depot underscored a strong day for consumer discretionary stocks. As US earnings season draws to a close, it’s fair to say to that results have been somewhat mixed this quarter with 71% of US firms beating estimates, but only about half managing to do the same on the top line.
Outside of equities, 10yr UST yields threatened to breakthrough the 2.00% level yesterday before rallying 7.5bp from the intraday high to close at 1.93%. In addition to the Fedspeak, the volatility was also attributed to short covering ahead of Chairman Bernanke’s testimony today. The USD index closed higher (+0.2%) in an up and down session. Gold (-1.3%) and silver (-2%) gave up most of yesterday’s rebound amid the stronger risk sentiment and stronger USD.
Turning to Asian markets, equities are trading mostly higher overnight led by gains on the Nikkei (+1.2%). The Nikkei traded through the 15,500 mark for the first time since December 2007. The KOSPI (+0.8%) and Shanghai Comp (+0.2%) are also firmer, but the ASX200 (-0.3%) is lagging the region’s broader moves. The Hong Kong equity markets remain shut due to inclement weather (“black rain”) but are due to reopen in the afternoon. I’m glad I flew out last night from there. I did one meeting yesterday where I was so high up that I was practically in the middle of the violent thunderstorm! I was trying to convince the client that I wasn’t in the slightest bit scared!! The reality was a bit different.
In the day ahead, Ben Bernanke takes centre stage when he speaks before the congressional Joint Economic Committee on the US economic outlook at 3pm
London time. The Committee is bipartisan, and it’s safe to say that will be an effort by lawmakers on both sides of politics to prise more detail with respect to the Fed Chairman’s QE plans. The Fed minutes from its Apr30/May1st FOMC meeting are published at 7pm London today. The BoE’s will also publish its latest meeting minutes this morning. US existing homes in April and UK retail sales are the highlights on the data calendar.
- 6077 reads
- Printer-friendly version
- Send to friend
- advertisements -


See Figure 1.
Did HKMEX open?
not
ah yes, today is the day at exactly 10 am, gold and silver prices get destroyed.......i bet silver hits the teens today......
cocksuckers...
excellent article, Tyler. this year's is the FED birthday, isn't it? 100y on December 22nd
-------
oh, I nearly forgot propose a view that might be controversial: is the ECB really part of this "gang of cbs"? because in the design phase, it was meant to oppose/adapt to this kind of environment we are entering. you know, price stabeeleeteee. we'll see...
What is American exceptionalism?
a feeling borne by the intent of the Founding Fathers to avoid policy mistakes done in Europe's history? coupled with the natural and personal freedom that a vast new world gives to new colonists?
No such thing. There's only Central Banker Exceptionalism and Civil Service Exceptionalism. We serfs are fortunate to live under the tutelage and directives of such wise, exceptional people.
A myth that only holds any validity as long as you fully fund your military.
A concept embraced by the Founders and their supporters and most Americans until the early 1900s that have the following principles:
1. A nation could learn from 2,000+ years of documented, historical failures of governments and design a government with little central power (States rights) and checks and balances.
2. The European government model, no matter the era, should never be followed.
3. That individuals are free and personally responsible for their circumstance.
By May 22, 2013 we find a nation where States have ceded power to the Federal Government because it is easier, citizens ceding freedom to the Federal Government so they are not burdened with responsibility, and a Federal Government that wants to be a socialist state like Europe.
I say we take off and nuke Jekyll Island from space. It's the only way to make sure.
"33.6 billion ruble bond auction of 2019"
I know couple of guys in Black Dolphin who can hit a bid on that.
Kiss the Ass Of The Lying SOB Tyrants That Has Helped Enslaved The World, Urinates on Us, And We Are Supposed To BeThankful Day...
I know it wont fit on a Hallmark Card
Can you feel the love?
So, what was the point of all the taper talk exactly? Why float some trial ballon for policy they clearly won't or can't engage? The optics are meaningless.
Copper is signaling the all clear
Doesn't it make you TomDick (sick) when we are discussing Chairman/CEO instead of Jailtime for that criminal Jamie Dimon the Welfare Queen.
Further it is my assumption that those two jobs are important to him and the sodden rest for fear that anyone brought in for the chairmanship would expose JPM's corrupt business practices and creative accounting methods.
Smug fucker and we can only hope that the arselickers on cFLEMbc get to see him soon in an orange jumpsuit if not hanging.
Have a nice day y'all
"Smug fucker"
Indeed. However, it brings a smile to my face to think how many times he's had someone spit in his food and serve it to him with a "enjoy" Mr. Dimon.
I'm glad the CB'ers are in a good mood b/c most people I've talked to in the last few weeks are in a mild state of depression. Businesses slow, postal rates up, delinquent account receivables rising, QE uncertainty, Bubble Hosuhing, Bubble stock market, hot/humid weather coming, sea lions deformed off the Cali coast, Fuki ships washing up on west coast shores, more boarded stores fronts in strip malls....a whole host of things.
Good thing we have the William Dudley leading the way with these confident market inspiring proclimations.
The True Daughter of Mother Omida Witch declared today that all will be good this year, <strong>if</strong> will not be bad. Please take your precautions when you see black cats walking on the street!
There is one issue that the PTB along with their lackeys at the press keep off the radar that will affect their ' inflation expectations' blather: With their massaged CPI figures the working man's plight is totally ignored. He/she has struggled to keep up with the insane actual inflation while his/her wages and pensions have been kept at mostly 1970's levels.
My guess is that when the lid finally does start to jiggle on that pressure cooker, the Central Bankers around the world will do more than look for an exit, they will run for their lives.
Even CNBC is showing it's colours as expected :
Gold rallied years on misunderstanding
http://finance.yahoo.com/news/gold-rallied-years-misunderstanding-021935...
CNBC will soon ( have to ) explain why all the CBs are buying boatloads of it.
;-)
That has to be one of the worst articles I've ever read, even by a Keynesian arse candle!
These "journalists" of bollocks will never be employed again, after this shitstorm hits!
I've bookmarked this one especially! Re-reading this in 5 years will be fucking hilarious!
Frankly, we need a "No More Lies" week first.
Says 2%-2.5% growth “pretty good” given fiscal restraint
I don't think I could get past saying growth without a smirk showing. That's why I'm not on TV, plus I would just start dropping F bombs everytime they mentioned Bernanke.
if bernanke says qe is good to go on, dow closes at 15,600 today.
if he says they maytaper, market will be flat because they will say that was priced in already, and in which case i would fall over and die of laughter because ill say to myself, wtf was priced in, a 20 point drop in dow?
i cant wait till bernanke and all his fed friends and central bankers are hung to death.
Wir sind alle doch noch Schlampen.
It seems obvious that the bankers know that what they are telling people are lies. People know the bankers are constantly telling people lies. It is a pure power play. Ram it down people's throats until they cannot take it anymore and then something will break...
It is clear that the banks have the ability to make it break any time they want and they are driving toward making it break. The question then is "what are they waiting for?". Is there some preparation? Is there some cosmic ritual? Is there a blood sacrifice to Moloch, Ishtar or Satan that must happen at the same time? Is the banker supply hut out of Bernanke's favorite nose bones?
I think they are waiting for Germany to get most of its Target2 Accts. Receivable back, as well as some €€€ from club Med. They are also waiting for Japan and Chinea to get super pissed at one another. Nothing better to stimulate the economy like a good ol' fashioned war post-fiscal Armeageaddon.
http://www.informationclearinghouse.info/article30620.htm