Futures Lifted By Verbal Cental Banker Exuberance

Tyler Durden's picture

Once again it is all about central banks, with early negative sentiment heading into Asian trading - following the disappointing announcement from the PBOC about "ample liquidity" leading to the 6th consecutive drop in the Shanghai Composite while the PenNikkeiStock index tumbled yet again -  completely erased and flipped as Mario Draghi spoke, although not to explain his involvement with the latest European derivative window-dressing scandal, but to announce that he is, once again, "ready to act" (supposedly through the OMT, which despite the best hopes to the contrary, still DOES NOT OFFICIALLY EXIST) and that while it is up to government to raise growth potentials, growth would "partly come from accommodative policy." In other words, ignore all BIS warnings, for Europe's unaccountable Goldmanite overlord Mario Draghi continues to promise more morphined Koolaid (read record Goldman bonuses) to any banker that comes knocking.

Sure enough, European stocks are now trading at session highs, and European optimism that the monetary spigot is still quite open has pushed US equity futures to their respective session highs as well.

In other news, formerly-exiled (and pardoned by donor recipient Bill Clinton) Glencore founder Marc Rich has died in Switzerland at age 78.

The crash in the Indian Rupee and the precious metal complex was already noted, even if bond yields are modestly tighter, both across the European periphery as well as the 10 Year which was down to 2.57% at last check. Alas, not so much Indian 2022 bonds, which are now 9 bps wider to 7.77% and surging.

And just to provie that it is indeed, "all about the Central Banks at the moment", this is precisely how DB's Jim Reid begins his daily comment of the day. To wit:

It's all about the Central Banks at the moment - a comment that we'll probably continue to make many times over the next few years. On balance the PBoC is edging out the Fed as the main concern for markets at the moment. Its also providing us with pretty volatile intra-day markets. Indeed, as we went to press with the EMR yesterday, the Shanghai Composite index was trading at a low of - 5.5% before staging an impressive come back to finish the day relatively unchanged (-0.2%) on the back of some somewhat reassuring comments from PBoC officials. The PBoC’s comments mostly downplayed the concerns around liquidity and money market rates saying that liquidity was partly a seasonal factor.

A number of domestic newswires have also run editorials overnight suggesting that liquidity will return to the banking sector after month-end. Looking out to the rest of this week, it’s very likely that we’ll see more headlines from PBoC officials with Shanghai’s annual Lujiazui Forum (a financial conference) starting tomorrow and continuing through until Saturday. This forum is co-sponsored by the PBoC, the local banking, securities and insurance regulators.

As we type this morning, the Shanghai Composite is trading about 0.9% lower with financials down 2.6%. Onshore money market rates remain elevated though newswires are reporting that the PBoC has intervened to inject liquidity through open market operations overnight. Elsewhere in Asia, sentiment is more stable this morning with gains seen on the Hang Seng (+1.0%) and KOSPI (+0.2%). S&P futures are trading about 5pts lower (-0.3%). There have been large moves seen in Asian credit which is getting squeezed tighter amidst the better market sentiment - the IG index is trading around 10bp tighter overnight. The CDS of higher beta EM sovereigns such as Indonesia are around 25bp tighter.

Back to China, whether or not the liquidity picture eases, there is concern building that what's happens so far will impact loan growth over the coming 1-2 months and to real economic growth. In terms of the observable indicators, the one-year yields on local AAA corporate debt has spiked 121bp to 5.15% according to the South China Morning Post citing data from ChinaBond. At the same time, bond sales slumped to RMB158 billion for the month of June, the least in 17 months and down 57% from May. The article says that at least 11 companies have delayed bond sales this week alone and about RMB7 billion of offerings have been postponed. Whether the banking system liquidity issues lead to a longer term slowdown in credit growth, remains to be seen, but constrained banking liquidity appears to have limited the ability of companies to raise funds from the bond market for the time being.

Returning to yesterday’s session, we noted the interesting interplay between USTs, equities and credit. Starting with USTs, 10yr yields reached a low of 2.48% during the European session, but the subsequent release of some upbeat US data helped 10yr yields close at a high of 2.61% at the end of US trading. Interestingly, the S&P500 remained firm throughout the session, even reaching an intraday high of +1.3% (close 0.95%) despite the +13bp move upwards in US rates. Similarly the CDX IG credit index rallied into the close to finish at the day’s tights. This was in contrast to Monday when we saw softness in both equities and credit as yields spiked briefly up to 2.66%.

Much of the move up in yields was attributed to some fairly strong US data. This was interesting given that the data collection/survey periods were all prior to June’s FOMC. Consumer confidence for June came in at a cyclical high of 81.4 (vs 75.1 expected) as consumers’ assessments of both future expectations (89.5 vs. 80.6) and present conditions (69.2 vs. 64.8) improved on the month. DB’s Joe Lavornga notes that the cut-off date for the June survey was the 13th, so the preliminary results were collated prior to the momentous FOMC meeting. Durable goods orders for May rose 3.6% (vs 3.0% expected). The Case-shiller home price index for April increased 1.7% (vs 1.2% expected). On a year-on-year basis, the index has risen 12% for its strongest annual gain since March 2006.

Outside of the PBoC, a number of central banks were also active yesterday in supporting sentiment. The ECB’s Coeure said that there "should be no doubts that our exit (from current policy stance) is distant and our monetary policy is and will remain accommodative". Coeure added that the ECB has been speaking with market participants on the potential for negative deposit rates and the central bank stands "technically ready" for this measure. A similar message was also given by Draghi and Liikanen. Draghi said the Euro area still requires loose monetary policy and OMT is needed more than ever, which was somewhat timely given that periphery European bond yields are at or near YTD highs. Outgoing BoE Governor Mervyn King said markets had "jumped the gun" about when central banks were likely to start raising interest rates after the Fed comments.

Turning to the day ahead, we have another round of speakers from the ECB (Asmussen and Mersch) during the European trading day. In the US, Q1 GDP revisions and mortgage applications are the main data releases.

And SocGen's recap:

It has taken statements by three Fed officials, ECB president Draghi and BoE governor King, but at least we saw some degree of normality returning yesterday as volatility eased off in FX and the VIX index dropped a full 3.5pts from Monday's 21.93 high. The PBoC too has been credited for helping to restore stability, even though the funding situation in China remains strained. At yesterday's fixings, 1-month CNY libor was set at 8.418%, nearly 400bp above the rate a month ago.

Stocks ended the session higher on both sides of the Atlantic despite a further back up in US yields after strong data for consumer confidence and new home sales. Seven straight sessions of higher yields have been registered and the tactic of selling rallies will not be abandoned soon as the UST 10y climbs over 2.60%. Mortgage applications data may provide a more sobering picture as mortgage rates surge, but this will not turn the tide and we reckon the advent of debt supply will keep yields and swaps in the ascendency into next week. That should keep the generally USD-bid tone intact, though chinks in the armour have started to appear with oversold currencies trying to cut their losses. Positioning looks interesting in that post-FOMC liquidation of USD longs by speculative accounts did not slow the USD rally. Tactics may well be reversed and give the greenback another tailwind.

The demarche from president Draghi yesterday on the OMT shows the lengths to which the ECB is prepared to go and how the game has effectively changed outside the US since the FOMC roiled bond markets worldwide last week. In the eurozone as well as in the UK, money market futures have sold off dramatically, pushing 2014 rates to levels that imply a tightening in monetary policy next year. The steepening has also seen short-term borrowing costs rise sharply; cue the results yesterday of Spain's 3-month and 9 month bills auctions. With the eurozone economy still limping along, one wonders what the ECB might do if yields keep pushing higher. Verbal intervention will suffice for now, but it could take bold policy steps to stop funding costs from rising even further. With 10y gilts having added 40bp in a week, no wonder BoE governor King in his final testimony yesterday lamented the premature judgement of people thinking a return to normal interest rates is imminent. It is a view incoming governor Carney will undoubtedly share when he takes office in Threadneedle Street on 1 July.

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Zer0head's picture

Futures lifted cause ZH contributing editor Chris Whalen is on BBG this AM

Chris maybe you'll be kind enough to provide us with a short note on the goings on at BBG surveillance the way you did for Kotok's fishing trip


Where is Ken Prewitt?

Is Tom Keene as a big a buffoon in person as is he on TV?

Is it true that Sara Eisen has been a guest of Mike at his Tuckers Town digs in Bermuda?

Are the producers of Surveillance aware that their show has become a sad parody of CNBS?

Do you take a shower after fraternizing with these MSM types or are you one of them?


Seer's picture

Apologies to Zer0head for hijacking, but, this might introduce a bit of excitement in the Central Banking community:

UC Regents, San Diego governments launch LIBOR lawsuit


Always figured that sooner or later some big entity was going to bump chests and that one such event might free the genie from the bottle.

Yeah, it's CA, but even so I think that it's worth rooting for UC Regents here.

buzzsaw99's picture

If there is a scam, a california pension fund will find it and be the largest investor every time. They have thousands of lawsuits they should be pursuing.

Seer's picture

I don't care if it's another rat gnawing on the other rats, I just want to see some rat-gnawing!  This could be the thing that unleashes the floodgates.  Just not seeing a successful Prisoners Dilemma pulled off here...

hooligan2009's picture

central bank, money printed and government deficit funded takeovers of large overseas companies by currency debasers


the lunatics are attempting to capture the asylum

Paper CRUSHer's picture

Many have been commenting on the recent crude price which still remains firm despite liquidity concerns globally,as much as i hate say this.......damn, the kid is resilient.

The black stuff continues to take the shine off AU as the following long term gold/oil ratio suggests:



Seer's picture

How long does oil's history go back?

No argument from me on the importance of oil.  I don't, however, see it as becoming very usable as person-to-person barter material: a bit on the bulky side (yeah, a bit of a pun there).  Its real value only exists within the framework of a highly non-sustainable infrastructure.  An interesting test, I suppose, would be to go out to some third-world rural area and offer individuals the choice of an X value of oil OR an X value of gold and see what folks would be more likely to go for.

Seer's picture

I don't even need to read the article to answer that one!

Everything is in the toilet except the stock markets.  Seems clear what the policy biases are...

Just think, Americans can also experience live the game of Pipeline Disruption ala the ME..  And if there are no honest-to-god real people sucked into the game you can be assured that the govt will provide the players!  I figure one good "terrorist" go at a pipeline ought to be worth a whole ton of security contracts and removals of rights... (they'll probably even use real life Taliban just like in Syria and elsewhere- figure that it would be maximizing taxpayer dollars by using existing resources!)  PNAC II: "it'll take another 9/11 to get people to respond"

GMadScientist's picture

Well as long as they don't try to close Gitmo. /sarc

involuntarilybirthed's picture

"They Shoot Horses, Don't They" 

PhilofOz's picture

Comments are scarce... my fellow goldbugs in a state of shock I'm guessing. As an Aussie, I guess I'm "lucky". The AU$ dropping from around US$1.05 to circa 92.5 has softened the blow. Sell! Never! Well not until all falls apart and the fiat I still have becomes less valuable than toilet paper.

ExYank's picture

I dont think our plastic Aussie fiat will ever have the high value of toilet paper. No absorbant qualities what so ever with this stuff.

PhilofOz's picture

I think I'll feel a lot more comfortable with them than Bernanke's FRN. 


Meanwhile Gillard goes and Rudd returns! Ms Liar replaced by Mr Slime!

GMadScientist's picture

Much lower cocaine content; not sure what that does to the valuation.

Clam McCain's picture

Dont buy gold here. Remember Paul Tudor Jones - losers average losers

GetZeeGold's picture



No one has ever told me to buy gold.....but I still did and I started a long time ago.

Quinvarius's picture

Paul Tudor Jones would be buying here.  You should probably actually read about his trading style.  He picks bottoms and tops.  He would never chase gold down in this fundamental situation, after this kind of shakeout.

Clam McCain's picture

The bottom is in when it stops going down..no signs of that yet?

GetZeeGold's picture



No signs of stopping fiat printing......someone is lying.


If they want to hand out cheap gold.....I'll take it.

Yen Cross's picture

     Someone needs to write a program that teaches the algos how to differentiate between bullshit and fact. No sane living person would buy equities or bonds based on jawboning from Draghi.

EclecticParrot's picture

In the old days, powerful traders would fade such empty pronouncements, so the fact that algos don't means that . . . well, it must mean that . . . ("Pay no attention to the man behind the curtain -- the Great Draghz has spoken !").

orangegeek's picture

It will be interesting to watch the US Dollar rise along with US equities.


Historically, the US Dollar has an inverse relationship with the S&P500.



Seer's picture

Ultimately it comes down to "who the hell is buying?" the products.

That string is never going to hold up to all the pushing.

People really didn't expect instability to be stable did they?

Cycle times to continue to get shorter.  Stability is starting to look like string...

new game's picture

corp bonds go down and profits follow.

this relationship always impacts stock prices.

liquidity is the issue

cash will remain king until something gives.

bet accordingly, as in the sidelines...

shit in the pool and everyone is getting out-is that a baby ruth?

Seer's picture

It's really like a horse race at the glue factory, and you're late for dinner and need a horse to ride home on.  And then we start to think that maybe the pig with the lipstick holds promise...

slaughterer's picture

Is Draghi still jawboning a program that does not exist and has no legal term sheet? Yes.

Are markets reacting?  Yes.


Seer's picture

As long as they believe that confidence in deception is working they'll continue to control the markets.

Zer0head's picture

No indication if this guy facing 13 years in Prison was a ZH reader but probably he was

At least now when people say no one went to jail cause of the banking crisis, they can be proven wrong


Seer's picture

And meanwhile the San Diego Association of Governments co-joins UC Regents in a lawsuit over LIBOR*.

Orwell was an amateur!

* In case people missed it up-thread (ZerOhead, really, I'm not stalking you! :-)):


Seer's picture

Aparently a pro-central banker is lurking (down arrow).  That or anytime anyone mentions CA it's an automatic down-arrow? OR, there are fans of Orwell who don't believe that someone/something could out-Orwell Orwell?

Fucking pikers...

razorthin's picture

If it were true gold would be surging.

GetZeeGold's picture



It is......in China.


Most Westerners will have upgraded their cell phone in the time it will have taken to get to the front of a gold line over there.


Meanwhile back in the heart of the financial capitol that is New York city.....Anthony Weiner jumps out into the lead. Coincidence......or not?

new game's picture

indeed it is china. liquidity. where is the cash? hmmm.

that paper, well, has implications-ha, payments remain the same but growth is dropping.

not a good mix when extended to the max.

moar credit-that i'll do it....

or jump.

Seer's picture

For the longest time I'd figure the camel's back would be broken from China's straw.  Do you think that China will start looking to dump USTs (which would likely cause the USD printing presses to run harder)?  It's kind of looking like they don't want to crank on their own presses.

Investor-1's picture

The financial market is a difficult place to operate in as an investor. In the past I have lost a lot of money making the wrong trades. I now copy the trades of a few good traders. They make a lot of money trading forex and gold.

resurger's picture

Those fucking CB's

scatterbrains's picture

The tide is unusually low this morning.. and still getting lower.. look at all those pretty sea shells.. I wonder how far I can walk out..seems like miles.. weird.

ziggy59's picture

Hmmm...be aware of tsunami waves

Quinvarius's picture

The S&P pump reminds of the days of 2008 when it would get a runup in the morning only to get sold into hard and end very red.  I don't like the looks of it.  Looks like false advertising.  The trend is already established.

thismarketisrigged's picture

@quinvarius, i agree this is a false open, and we prob do end red.


the point is that we should already be heavily red, but instead, some jackass opens his mouth to pump up markets, so wherever we fall from will be a lot less severe

thismarketisrigged's picture

of course leave it to some douchebag central banker, in this case draghi to fucking say something that is totally fucking false to pump up markets.


that makes it 2 fucking nights in a row where asia was falling and some asshole comes out and spews bullshit to make futures green.


how fucking stupid are the people/algos to listen to what this fucker says? draghi said the same shit last summer, and nothing was done. the man is a fucking liar who should be hung immediately.


fuck u draghi u piece of shit.

Seer's picture

"how fucking stupid are the people/algos to listen to what this fucker says?"

I reckon that there are plenty of people that TELL him what to say, and that you can find these people standing behind all those rising stock market numbers.

Govt and big business are volleying with each other.  Govt pumps money into the stocks so that they can collect tax revenues: where else are tax revenues to be found?

And meanwhile more and more people are dropping out of the stadium.  At the point that there's not enough spectators (folks helping prop up the "confidence") the game becomes moot and collapses.

Only thing left is The LIE.  It was always there, it's just that we can no longer pretend that it's not.

Bryan's picture

Verbal diarrhea.


q99x2's picture

That's a big 10-4. We got a verbal.

HeliBen's picture

The Draghi bazooka is in play. Should work, COUGH.

Hondo's picture

One cannot complain about the 47 million on SNAP as the top 5% are given mega welfare payment from the FED through QE..