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European Bond Market May See Nasdaq 2000 Style Collapse, AXA's Haley Says
We’re now officially two weeks into the ECB’s trillion euro PSPP wherein Mario Draghi will do his best Haruhiko Kuroda impression by monetizing all the government debt he can find and in the process likely discover what should have been clear from taking a look at how effective previous iterations of unbridled money printing have turned out to be when it comes to stimulating growth and boosting inflation expectations:
Essentially, the more you do it, the less effective it is, and when it comes to inflation expectations, the results have been underwhelming to say the least. Nevertheless, Mario Draghi and other ECB officials like chief economist Peter Praet have been busy explaining just how committed they are to asserting “monetary dominance” by purchasing assets forever if necessary. Here’s governing council member and Bank Finland chief Erkki Liikanen:
“The large-scale asset purchases will be carried out at least until end-September 2016 and in any case until the Governing Council judges the pace of inflation is returning sustainably to a level in line with the price-stability objective [and] we are committed to that resolutely and without doubt.”
Meanwhile, Q€ is distorting euro money markets and effectively stripping the market of its ability to signal anything at all about risk. Here’s what we said earlier this month on the subject:
In a nutshell: short-end core paper will trade below -0.20%, extreme supply/demand imbalances will cause general collateral rates to trade through the depo rate, money market fund yields will turn decisively negative testing investor patience, and central banks had better make good on promises to make some of their inventory available for lending or risk impairing the functioning of the repo market (never a good idea).
It’s in this context that some have begun to suggest that the ECB has created a bubble in eurozone government debt that could end very badly. According to AXA’s Nick Hayes, the EGB bubble may end in a 2000 Nasdaq-style collapse. Here’s more via Bloomberg:
The comfort with which investors are embracing negative yields is similar to behavior of those who had been underweight technology stocks in 1999 before rushing in, Nick Hayes, fund manager at AXA Investment Managers, says in e-mailed comments.
These investors thought, “maybe I should just buy these IPOs because they always seem to go up, even if the economic fundamentals are poor”
...and this will lead to...
Capitulation of euro-area govt bond market participants who were previously short duration means positioning is more balanced than in 2014.
...which means...
This means market may “just fall in on itself” like Nasdaq in 2000, and rising yields will be met with little resistance.
...and the trigger could be...
Any re-pricing of USTs, and other core govt bonds, could lead to a selloff in most of global fixed income.
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I've been crouched under my desk since 2008 waiting for a collapse. When do THESE guys think it's going to happen? Sure is getting cramped under here.
It's always just about to happen according to ZH.
As the bond and stawk markets implode, the monies will reach terminal escape veolocity and have nowhere to go. By we math, this should translate into a $17 trillion dollar Bitcoin market!
https://btc-e.com
why just bitcoin? lots of choices when it comes to digital currencies...
still a "full faith and credit" system...
tick tock motherfucker...
It involves faith but no credit. Credit of course can be built around it though. Bitcoin is and will remain the premier, non-statist digital currency for the foreseeable future.
LOL!!! I know a person who went to work for JPM in 2004 to work on their "investments in digital currencies"...
Non-statist my ass. The primary dealers have access to endless liquidity, they can buy all the shitcoin they want too.
Yeah, and what happened to their patent application? Oh right, it flunked... not just once but multiple times. And even if it would have succeeded it wouldn't have mean sweet fuck all for Bitcoin as nobody would use JPMCoin.
By your "logic", anything with 4 wheels must be made by GM.
So you are seriously going to deny that a bank with tens of billions in profits and access to all the credit/money they want cannot move the price of bitcoin?
LMFAO!!!!!
Why have they not done so and what would be their motive? Moving away from the rest of their dollar-denominated assets? To collapse the dollar, their privilleged position with the Fed and end their power?
Try thinking about it, assuming you can....
Good one........only reason bitcoin still exists is because governments want to copy it, it's their little social experiment.
No, governments are basically powerless to do anything about Bitcoin.
Governments are fucking powerless to begin with as they are simply puppets of the monied interests you stupid fuck.
And the monied interests are also powerless against Bitcoin you stupid fuck.
Well maybe not entirely powerless (yet), but if they're going to do something, it better be really big and really soon!
Right, becasue they can't buy bitcoin? LMFAO!!!!!!!!!!!!!!!!!!!!!
as soon as true price discovery returns...
so it could be a while...
Maybe it's price discovery, I don't know. I'm a layman. But it seems to me that these things more often than not kick off due to cash flow issues - you're supposed to pay somebody but you can't, and it cascades.
If that's true, then the banks are probably not the trigger point, with unlimited access to funds. Who needs to pay but can't? Maybe the energy companies?
You are thinking about it backwards. Not only does money/credit creation not require any real collateral, with ZIRP/NIRP there is essentially no cost/risk (which is a lie of course) either...
There will always be an "ability to pay" in this system, the issue will be the ability to actually deliver...
The instant ZH turns bullish.
Finally an article that understands why the US is in such a tight position now. If the US raises rates even slightly they will crush the Euro debt as it gets repriced due to a lack of buyers (people are buying the negative rate debt assuming rates will go lower and their bonds will appreciate). If the US keeps interest rates low they risk letting their own markets blow up (break out your Dow 40k hat again). Either way Europe is definitely sinking under its own steaming pile of debt, just depends on the timing for how it all plays out.
Scorthed earth tactics by the Italian.
the ecb would like to encourage deficit spending but they don't want to get greeked. how funny.
Well then Nicky!!!!! Let's put all policy holder assets into EU Bonds!!!!!
Does anyone know how i can etf 3x short the eurobonds??
i can think of a few reasons why you might not want to do that.
Bullshit. Why, who or what entities are actually going to sell? And to whom or what entities will they be selling?!?!?
were they printing trillions in 2000... I don't think so
EU QE is what all QE has ever been - fraudulent and Government and TBTF Bank bail outs. The media and average man on the street will always be too uninteligent and distracted to understand this relatively simple but cleverly obfuscated fact. If QE was for legitimately intended to stimuoate growth and boost inflation the Central Banks would have simply decreased the 'productive' people's debt through buying down principle and/or incremental intrest rate reductions on their mortgages, student loans etcs and let the banks bankrupt and write off the unservicable bad bonds/debts.
Looks like we are seeing more a Nasdaq collapse Nasdaq 2000 style.