This page has been archived and commenting is disabled.
China Stocks Surge, Europe/US Purge, & Portuguese Bonds Are Crashing
Between escalating Grexit concerns and Podemos 'victory' in Spain, European bond and stock markets shuddered somewhat today. EURUSD continues to close lower - back below 1.1000. All major bourses across Europe are in the red with Greece and Spain worst (ASE -3%) but the most notable shift is a collapse in Poruguese bonds. Illiquidity has always been an issue for PORTUG bonds but today's near 4 point collapse in 10Y bond prices (and 48bps spike in spreads) is dramatic to say the least. Spain also saw bond risk jump 10bps. Bond yields and spreads are now higher than before Draghi announced Q€ in January and dramatically higher since bond-buying began. If EU leaders proclaim they can see no contagion from Greece, show them these charts. Finally, despite cash markets being closed, US equity futures also suffered (despite an exuberant BTFD rip higher in China overnight).
European stocks in the red...
Portuguese bonds are crashing... unwinding all the excited exuberance of Q€... Of course with The ECB hoovering up everything in sight, any selling pressure is exaggerated by the total lack of liquidity (see CYNK or Hanergy) but based on Bloomberg data it appears real and traded and is the benchmark 10Y bond for the nation!
EURUSD continues to close lower - back below 1.1000...
US markets were not unharmed as futures slid further from the late-Friday weakness...
China's incessant BTFD'ers came out after a very weak opening but by the close the great rotation from CHINEXT momo high-flyers to Shanghai idiot-makers was well on its way to exponential...
Charts: Bloomberg
»
- 15765 reads
- Printer-friendly version
- Send to friend
- advertisements -
Portugal & Spain are the next Greece
"I have not yet begun to fight print." - Central banker blood oath
The EU is doomed.
It was a stupid idea anyway.
So Europe implodes into a deflationary abyss now which sinks the US with it.
Russia can't sell enough gas to Europe and China doesn't need any more either so they go broke too.
Now watch every nation start demanding other nations pay up in gold
Which leads to WW III
Let's hope that massive comet gets here soon!
It was not stupid by countraire very clever. However, the goal and design was to fail not succeed.
You have a union with states issuing their own bonds (imagine that Michigan issues its own bonds) ... "market" attacks and picks each one by one
https://www.bullionstar.com/blogs/koos-jansen/xinhua-china-sets-up-gold-...
here is another stupid idea ... China sets up global fund for central banks .... hum ?
well, UK gordon brown lead the World central banks selling their gold and establised the Brown bottom in the process.
China it seems is the designated driver on the other direction.
If it is true that the governor of central banks meet every two months in Zyrich you can bet this has been discussed and decided there.
I wonder who is going to sell it to them because you know they got deep pockets ... can print it....
Cities issue bonds too, alas why San Leandro California flies Chinese flag at city hall. "Who owns your city?"
Comet bondacolypse
Yep, Greece is just the overture, but it looks like the full symphony is about start, so popcorn and tequila for everyone bartender.....
BYOB in case bar supplies run short.
If Greece looks like this at 350 billion, image Uncle Sammy at close to 20 trillion.
"it'll be a chiller, and a thriller from Manila"
Exactly TRP, which is THE reason that the EU hand will be forced. Otherwise, they would continue to revere their law school mantra and drag this GRucifiction out indefinitely.
Futures are -10bps. Barely a rounding error
Yes it is a PODEMOS VICTORY .... ZH editor is not a "victory"
Bring it ON!
OT, but interesting:
How Iraq has left us with the biggest financial bubble in history"Iraq couldn’t be described as the start of it; that more correctly came from the bursting of the dot-com bubble, and then a year later from the shock to confidence of 9/11. But it very much fitted the pattern by which all economic setbacks and shocks, rather than being allowed to run their course, are answered with another heavy dose of supposedly counteractive monetary activism.
Iraq was just the latest example of what had become known as the “Greenspan put”, the reassuring knowledge that whenever disaster threatened, the cavalry of the US Federal Reserve could always be relied on to come riding over the hill. From the stock market crash of 1987 onwards the Fed became the favoured economic fix. As each bubble burst, the monetary authorities would respond by sowing the seeds for the next one.
What Iraq did was set the stage for the final, disastrous, blow-off in already grossly inflated financial markets. In the process, advanced economies became almost wholly dependent on cheap debt to support growth. It wasn’t just mortgages and credit cards; governments also used the easy money environment to take the lid off spending or, in America’s case, cut taxes."
http://www.telegraph.co.uk/finance/comment/jeremy-warner/11616509/Jeremy...
I think stronger case is when Nixon took us off Gold standard in 1971. At that time you could buy a new Volkswagen for 1900 dollars, 1/20th the middle class annual salary.
The inflation alternatively buying power of labor and USD has been down since. Despite Volker's moment (@19%), American economy sunk, buying power of USD dissipated, companies went off shore, and defense spending grew, social programs grew, and wars raged on.
Dot com was a bunch of fantasy company's with no real products, suppose to replace all the real stuff that was moved off shore. Dot com was a momentary distraction from "the US doesn't make anything anymore". Capital was transferred/lost reallocated, Greenspan continued that and put capital in non-productive houses. And wholla no US economic output.
EDIT: us annual salary was about 24k not 40k, but you could however, buy a new corvette for 5k, or 1/5th annual salary and if you kept it nice, sell it today for 40k about 1/2 upper middle class salary today.
It wasn't Iraq, 9/11, dotcom crash or anything. Those were all sideshows. The plan was put into place long ago and those were just events to move the plan along.
Agree. However, once gold standard was breached, central banks had full control.
The retail stores were interesting yesterday. Quite a few shoppers around 3pm but I saw three credit cards declined in front of me while waiting in line. One walked out the other two paid cashola.
More people are buying online ... except for the ones who don't have a credit card and are forced into the physical store. However, the tellers are pretty careful thee days about fake credit cards, fake $100 bills [they even check the frigg'n $20 bills now!] and checks for insufficent funds in the shoppers account.
RE: the issue formerly called "Customer Service...." .... I notice jcp, Kohls, and Sears customer service have deteriorated badly the past several months, while our local Walmart has actually made a big turn-around.
imo, a store can lower their prices alot but if their customer service stinks, they'll lose Big Time since buyers hate rude or bad customer service and lower prices do not compensate. As my neighbor says, "It's about respect!"
https://www.foreignaffairs.com/articles/united-states/2013-09-22/who-sho...
Five years later, however, the power of the Federal Reserve is greater than ever before. Congressional dysfunction and partisan warfare have made the possibility of economic recovery through fiscal measures or other legislative initiatives remote; monetary policy and the Federal Reserve have become the last hope. The Fed has responded energetically with initiatives such as quantitative easing (buying bonds in large amounts to push down long-term interest rates), which was an unprecedented and massive exercise in policy innovation. As the financier Mohamed El-Erian observed in 2012, the Fed and other major central banks were "neck deep in extreme policy experimentation mode."
As a result, the two salient features of the economic crisis have been political gridlock and technocratic entrepreneurship. Compare this to the nation's response to last major economic crisis, the Great Depression. In those days, it was the political class that took the initiative, while the Federal Reserve took a secondary role. President Franklin D. Roosevelt himself set the government’s tone, working with Congress to pass a battery of legislative initiatives aimed at restoring confidence. "The country needs bold, persistent experimentation,” Roosevelt said. “Take a method and try it. If it fails, admit it frankly and try another. But above all, try something." Today, the same mantra applies -- but it applies to central bankers, not to politicians.
In that sense, the last few years have upended our understanding of the role of central bankers and the reason for central bank independence. Before the crisis, during the years when countries were beginning to take the idea of central bank autonomy more seriously, many people asked how it could be justified in a democratic society. The response from some advocates of central bank independence was straightforward. Banks had a simple goal -- price stability -- and well-established techniques for achieving that goal. They did not engage in much policy innovation and, above all, they were not in the business of picking winners and losers in the economy. In other words, the power that was being given to central banks was limited, so the threat to democratic principles was not substantial.
But the game has changed. The objectives of central bank policymaking are no longer so simple: for example, there is an active debate among central bankers about the relative importance of job creation and inflation control. At the same time, the techniques for achieving those goals are less certain. Finally, the Federal Reserve and other major central banks are now unambiguously in the business of picking economic winners and losers. Recent studies have highlighted the extent to which such central bank policies as quantitative easing have conferred big rewards on some groups while penalizing others. A 2012 study by the Bank of England conceded that the benefits of its quantitative easing program "have not been shared equally," with wealthy households benefiting disproportionately.
But the critical point is this: although the premises on which U.S. politicians and the public initially accepted the delegation of authority to independent central banks have been blown apart, that delegation persists. In practice, central bankers’ power has broadened, while legislative power has atrophied. And this is true in other countries as well. This is a troubling shift, and it has not gotten the attention it deserves. The people who advocated for central bank independence in the 1980s and 1990s had to make their case explicitly, since, in many countries, they were calling for legislative change. But the current shift has happened in an ad hoc way, under the pressure of the moment, without a compelling explanation of how it can be squared with democratic principles.
The Greenback is a debt substitute.
And it has the value of being a currency and actual money that can buy a lot of things.
No it does not have a negative yield.