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For The First Time Ever, QE Has Officially Failed
Over two years ago in "Desperately Seeking $11.2 Trillion In Collateral", Zero Hedge first warned that as a result of relentless central bank monetization of debt, liquidity in bond markets would decline at an ever faster pace even as, paradoxically, these same central banks added "phantom liquidity" (the topic of another post from two years ago) to equity markets in their attempt to artificially inflate stock prices to record levels without fundamental justification.
Sure enough, with the usual 2-5 year delay, in 2015 the primary financial topic sweeping the mainstream financial media and all the "serious" pundits, is the collapse in bond market liquidity.
Some, the more naive ones, blame regulation. Others, such as iconic Citigroup credit strategist Matt King strategist explained - once again - that Dodd Frank is a negligible reason for the total plunge in bond market liquidity which is the result of, just as we warned, central bank intervention and the relentless ascent of algorithmic trading.
But even as everyone is finally arguing about the cause of the plunging bond market liquidity and has no clue how to resolve this biggest nightmare for what once used to be the deepest and most liquidity of markets (at least not without forcing central banks to sell the trillions in bonds they hold, a step which would free up collateral but also result in the biggest market crash ever), a far more ominous question has reappeared. One which, as usual, we asked nearly three years ago: what happens when central banks soak up too much liquidity.
Our answer, at that point, QE will have officially failed, because instead of lowering bond yields - which as a reminder is the primary QE transmission mechanism, one which forces investor to reach not only for yield but also for risk in other asset classes such as equities - any incremental bond purchases will start raising yields as the adverse impact from the illiquidity "premium" surpasses the price appreciation benefit from frontrun central bank buying.
Impossible, you say?
Not only not impossible but in one country it just happened. Sweden, and as Bloomberg sarcastically notes, "It’s probably not what the Riksbank expected."
What is "it"? Precisely what we said would happen three years ago:
Quantitative easing is supposed to drive down longer-dated yields. But as investors obsess over market depth, the Riksbank’s bond purchases are undermining liquidity and driving Swedish yields higher.
“The financial conditions -- the currency and the bond yields -- are moving in the wrong direction,” Roger Josefsson, chief economist at Danske Bank A/S in Stockholm, said by phone. The assumption is that “the Riksbank wants yields to go down and the krona to weaken, but it’s been the opposite direction recently. That should pose a problem.”
As can be seen on the chart below, Sweden’s 10-year government-bond yield, which traded as low as 0.2 percent in April, was at 1.1 percent on Tuesday. Its five-year yield was 0.4 percent, after trading below zero just two months ago. And though Swedish yield spreads have narrowed relative to German bonds, investors can still earn about 15 basis points more by holding AAA-rated 10-year notes issued by Sweden than they can holding similar notes from Germany.
Why? Danske Bank explains: “Swedish rates continue to trade strong relative to Germany because of a lack of material in the repo market as a result of the Riksbank’s QE program.”
The Riksbank targets about $10 billion in government bond purchases as it tries to revive consumer-price growth after months of deflation. That’s about 14 percent of the market or 3 percent of Sweden’s gross domestic product. Any efforts to expand asset purchases would deplete Sweden’s already limited sovereign debt supply, SEB AB and Danske Bank have said.
Adding insult to injury, now that the "virtuous QE cycle" is broken, the extra yield is adding to the appeal of the krona. "Since the Riksbank started its bond-purchase program in mid-February, Sweden’s currency has appreciated more than 4 percent against the euro. It’s up 5 percent against Norway’s krone and is 3 percent higher versus the dollar."
That will make it harder for the bank to prevent disinflation as import prices decline.
And since Swedish QE has now officially broken and every incremental monetization will merely boost yields that much higher as the bonds become ever scarcer, the Riksbank can well proceed to monetize more... only to end up with higher yields... and an even stronger currency!
Which is precisely the opposite of what QE is intended to achieve.
And just like that, for the first time ever we see just how the closed QE loop transitions from virtuous to absolutely vicious, and how suddenly the central bank is left without any recourse to push yields lower as the very mechanism that has been designed for this now is pushing yields higher.
The good news for the rest of the world is that there is still some unencumbered collateral left, and that - at best - the world's central banks probably have 2-3 years of monetization dry powder left. After that it's pretty much game over... and the monetary paradrop.
For Sweden, however, it may be far too late. Then again, the locals don't seem too concerned.
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^seconded
I am a bit confused as well, but let me hazard a guess. Investors are so fearful that they will not be able to liquidate their bond holdings should they need to that they are demanding an ever-increasing liquidity premium for holding these bonds. The reason the bonds are illiquid is there is little market depth to the bond market since the central bank holds such a huge share of the market. Higher risk premium = higher discount rate = lower PV of the bond's cash flows = lower price = higher yield.
Feel free to correct me if I am wrong.
da gov, buyer to manipulate rates(and currency) holding high percent of outstanding. market shallow and nobody want to jump in pool and break neck. rates rise in illliquid market. eventually equilibriom found again, but damage done. thanks cb for your stellar work. maybe next tyme you just stay the fuck out of the pool. candy bars floating around...
That's because, as they (central banks) create the currency from nothing to purchase a future bond obligation, it creates devaluation at the same instance. The yields have to increase to support the expected inflation effects through the time frame the bond is sold at. The currency becomes stronger through the short term because (believed) the bond holds up the currency (already spent into cirrculation) untill the bond maturity expires and after the bonds expire without being 'rolled over' the currency floods the market unless otherwise retired and retiring currency causes liquidity issues (true deflation).
Edit; the bond pricing reflects the demand/competing bond market. To sell a particular bond vs anouther bond.
As someone here once stated -
The Central Banks of the world are masters at backing themselves into corners, corners which they created...
1. Anytime you can insert a hot swedish, or for that matter, any Nordic, feel free.
2. How the fuk do we get rid of these pop up ads and background scripts??? As much as I like this site I'm ready to abondone it over this fukn ad nonsesne.
By the time they're "legal" (for a white man) they are already raped/fucked to pieces by immigrants.
And again dude,seriously get some psycho sexual help or find a website that caters to your weird obsession
Adblock plus does the job :)
Adblock Plus is great
ONE MORE TIME
Get Adblock or Adblock plus
Just works (but you will ot see any more singles ads or eurasian dates)
I think you found one thing we can all agree on.
WE LIKE NASTY !!!!!!
What is the quality of life like in Sweden? For some reason I don't think that there are many "detroits" in Sweden.
Surf much? Plenty of anectodal evidence to the contrary. Scary shit if it's true.
http://swedenreport.org/2014/10/29/swedish-police-55-official-no-go-zones/
Malmo...
http://www.whyileftsweden.com/
not saying I always agree, etc. but...interesting.
could use more porn, though.
Sweden: Rape Capital of the West - Gatestone Institute
http://www.gatestoneinstitute.org/5195/sweden-rape
I expect Europeans will keep taking it, and keep letting immigrants who don't give a shit about their culture in... because they are more afraid of being called "racist" by disingenuous, hypocritical ideologues, than they are worried about their countries turning into 3rd world totalitarian dystopias where their own ethnic group is a minority surrounded by a sea of hostile "minorities" who want MOAR for free, and who think "European" ethnics have zero rights to preserve culture, or language, let alone "race" - which is merely a social construct.... according to some academics...
Are you counting the two rapes blamed on Julian Assange? I don't think those two are settled yet until he is triad in America.
There are more blondes in the UK and Netherlands than in Sweden.
Another myth busted for you.
http://bigthink.com/strange-maps/214-the-blonde-map-of-europe
Blond jokes are 'resentiment'
Can you guys keep the chatter down? I'm trying to stroke one out to that pic!
perfect teabag material . . . (that's nasty!)
No this will be the next failure, just look at this chart. 2827 days bettween tops.
http://safehaven.com/article/38058/dow-decline
Its an incredible thing to have happen to you Tyler my friend, wake up one day and read an article that imbues you to read another, then another, and then search the web for other confirming, rather than conforming articles, and realise just how it is.
I suppose all us fuckers here had that, Indeed, I would bank on it. Your whole life is a lie, every fucking thing about it is fabricated, a right fucking charade. From the moment you wake up mate, till you put your head back on that pillow is a lie of proportions you couldnt even comprehend. And of course, its that way by design, not mine mind. Could you imagine having to come to terms with that? And then off you go talking about QE?
At this point in time mate, what difference does it make? Take consolation though, it will end, and will be sorted, we just dont know when, and by whom.
And dont get me wrong Tyler mate, I have learned quite a bit reading here, and seen the best that humanity has to offer post comments, right here on your site, and it gives folks like me hope. This website is the one I look at first, and last. Even with rudimentary maths though, you can see QE as what it is.
Just the lie that you have always lived. Till you dont.
And you fucking cunts that make this place the way it is, Inthemix says thanks very much when it goes down, it was a mother fucking pleasure ever conversing with people that know the score, and some of you, I hope to meet in another time.
Best of luck folks, arse up, head down and give these cunts war.
They deserve nothing fucking less.
;-) :-)
The down voter? NSA, GCHQ,
Come on then you deprived fucking cunt, insult all the fuckers who post here and fucking down vote the one bloke, regardless who will post the fucking truth, you child molesting protecting cunts. Come and fucking post what this boyo said is wrong. You cunts want skinned alive.
:-)
zerohedge has been the first one to warn pretty much anything and everythig ..... so I let you warn everyone .. did you warn everyone .. that 1 + 1 = 2
what do you do after warning? keep warning?? be the first one ... on everything .. you are a winner. the winner at telling everyone everthing before anyone does.
http://just-a-thought-from-thinair.blogspot.com/
She will still have those purdy eyes peeking through the hajib at least.
sweden isn't in the loop. you can pee in the ocean and nobody cares, but pee in the pool and everybody jumps put
everybody pees in the pool, most dont do it from the diving board.
Swedish girls make my balls tingle
come to water land.... ....minne sota
The Riksbank (should that be Riskbank) is undergoing a significant existential crisis. They are the laughing stocks of Europe as regards their inability to forecast inflation. The Swedes are highly indebted, there is a significant housing bubble. They can no longer control their currency. Immigration is a significant problem - they take people in and then leave them on the streets to beg. Support for the right wing is growing by the day.
A good report exposing the truth about the state of Sweden;
https://gallery.mailchimp.com/708e119fa74cd33e6a28f949a/files/Sanandajin...
The whole project is ego driven... no different to every war (hot, cold or financial) that has ever been fought... what amazes me is how the bullshit continues on in this Fiat currency, nothing is as it seems, upside down world.. Maybe the whole thing is a game/matrix of deception and the people are in a deeper sleep that we on ZH realise.
Regardless, I believe I woke from that sleep a year ago, got an alternative education on ZH and consequently got into gold bullion and now I want to give something back.
For those of you not actually in the physical metal .. I can highly recommend it.. because no matter what goes on in the EU Punch and Judy show... my stress levels reduced 90% knowing I have some bullion.
You might think I'm just spamming, but I'm not... I'm deadly serious! I got involved in a German company called Karatbars International who produce Gold Bullion in small weights and boy am I glad on various levels.
They developed an incredibly lucrative affiliate marketing system to get their product to market... Its free to join at the basic level although if you decided to go all in to earn the highest commissions the buy in price is essentially peanuts... FFS my day job Personal Indemnity insurance costs more per month!!
The downside is it's more a mass education programme than marketing,,, because aside from ZeroHedgers the financial IQ out there is well down the trickle down economic cascade and those people need to be educated to get some AU!
I know there are lots of you out there that would love to get your hands on bullion and get the money to acquire it from actually helping some of the lambs lined up for the slaughter - We could actually be doing something worthwhile.
Check out my website www.teamramgold.com its only a simple website to give a snapshot of the programme, but feel free to get in contact with me and I'll show you an incredible system. It could be the most lucrative email you will ever write..
And yes OK I am pitching (a bit) but if you get the programme you will understand why.. I'm a capitalist but with a social conscience.
That post is a blatant advert.
Sweden has plenty of other structural and/or societal problems irrespective of whether or not QE failed there.
As an FYI, the kewpie doll in the photo is not highly representative of their general population. Relatively few Swedish women actually look like that one.
..
Yes, butt, are they as "Nasty", as she proclaims to be???
There is likely no inducement that would get me to pursue a woman from there. That nation is a hellhole of political correctness and radical feminism. Manliness is under constant attack in their society.
Dude, you are confusing pride with being a feminazi. There is a big difference. The Swedish women have a lot to be proud of. Feminazis, not so much, and that's why they keep trying to shovel their BS down your throat. As for Stockholm, with all the topless pools and beaches, I felt like a kid in a free candy store.
"Dude, you are confusing pride with being a feminazi." - grekko
No, dude, I am not.
http://www.euronews.com/2013/03/08/has-swedish-feminism-gone-too-far/
key excerpts (2013 article is still highly relevant):
"Ann Helena Rudberg joined the feminist movement in the 1970s, to fight for women’s rights because she saw her mother suffer violence at home. Today she argues women have equal rights and that feminist political parties are taking things too far.
Rudberg said: “It’s a power struggle between men and women. And the effect of that is that on one side we have women and on the other side men. And this is not good for the children or for anyone.”
"Some critics say Sweden’s government is taking a feminist agenda to an almost radical level."
But they are vikings at least in their genes.
They are Germanic in Language and Heritage if there are many peoples in their history. AND after WWII the Germans became sort of PC and all that... but meet Germans and you see they have good blood lines and a sense of history and education in many sectors of society.
I give the Vikings a plus since a guy set me up to try to embarrass me in Copenhagen... Viking Style.
Joke's on you guys,
that's the Swedish Bruce Jenner.
Do I have to be gay or straight to hit it?
yes
try approaching from an oblique angle.
Well I've seen much worse looking failures.
This Nasty pleases Ragnar Lothbrok
No worries. The evacuation of California should prove to be an effective temporary stimulus
http://drsircus.com/world-news/moving-from-the-west-coast
BS...just start taking in lower quality collateral, of which there is an unlimited supply.
Yes, it's called money printing: you monetize the population's "goodwill" as collateral to the monetary paradrop.
Central banking..the Worlds largest pawn shop
Some of you sound like slavering wankers with ZH on one screen and youporn on the other; and your pants at your ankles. All afternoon long.
I actually find her rather bleary-eyed and coarsened, considering her superior racial heritage. So much of the world is trashed and nigged-out. Sigh.
Re: post about CNBC...perhaps they should hire this Nordic honey.
Look real hard at that expression on her face. Looks like she might have just read a blog entry with a sobering message.
nasty, did someone say somethong
about a bond?
She is wearing a cross around her neck. Anybody think she spends much time in church?
Wow do you Mom's basement trolls react so hatefully every time you see a beautiful woman?
All I see is a gorgeous woman. Why would you assume anything bad about her?
Umm, she has the word nasty tattoed above her vagina ?
That's Swedish for "chaste"
Why would she? She is also wearing what looks like a sparkling weapon on her finger.
Half in Europe are Catholic & Half are Protestant.
Don't read too much into it.
top half protestant
bottom half catholic
Nasty vaginal orders. I couldn't help myself. /lol
Bacterial vaginosis (often caused by a Gardnerella vaginalisbacterial infection)
Chancroid (sexually transmitted disease caused byHaemophilus ducreyi)
Chlamydia (sexually transmitted disease caused byChlamydia trachomatis)
Genital herpes (sexually transmitted disease caused by the herpes virus)
Gonorrhea (sexually transmitted disease caused byNeisseria gonorrhoeae)
Pelvic inflammatory disease (PID, which is a complication of several different sexually transmitted diseases)
Poor genital hygiene
Tampon left in the vagina for more than several hours
Trichomoniasis (sexually transmitted disease caused by the parasite Trichomonas vaginalis)
Vaginal yeast infection (vaginal thrush) caused by Candida albicans
Thanks for the the biology/STI lesson. My old fella just went limp.
It is pretty simple. The Swedes just need another healthy dose of "Lagom". And they need to stop eating out in restaurants so much.
"The Lexin Swedish-English dictionary defines lagom as "enough, sufficient, adequate, just right". Lagom is also widely translated as "in moderation", "in balance", "perfect-simple", and "suitable" (in matter of amounts). Whereas words like "sufficient" and "average" suggest some degree of abstinence, scarcity, or failure, lagom carries the connotation of appropriateness, although not necessarily perfection."
http://4.bp.blogspot.com/-DwNMfBLz0HA/T8O9RsUQ-LI/AAAAAAAAABE/Nq-FWXE5z8...
Nic click bait but she's probably a WAG. Who knows where she's actually from, but it's easy to see where's she's going.
Considering you're already there....
Stakka Bo was way ahead of their time.
The details of my life are quite inconsequential... very well, where do I begin? My father was a relentlessly self-improving boulangerie owner from Belgium with low grade narcolepsy and a penchant for buggery. My mother was a fifteen year old French prostitute named Chloe with webbed feet. My father would womanize, he would drink. He would make outrageous claims like he invented the question mark. Sometimes he would accuse chestnuts of being lazy. The sort of general malaise that only the genius possess and the insane lament. My childhood was typical. Summers in Rangoon, luge lessons. In the spring we'd make meat helmets. When I was insolent I was placed in a burlap bag and beaten with reeds- pretty standard really. At the age of twelve I received my first scribe. At the age of fourteen a Zoroastrian named Vilma ritualistically shaved my testicles. There really is nothing like a shorn scrotum... it's breathtaking- I highly suggest you try it.
It's pretty simple when the feminist get called on the CDC virus carpet. Don't stick your dick into these dirty women. Let them ride fence on lesbian adoption. Then we can civil service to remove two dikes fighting over child support payments and Tranny spousal payments.
Good bye SCOTUS members, you just broke the Constitutional law.
What if someone asked the most fundamental of all questions with respect to this topic?
Something like, what would happen to values if never another new increment of currency were introduced into the existing pool of currency?
Is there not already enough currency in existence to facilitate the exchange of values?
What is it that citizens of the earth would have to do in order to obtain a share of the currency that already exists?
What is it that the pool of currency represents?
What is value?
What would happen to value? Would it rise or fall?
There's only on thing holding this country back >>> https://biblicisminstitute.wordpress.com/2015/06/25/warmongering-vs-econ...
Here are some signs of a coming recession.
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record...
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
Here is the starting point.
http://michaelekelley.com/2015/04/28/next-recession-will-start-with-this-country/
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Let's get to the root of the problem, shall we?
Relax guy's. She'll be just as fat and uggly as the rest of you in 20 years. :)~
Did anyone even read the article? Bwaaaahaaa!
She is pretty average for a Swedish girl. I have been there and there are a lot that are much nicer.
As far as aging, Nordic women age pretty well. Danes and Swedes, in many cases, still look great 20 to 30 years later.
Ha! I just noticed her hand.
A hospital psychiatrist friend once told me there were two things he would look for when they sent him a new patient.
(1) are they wearing more than one ring on one finger.
(2) are they wearing a hawian shirt buttoned with one button in the middle.
Either one of those would tell him that they were nuttier than a fruitcake and up to the eight floor they went.
Notice her left hand....She is nuttier than a fruit cake according to one professional.
what article? there was an article?
All I see is a nasty (not so nasty really) head, shoulders and belly button pattern.
Seriously, the chart shows a head and shoulders reversal pattern. Yield has already broken through the neck line. Expect higher interest rates yet, Sweden.
I am sure that a lot of you would laugh at the notion that technicals have forecasting merit. Do not under estimate the power of technical analysis.
usually the rug matches the curtains so she has golden blond carpet going from her eyebrows
I loooove Swedish women.
And on a side note, about 5 years ago there was a real study done to determine in which country was a person most likely to get laid on the first date. And the winner was... SWEDEN. And some people don't believe there is a god.
Could have been Mongolia.
Tell that to Julian Assange
That's good to know. But didn't Assange get into legal trouble for allegedly raping a chick or two? He's now rotting in jail the Ecuadorian Embassy, isn't he?
Swedish chicks, the untouchables.
I'd like to have a look SSW of Nasty.
Yeah, kind of like a lovely summertime adventure into the beauty of nature. Trekking through the bush, seeking out hidden caves and stuff like that.
Yeah... am I the only one getting a puffy the size of Florida?
Where was the article - what was it about? Damn. ;)
Mm-BOY-yoy-yoy-yoy-yoy-YOING!
GREAT WORK TYLER.
REALLY
pretty amazing zero hedge
TYLER, please be sitting down before reading this.
I'm sure there are many theories for the phenomenal turn around in your chat "Sweden 10Y Yield. What happened around the first week of April 2015 that would have caused such a reversal in the market?
The most timely event (which reinforces my theory) begins in late January 2015 with the election of the Syriza party in Greece.
Hardly 2 months later, on April 8, 2015, the end of the its first week, Alexis Tsipras travels to Moscow to meet Vladimir Putin.
AND THE RATES FLY.
You couldn't make this shit up if you were a pathological liar.
Just one of those Rothschildern coincidences?
Just keep posting awesome pics of Swedish babes. Isn't that what matters?
Isn't the answer obvious? Print more bonds and flush that debt down the toilet just like the other debt that you created. Print and give the new currency to the bankers so that they don't go broke. Leave no banker behind that is the new motto. If there is a shortage of something that can be created with a keystroke it seems pretty obvious what any good skumbag should do.
The locals should be more concerned about the noggers raping their women.
TERROR IN FRANCE LATEST
France: multiple terror ISIS:
http://tersee.com/#!q=france&t=text