As we reported last week, as a result of spiking yields and due to an odd confluence of calendars and cash yields, today's 5 Year might end up as a 7 Year reopening (specifically 7 Year Series P-2018 CUSIP 91282RE2). It did: as a result of falling in the indicated yield range and having a 1.5% cash coupon, today's 5 Year is effectively a 7 Year bond reopening. From the TSY: "Although a new 5-year note offering was announced on Thursday, August 22, 2013, the interest rate of 1-1/2 percent determined at today's auction for these securities matches that of an outstanding 7-year note with the same maturity and interest payment dates. In accordance with Treasury's past procedure, the 5-year notes will be considered an additional issue of the outstanding 7-year notes of Series P-2018 (CUSIP No. 912828RE2) originally issued August 31, 2011." Curiously this happened even as someone was dumping the 5 Year aggressively into the auction, which closed at 1.624%, a fraction away from the 1.625% permitted range, and tailing materially from the WI which was trading at 1.620% at 1 pm.
When it comes to the accuracy of its reporting, PressTV is somewhere just left (or right) of Debka, so take this with a metric ton of salt. However, it bears reporting on the off chance it is accurate. From PressTV:
US troops backed by tanks and fighter jets have been mobilized along the Jordan-Syria border, as the West appears to be moving toward military action against Damascus, reports say.
That said, we would wait for confirmation from at least SyriaNow before lending much if any credibility to this report.
Financial Times: "World Is Doomed To An Endless Cycle Of Bubble, Financial Crisis And Currency Collapse"Submitted by Tyler Durden on 08/28/2013 10:37 -0400
It's funny: nearly five years ago, when we first started, and said that the world is doomed to an endless cycle of bubble, financial crisis and currency collapse as long as the Fed is around, most people laughed: after all they had very serious reputations aligned with a broken and terminally disintegrating economic lie. With time some came to agree with our viewpoint, but most of the very serious people continued to laugh. Fast forward to last night when we read, in that very bastion of very serious opinions, the Financial Times, the following sentence: "The world is doomed to an endless cycle of bubble, financial crisis and currency collapse." By the way, the last phrase can be written in a simpler way: hyperinflation. But that's not all: when the FT sounds like the ZH, perhaps it is time to turn off the lights. To wit: "A stable international financial system has eluded the world since the end of the gold standard." Q.E.D.
At a time when we claim to be seeking a permanent solution to the circular situation which exists between Israel and Palestine (Palestinians), it is incongruous to reality that we fail to see what is happening all around the Middle East. The old United Arab Republic, Syria and Egypt, have over 90 million people divided and fighting, whether in open civil war or through socioeconomic confrontation. It has less to do with political regimes, and so-called dictatorships such as those of Mubarak and Assad, and more to do with the existing distribution of wealth and power. And equity may or may not come through dialogue (hopefully) or civil struggle (unfortunately).
With a debt once again jumping higher, GDP stalling, crime soaring, unemployment surging, and homelessness rife - oh, and the money-men (women) proclaiming that "Greece should never have entered the Euro" - the government is now backtracking on a previous decision that "expired foodstuffs will be made available for purchase as of September 1st." Unsurprisingly, the announcement of the new regulation on Monday sparked angry reactions from consumers, and prompted the Consumer Ministry to explain on State TV that the directive had been misinterpreted by media reports and does not represent a public health hazard.
Pending home sales missed expectations for the first time in 3 months, falling 1.26% MoM (vs a 0.0% expectation). This forward-looking measure of housing based on actual contract signings suggests that all the anecdotal evidence of an artificial echo-boom in real estate coming to an end. With the West down 4.9% and Northeast down 6.5% MoM (the biggest 3-month drop in 3 years), even the much-vaunted fair-and-balanced National Association of Realtors are forced to admit that "higher mortgage interest rates and rising home prices are impacting monthly contract activity." Whocouldanode?
With 'drums' growing ever-louder, Russia's "emergency situations" ministry has sent a second aircraft to evacuate citizens willing to leave war-torn Syria. As RiaNovosti reports, "an Ilyushin-62 plane took off for Latakia. This special flight is for Russian and CIS nationals who had earlier expressed their determination to return to Moscow," emergencies ministry spokeswoman Irina Rossius said. The plane also bore humanitarian aid for, what a Russian foreign ministry spokesman said at the time was, about 30,000 other Russians that were still living across the country.
ISRAEL IS DEPLOYING ALL OF ITS MISSILE DEFENSES AS A PRECAUTION.
It makes perfect sense that the precious metals are being slammed lower (as well as WTI modestly) as US equity markets open. No other asset-classes are exhibiting the vertical moves. Pre-open margin calls?
Still confused what that fateful FOMC day just three weeks away from today may bring, in the aftermath of a Jackson Hole symposium which was mostly focused on the adverse side effects of Quantiative Easing and the proper sequencing of unwinding the Fed's nearly $4 trillion balance sheet? Here is the explanation straight from the firm whose chief economist has dinners with none other than the Fed shadow Chairman, Bull Dudley, on a frequent basis. To wit: "First, we expect Fed officials to adjust the “mix of instruments” somewhat away from QE towards forward guidance at the September meeting, which appears to be an appropriate strategy in light of these results. Second, we expect that the FOMC will focus most if not all of the tapering on Treasury purchases rather than (current coupon) MBS purchases, consistent with the evidence that the latter are more effective in lowering mortgage rates and easing financial conditions." So: $10-15 billion reduction in TSY monetization announced in September, enacted in October, and a seismic shift in FOMC communication away from actual intervention to promises of such, aka forward guidance. Judging by the recent track record of "forward guidance" so far, the global market volatility exhibited so far may well be just a walk in the park compared to what is coming.
If last night the year 1993 was notable for India, as the Rupee had its largest plunge since March of that year two decades ago, today 1993 is just as memorable for CNBC. The reason: according to the latest Nielsen data, in July the financial network's prime (25-54 demographic) viewership just tumbled to a fresh 20 year low of just 37,000, the lowest since, you guessed it, March of 1993. Why is this a problem? Considering CNBC came on air in its current post-FNN incarnation in 1991, the core viewership is now about as low as it has ever been for the struggling broadcaster which as recently as 2007 was ranked as the 19th most valuable cable channel in the US. Now: not so much.
With the 22 Arab League member stopping well short of endorsing outside military action - though urging the UN to agree on 'deterrent' measures - the burden of proof for attacking the Assad regime remains firmly on the shoulders of the US. As as the WaPo reports that the administration is planning to release evidence possibly as soon as Thursday, that it will say proves that Syrian President Bashar al-Assad bears responsibility for what U.S. officials have called an “undeniable” chemical attack that killed hundreds on the outskirts of the Syrian capital.
The key overnight events were already discussed previously, but here they are again: the wholesale selloff in Asia (which subsequently shifted to Europe), the accelerating outflows from India (moment ago the SEBI website announced a net INR13.7 billion selling in Indian stocks yesterday and the near record collapse in the Indian Rupee to new record lows, and the ongoing uncertainty over Syria and what it will do to crude prices (if SocGen is right, nothing good). In brief: a market conditioned and habituated to a world in which Bernanke promises "to make everything ok" suddenly finds itself in the throes of uncertainty and following 4 years of dumb trend-following, has no idea what to do.