Not "contained." Just six short months ago, the 2Y bonds of Austria's bank bank - HETA Asset Resolution AG - were trading well above par as the world and his mom reached for yield (~6%) in all the wrong places. Today, following the "spectacular development" over the weekend that the bank will be wound down due to the discovery of an $8.5bn "hole" in its balance sheet, the 2Y HETA bonds are trading below 50c on the dollar (at a yield of 54%). This is indeed Austria's "Lehman" moment as for the first time in the new European 'bail-in' era, senior debt is getting a massive haircut.
TINA and the complacent belief in free lunches strip the resiliency from a system and leave it vulnerable to collapse...
The deterioration in the subprime auto market is perhaps the clearest sign yet that we have learned literally nothing from the crisis years. That is, this is precisely the same dynamic and it will end precisely the same way: defaults will rise, investors in assets backed by these loans will suffer outsized losses, and the assets themselves will become completely illiquid.
With Philly Fed's 10th president, Charles Plosser retiring effective March 1, 2015, algos were wondering if he would be replaced with another former Goldman partner, or if his seat would be filled with yet another academic. The answer, as the Pgilly Fed reported moments ago, is the latter. Meet the new president of the Philly Fed: Patrick T. Harker, 56, currently president of the University of Delaware, former dean of the Wharton School at UPenn, and a member of the Philadelphia Fed's board of directors. His career academic background: Harker has a Ph.D. in civil and urban engineering, a master's degree in economics, and an M.S.E. and B.S.E. in civil engineering from the University of Pennsylvania. Wait, so no econ PhD? There may be some hope yet...
It is deja vu all over again - just as it did last week - after dumping into Monday open, the machines ramp WTI (on no news and certainly not on the back of any data which was all abysmal).
Despite a collapse in US macro data in February, Markit somehow managed to conjure a better than expected 55.1 print for US Manufacturing PMI. Under the covers employment creation was the slowest since July and inflationary pressures loom as selling prices rose notably. ISM Manufacturing printed 52.9 - a small miss vs 53.0 expectations - down for the 4th month in a row to 13-month lows, with employment at its weakest since June 2013. Construction spending's modest rebound in (seemingly un-weather-affected) December (after dropping in November) has been destroyed with a 1.1% drop in January (against expectations of 0.3% rise) for the biggest drop in 8 months.
The ink is not even dry on the much fought extension of the Greek bailout, so hated in Greece because it perpetuates the "austerity" memorandum conditions and already Spain is stoking the anti-austerity fire in Athens even more when moments ago Spain's Guindos revealed that not only is a third Greek bailout imminent, and will cost Europe's taxpayers between €30 and €50 billion, but that Spain, whose banks were completely insolvent as recently as 2 years ago and were only "saved" thanks to the ECB's direct and indirect (repo) bond monetization pathways will provide between 13% and 14% of the funding!
- "THIRD GREEK RESCUE' TO BE EU30B-EU50B: SPAIN'S DE GUINDOS
- SPAIN TO PROVIDE 13-14% OF EU30B-EU5O 3RD GREEK RESCUE: GUINDOS
What makes the announcement doubly ironic (the broke bailount out the insolvent, or is the bankrupt saving the liquidating?), is that just hours earlier Spain’s deputy minister for the European Union Inigo Mendez de Vigo said that "Greece should do less talking, do more reforms." But why if Spain will be so kind as to provide the funding needed for the next Greek bailout, and the bailout after that, and the one after
Crude oil prices are once again following the path of least deja vu resistance this morning. Having spiked into NYMEX close on Friday (exactly as they did following the rig count data the previous week), WTI is back to a $48 handle this morning following news that Saudi Arabia has increased production to its higest level since 2013. Iraq (another OPEC nation) stirred the pot further by forecasting increased supplies in the next month. This comes as US production hits record highs and vital Oklahoma storage tanks will fill up even sooner than expected, driving the "JK" spread above $2.50 (April delivery drastically cheaper than May). As on analysts noted, as "Cushing continues to fill massively, we could see a '3' handle on WTI."
Following December's worse than expected drop in personal spending (and slowing groweth in incomes), analysts wewre expected the usual hockey-stick bounce... it did not happen. Despite all the exuberance over low gas prices, US personal spending dropped 0.2% in January - twice as bad as the 0.1% drop expected and the 3rd miss in a row. The spending drop was driven in large part by a slide in non-durables. Personal income also missed excpectations, rising just 0.3% (against a +0.4% expectation) hovering at its lowest growth since September. The savings rates surged to 5.5% - its highest since Dec 2012.
Over the past few weeks, a new piece of equipment has been spotted hanging off the NYSE primary microwave tower. Here it is...
The best performing asset overall in 2015? Well, just tell Putin "spasibo"...
- Hilsenrath: Fed Ushering in New Era of Uncertainty on Rates (WSJ)
- Is Supreme Court's chief justice ready to take down ObamaCare? (The Hill)
- Netanyahu arrives in U.S., signs of easing of tensions over Iran speech (Reuters)
- Nemtsov Murder Fuels Suspicion, Fails to Spur Russia Selloff (BBG)
- ECB uncomfortable with leading role in Greek funding drama (Reuters)
- Video shows Los Angeles police shooting homeless man dead (Reuters)
- Iraq Military Begins Campaign to Reclaim Tikrit (WSJ)
- How Billionaires in London Use Secret Luxury Homes to Hide Assets (BBG)
With key economic data either behind us (with the downward revised GDP), or ahead of us (the February payrolls on deck), and the Greek situation currently shelved if only for a few days/weeks until the IMF payment comes due and the farce begins anew, stocks are focuing on the widely telegraphed 25 bps Chinese rate cut over the weekend, which however has so far failed to inspire a broad based rally either in Asia (where the SHCOMP closed up 0.8% after first dipping in the red) or across developed markets. In fact, as of this moment futures are hugging the unchanged line as the USDJPY attempted another breakout of 120.000 but with numerous option barrier expiration stop at that level, it has since retracted all the overnight gains and is back to the Sundey lows, even as the EURUSD has seen a powerful breakout from overnight lows and is currently at the highest level since the US GDP print, following the release of the final European February PMI data, as a result of USD weakness since the European open.