Overnight Summary: No More SSDD

Tyler Durden's picture

Something is different this morning. Whether it is the aftermath of yesterday's inexplicable 10 Year auction demand spike, or more explicable plunge in the ECB's deposit facility usage, or, the fresh record low yield in the supreme risk indicator, Swiss 2 Year bonds, now at under 0.5%, market participants are realizing that the status quo is changing, leading to fresh 2 year lows in the EURUSD which was at 1.2175 at last check, sliding equity futures (those are largely irrelevant, and purely a function of what Simon "Harry" Potter does today when the clockworkesque ramp at 3:30pm has the FRBNY start selling Vol like a drunken sailor), and negative yields also for German, French, and Finland, with Austria and Belgium expected to follow suit as the herd scrambles into the "safety" of the core (which incidentally is carrying the periphery on its shoulders but who cares about details). Either way, Europe's ZIRP is finally being felt, only not in a way that many had expected and hoped and instead of the money being used to ramp risk, it is further accelerating the divide between risky and safe assets. Look for the Direct take down in today's 30 Year auction: it could be a doozy.

More on the overnight action from Bank of America:

Market action

For a sixth day in a row, Asian stocks fell as Australia's employers shed workers pushing up the unemployment rate. The unexpected interest rate cut by the South Korean central bank couldn't help lift stocks. Investors are worried that additional monetary policy will be unable to counter the global slowdown. The MSCI Asia Pacific Index fell 1.6%.

Looking at the individual Asian markets, the worst performer was the Korean Kopsi down 2.2% followed by the Hang Seng off 2.0%. Rounding out the markets in the red were the Japanese Nikkei and the Indian Sensex down 1.5%. On the flip side, the Shanghai Composite rose 0.5%. 

In Europe, equities are down 1.1% in the aggregate while at home, futures are pointing to a 0.9% drop in the S&P 500 later today. Bloomberg headlines are suggesting that the sell off is due to investor's disappointment that the Fed did not explicitly call for more QE in the FOMC minutes. In our view, the Fed left the door open to additional policy action. 
Treasuries are bid across the curve. The five year yield is down 2bp while the 10-year and long bond are down 3bp. The 10-year yield is currently trading at 1.48%. In Europe, we continue to keep an eye on Italian and Spanish yields, both of which rose today. Italian 10-year notes are up 6bp to 5.84% and Spain's 10-year is 11bp higher to 6.61%. 

The dollar is strengthening in the currency market. The DXY index is up 0.2%. Dollar strength is generally bad for commodity prices and we are seeing that play out today. WTI crude oil is down $1.17 to $84.61 a barrel and gold is up $12.30 an ounce to $1,564.08

Overseas data wrap-up

Overnight, the Bank of Japan left its monetary policy stance unchanged. The policy board voted unanimously to maintain
interest rates of 0% and leave its asset purchase program unchanged at 70 trillion yen. Slightly tweaking its economic projections, the central bank now expects growth of 1.7% and a 0.7% rise in consumer prices for the next fiscal year. Note that 0.7% yoy increase in consumer prices is below the BoJ's own target of 1% inflation. That suggests that the bank should
do more monetary policy stimulus. 

In Australia, employers cut payrolls helping push up the unemployment rate in June. Australia shed 27,000 jobs in June basically fully offsetting the revised +27,800 jobs created in the previous month. The increase firings helped push up the jobless rate for a second month in a row which now stands at 5.2%. Expectations for a 25bp rate cut is growing, traders are now pricing in a 78% chance the RBA will cut rates next month. 

Late yesterday, Brazil's central bank cut its benchmark interest rate by 25bp to 8.00%. That was in line with consensus expectations. The cut is the eight straight for the central bank and the CB signaled that it will continue to cut interest rates in the months ahead as it tries to stimulate the domestic economy that is weakening due to a slowing global economy. 

Industrial production in the euro area continues to weaken falling 2.8% mom in May building on the revised lower 2.4% drop recorded in the prior month. The euro area's manufacturing sector should continue to weak as the economy falls further into recession. 

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GetZeeGold's picture



Something is different this morning.


I sense a rift in the farce.


El's picture

Sadly, I suspect it is just a different chapter of the farce.

GetZeeGold's picture



We'll need some more paper for this chapter.....and a LOT of paint.


TruthInSunshine's picture

Just one of the many reasons ZH speaks to my cynical but realistic fundamental personality (some dare not admit the PPT exists, but they must have ignored all such concrete evidence to the contrary, including The Bernank's open admissions on proxy-castvision such as 60 Minutes that "targeting equities to generate a 'virtuous circle' from a wealth affect " is routine- Breaking Markets Bad Bernank will be Sad Ben when he reaches for the lever to do so and find that it breaks off in his hand):


"...sliding equity futures (those are largely irrelevant, and purely a function of what Simon "Harry" Potter does today when the clockworkesque ramp at 3:30pm has the FRBNY start selling Vol like a drunken sailor)..."

GetZeeGold's picture



Sir....allow me to reiterate.....these are clearly not the droids you are looking for.


viahj's picture

move along, move along

Badabing's picture

Like thousands of souls cried out simultaneously and then where silenced.

the not so mighty maximiza's picture

Like thousands of souls cried out simultaneously and then where broke.

GetZeeGold's picture



So loud it echoed.....which doesn't make sense if it's silence.


ArkansasAngie's picture

It isn't so much that government debt is crowding private debt.  It's the fact that by not allowing price discovery and purchasing assets at their economic value, investors are investing in debt service cash flow (nonproductive) instead of asset utilization (productive).  So ... it is a malinvestment of funds.
It also punishes those who behaved properly by taking their money and giving it to people who did not behave properly. Isn't it interesting that corporate leaders aren't demanding change in policies which would benefit them.  Instead of Apple having $100 billion in cash being invested in plants, research and jobs ... we have Apple parking their money in Tbills. Great job guys.  Don't let the door hit you in the ass on the way out.


Sudden Debt's picture

Because I know how my Belgium government works, I'll tell you how it will play out once we get negative yields...

They'll call for a meeting...


they'll say...

MONEY'S FOR FREE!!! LET'S SPEND IT LIKE IT'S 1974-2012!!!!!!!!

and 6 months later, we'll be at 20% yields on a 10yr bond because the debt ballooned to 300% of GDP.....


mark7's picture

You are from Belgium?! Still waiting for a landline installment after two years? It is such a friggin' effective country, totally awesome. Real first choice to put EU institutions there! NOT! :) 

Ancona's picture

It's all over but the crying. The SNB is going to be in very deep shit if the Eurozone breaks up and all those currencies they bought revert to peseta, lira and excudo denominated.

Stock Tips Investment's picture

The crisis in Europe is such that any change is possible. Each adopted as European authorities, ends up having a negative effect on your economia.Mucha intervention, many regulations, few solutions and a Europe that is drowning in a deepening crisis.

Thisson's picture

No, because paper losses are immaterial to central banks which can print their own paper currencies.  If the SNB spends swiss francs to buy italian debts, and those debts default, they can just print enough swiss francs to replace the ones they lost.

juujuuuujj's picture

It's mr. Steve Keen's time to shine again. This time it will be that hissing sound in Australia's property market that everyone pretended not to notice. 

Stoploss's picture

I just heard the words "zero global inflation".

Hang on, it gets worse...

Prepare for negative inflation.

Think about that.

Dapper Dan's picture


What we have is an overlying underlay of inverse negative parameters and leading positive indicators that cannot be correlated to any non linear fundamentals, conversely things will undoubtedly stay the same, unless they don’t.

I think.

world_debt_slave's picture

I gleefully await the total destruction of the central planners and their ilk.

GetZeeGold's picture



They have a plan.....it's just not a very good one.


Arnold Ziffel's picture

"Jim Rickards recently wrote about this:

'When one enquires of family members and representatives as to what it takes to preserve wealth over centuries and not just cycles, the frequent reply is 'a third, a third, and a third. This is shorthand for dividing one's wealth into one-third land, one-third gold and one-third fine art.'

--Note that government bonds are not on the list."

Thisson's picture

Art?  Hell, no.  Water would be much smarter.

i-dog's picture

That smile will soon disappear when the central planners finish demolishing this system (banks are next) and roll out their even-more-centralised (could anyone believe it is even possible!!) replacement system -- complete with iron-fisted control and a single digital currency topped-up into your arm chip ... if you behave....

Bank accounts, forex and stock markets were sooooo 20th century! 8-O

Doomer's picture

I think you meant the Swiss 2 year is under -0.5%.

Doomer's picture

Actually, Tyler, I am not sure what you meant.  As others have pointed out, your quotes seem way off.

mrktwtch2's picture

there is  a storm coming and this time the fed or ecb wont be able to send it away..get your umbrellas..it could turn ugly very fast..

bankofvol's picture

Swiss two years is at MINUS 0.38% on my Bloomberg screen, so I do not know which bond platform you are trading on but you are being ripped off -:).

Doomer's picture

Must be a quote from Goldman.  Special "muppet" pricing!

Arnold Ziffel's picture

Pension plans depend on 8% for their predictions. Bill Gross said yesterday this is creating a massive negative impact from the NIRP/ZIRP policy with serious consequences.

How many $$Trillions$$ underfunded are pension plans now?

ptoemmes's picture

I dunno, but if it isn't all of them already, there will be more very soon. Tick, tick, tick...

youngman's picture

Because the Pensions are lying in their estimates..they will be the last to fail....which is good..because they will have the most pain..which I think they deserve...they have padded their pension and now the padding has to come out...and it will...pain for all...but if they corrected it now..it would be less....but they will not...unions hold out until they lose their job as the factory is shut down..and moved ot a country will less costs and taxes and regulations and a more educated workforce and a harder working base..and less and less and less...

Thisson's picture

It actually won't make a differnece to the outcome, whether they state their assumed return to be 2% or 8%.  They are gonna get whatever real return they get, and the taxpayer doensn't have the money to make up the difference.  The pension beneficiaries are going to get about 40-50% of their expected payout in real terms (if they're lucky).

realitybiter's picture

I think the San Bernadino example is a good one....the concessions necessary to avoid BK were not that bad.  What?  20% reduction for pay that is 40% overpriced?  I am pulling these number out, but they are not far off.  They had a 120 million budget and 80 million in tax revs.  They took their chances.  

The unions won't budge.  They will not see the fraud in defined benefit.  They cannot see the problem with them contributing $150,000 in their entire work carreer and pulling out 80,000 every year for 15 or 20 years AND health benies, too...the math just does not add up!  It is a fraud.  You can not define a benefit in the future because you cannot define the future returns.  Period.

They all fail.  I have never once successfully convinced a pensioner that they "earned" a fraud.

It is a psychological issue.

mark7's picture

So much Weltschmerz and Lebensmüde today.

battlestargalactica's picture

I have American family members working in Eastern Europe and we have been speaking every day regarding a SHTF plan, since they're paid in Euros. On a call yesterday I learned that one of our mutual friends, British ex-pat living in Spain, had her entire life's savings frozen by a certain Spanish bank. Now she can't have her money in any form (Euros, USD, seashells) BUT she can have an equal amount of the Euro value IN THE BANK'S STOCK!!!! She is beyond f$cked and pissed. You can't make this sh$t up!

Imagine waking up tomorrow and your savings is gone, vaporized, but you can have that in Wells-Fargo or BOA stock?!? And to think, I still sometimes question the wisdom of PMs... I mean, aside from their penchant to have extremely bad luck while boating.

De minimus's picture

I guess we won't be hearing any of this on the "news." Wonder why?