CDS

CDS

This Is What The Coming "Bond Shock" Will Look Like

The only thing that can halt the tsunami of bond buying, would be a Bond Shock, an event that is certain to take place, the only question is when. As BofA points out, the relentless chasing after government paper will change "if Quantitative Failure spreads from Europe & Japan to the US."  Here's how to time it and what it would look like.

British Default Risk Soars To 3 Year Highs As Hedging Volume Spikes

Investors are increasingly reaching for protection of various sorts ahead of next week's Brexit vote. The credit derivatives market is the latest to experience the surge as corporate CDS indices spike on extremely high volume and perhaps more troubling, UK Sovereign CDS has spiked to its highest in over 3 years as fears of devaluation or default rise...“Many viewed Brexit as unlikely enough that they didn’t have to worry about it, and now they’re panicking to some degree."

"The Fed Has Failed" - A Disturbing New Warning From Bank Of America

"Central banks have lost the “War against Deflation”. They have failed to stimulate animal spirits depressed by the 4D’s of excess Debt, financial Deleveraging, aging Demographics and technological Disruption. This changes if Quantitative Failure spreads from Europe & Japan to the US. A rise in US bank CDS and/or a dive in assets related to consumer & housing credit would be very negative for global asset prices in our view. Note the new whispers of a peak in the US consumer credit cycle which, if true, at a time of zero rates in an $18 trillion, consumer-led economy would be concerning."

Futures Slide On Rising Dollar As Global Bond Yields Hit Fresh Record Lows

Please do not adjust your screens: that off-green color you are seeing, that is not a malfunction. Yes, for the first time in six days, global stocks are lower with the MSCI all-country world index dipping from a 6 month high dragged down by lower European and Japanese equity markets, as the USDJPY dropped to a fresh five-week low while Treasury yields continued to hit new record lows because, as Bloomberg explains, "traders assessed the outlook for the global economy."

Theranos: Unicorn Valley's Madoff Moment

In “The Valley” the last 7 or 8 years has seen a morphing of true business fundamentals into a place of pure financially adulterated fantasy. Here is where the story changed from “Something built that customers love and will pay for," into “Build something that can give the illusion VC’s want to see and hear so they can pay for the right to then sell that illusion to Wall Street and we all get rich.” True business metrics or morals be damned.

Bill Gross Explains Why He Is Now Shorting Credit

"For over 40 years, asset returns and alpha generation from penthouse investment managers have been materially aided by declines in interest rates, trade globalization, and an enormous expansion of credit – that is debt. Those trends are coming to an end.... A repeat performance is not only unlikely, it  is impossible unless you are a friend of Elon Musk and you’ve got the gumption to blast off  for Mars. Planet Earth does not offer such opportunities."

US Default Risk Hits 8-Month Highs

While still relatively low, USA sovereign CDS spreads have risen to 8-month highs, surging off early March lows. The reasons are likely numerous though we suggest the 4 surges in the last 3 months appear to line up with notable 'events'...

"We Are Becoming Convinced That The System Won't Stabilize" - Citi Explains How Central Banks Broke The Market

"Central bank distortions have exacerbated these movements, making investor interest more one-sided and leading one market after another to exhibit more bubble-like tendencies, rising exponentially and then falling back abruptly. As such, managers are struggling to justify their fees, while the sellside wonders whether it is really worth the continuing commitment to market-making in the face of increased capital requirements and legal and back-office overheads."