Gilts

How Much Longer Will Investors Trust The Central Banks?

It is time for central banks to start acknowledging their limitations, and doing so by acting and not talking about their future intentions. It is also time for investors to stop believing that central banks had the answers to begin with.

Global Central Bank-Driven Stock Rally Fizzles; Crude Rebounds On Saudi Oil Production Cut Report

Until minutes ago, this week's rebound in global equities appeared to be running out of steam as oil retreated from a two-week high and a dollar slide ended.  However, as noted just around 6am, Reuters reported, citing as it usually does various "anonymous sources", that in a radical departure from its long-held policy of not cutting production, Saudi Arabia was prepared to cut production on condition that Iran freezes output, which led to an instant spike in crude.

Soothing Fed Sends Global Stocks, US Futures, Commodities Higher

Following the Fed's "hawkish hold" and the BOJ's "confused contradiction", global risk (and non-risk) assets got the green light, and as a result stocks and bonds rallied in Asia and Europe, with US equity futures rising another 0.4%, advancing with oil and industrial metals, as iron surged in Chinese trading.

Taper Tantrum II: "There's No Simple, Painless Solution"

It is time for central banks to start acknowledging their limitations, and doing so by acting and not talking about their future intentions. It is also time for investors to stop believing that central banks had the answers to begin with.

"Get Ya Popcorn Ready" RBC Says: "Markets Are Paralyzed With Uncertainty" As "Spook Story" Arrives

"So here we go: BoJ ready to commit to go deeper negative rates and experiment with their curve, the Fed is seemingly locked-and-loaded on a hike as global growth rolls over, a deluge of supply into a suddenly wobbly rates backdrop, and a loaded-coil of synthetically low volatility across asset classes…as cross-asset correlations trickle back near multi-year/crisis extremes."

Traders Return From Vacation To Find S&P Futures Flat, Oil And Dollar Lower, Amid Flurry Of M&A

The return from summer holidays has started in much the same way as we left off August, with another subdued session that has seen European stocks little changed, Asian shares advance and S&P futures are modestly in the green amid a flurry of M&A. The US dollar weakened, with the Bloomberg Dollar Index down 0.2% for the 2nd day in a row as prospects for a U.S. interest-rate hike this month remained subdued.

The U.S. Economy: Bad Moon Rising

As for the incredible realm, one explanation is that the Fed is scared stiff it has nothing left in its toolbox to combat the next recession. Few major downturns have begun with the fed funds rate so perilously close to zero. The ultimate Catch 22 is that the flatness of the yield curve makes any fantasy of a Fed rate hike all too real for a dead breed the world once knew as ‘bond market vigilantes.’ It’s altogether possible that one more hike would be all it takes to invert the yield curve. The rest, as history has never failed to repeat, would be just that – history.

Global Stocks Rise, Metals Jump On Strong Chinese Data; Pound Surges On Record UK Mfg Spike

After a muted end to August, September started off on the strong foot overnight following a surprising beat in China's official manufacturing PMI print, which rose above 50 to the highest level in almost two years. That, together with a record rebound in the UK PMI, bolstered investor confidence, fueling gains in stocks and industrial metals. The dollar advanced against most of its peers while bonds retreated before Friday’s payrolls report.

Just 3 Charts

As the cracks in the vineer of central bank omnipotence grow ever wider, some brief reflection on the following three charts may awaken some 'animal' spirits of a different sort as the gap between fundamental reality and 'market' perception has never been wider...

Gilts Spike After Cover Ratio In Today's 15Y+ POMO Tumbles, BOE Buys All Bonds At Premium

While last week the UK bond market breathed a sigh of relief when the BOE found more than enough willing sellers into its longest-maturity, 15Y+ repurchase, or POMO, operation, following the uncovered operation two weeks ago, today concerns have returned anew when moments ago the BOE reported that its GBP1.170 billion repurchase operation was covered "only" 1.54x, down nearly by half from last week's 2.93x, and suggesting that supply of longer-dated gilts may once again be getting scarce.

Stocks Creep Higher As Dollar Resumes Falling, Oil Slides For Second Day

While the summer doldrums continue, with little market-moving newsflow overnight and zombified volumes, US futures crept higher and European shares rose after EU PMIs printed modestly better than expected, while a return to dollar weakness pushed emerging markets higher, even if it failed to boost oil which as we noted last night was downgraded by Goldman on various fundamental reasons.

BofA Looks At The "What If" Scenario For Bonds: Find A Surprising Result

One of the big fears among the bond market, where most participants now openly admit there is a "bubble in credit", is that an unwind in global bond yields would lead to substantial losses.  To test this assumption, Bank of America's Ralf Preusser looks at the "what if" scenario, namely what would happen to total returns should government yields fully reverse their 30 year historical evolution. What he finds is surprising.