Barclays

The Justice Department looks set to extract "unprecedented" guilty pleas from some of Wall Street's largest banks in connection with their role in rigging FX markets. Nevertheless, fears of triggering an "Arthur Andersen effect" will ensure that once again, TBTF institutions will suffer no material consequences.

As Barclays recently noted, there is a complete decoupling between futures and physical markets for crude oil and nowhere is that more evident than the high volume spike in crude that just happened after Saudi Arabia boosted crude production for a second month to the highest level in at least three decades, helping to raise OPEC output as U.S. growth showed signs of slowing.

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Whether it is more posturing ahead of OPEC's June meeting is unclear but the message from 'sources', according to The Wall Street Journal is "OPEC won’t agree to go lower," with regard global market share (which has fallen from more than 50-% to just 32% currently). The cartel's latest strategy report forecasts oil prices won't reach $100 - “$100 is not in any of the scenarios,” in the next decade (and could drop below $40) with its most optimistic scenario $76 in 2025 (which only Qatar and Kuwait can cover expenditures with). “If they want to sustain the organization, they have no choice,” but to reintroduce production quotas, adding any concession by stronger members would be temporary.

For many reasons the answer to the question: “will the commodity price rally continue?” is particularly important at this juncture, and the answer from Barclays is 'no' - it will prove very tough to make further significant gains in commodity prices from here unless supply/demand conditions improve very fast indeed. There are a multitude of factors but what erks them the most is the huge disconnect between price action in physical markets where differentials are signalling oversupply and futures markets where all looks rosy. The risks for a reversal in recent commodity price trends are growing, and with fewer market makers to absorb the shocks, potentially, a period of high volatility could lie ahead.

With a deal between Greece and its creditors seen as exceedingly unlikey at Monday's Eurogroup meeting, officials and analysts alike debate the logistics of default and a return to the drachma while Greeks may be called upon to choose between austerity or preparing for the possible introduction of a parallel currency and the economic malaise that will invariably follow. 

As the SHCOMP soars, the sellside reacts to China's latest round of easing and the message is clear: more policy rate cuts are in the cards as real lending rates remain elevated and deflation risk remains high. Meanwhile, the PBoC's statement was making the rounds on WeChat hours before its official release suggesting Janet Yellen isn't the only central banker that enjoys leaking information.

On the heels of last week's equity rout, China cuts interest rates for the third time since November. The move comes on the heels of last month's RRR cut and follows trade data that missed expectations (again) and a PPI print that betrayed persistent deflation risks. Perhaps more importantly, Chinese stocks fell last week amid still more rumors that tighter margin requirements are on the way. 

"The sharp rise in bond volatility over the past week or so is reminiscent of the VaR shocks of October 2014 in US rates and April 2013 in Japanese rates," JP Morgan says, before explaining how volatility induced selling (i.e. a VaR shock) is behind the rout in German Bunds. Predictably, QE has helped create the conditions which make such episodes possible.

As investors and traders ponder what’s next for the financial world’s safe haven asset par excellence, and as everyone from the world’s most famous bond traders to the ECB tries to comprehend how the market could have possibly become so thin so fast, we bring you a bit more in the way of visual proof that central planners have become the world’s greatest bubble blowers as well as a bit of history that may hold clues as to what's next.

"China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, in a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price," Reuters says, in yet another example of Beijing's rapidly expanding global influence.

Having initially missed its deadline to provide a response to Congress with regard the 2012 leak of FOMC minutes to an external newsletter writer, The Fed reluctantly admitted that none other than Janet Yellen had met with them. Today, however, as The Wall Street Journal reports, The (unaudited) Fed has agreed to furnish a congressional panel with the names of its staffers who had contact with Medley Global Advisors in the months before the leak, “with the understanding that the names will be kept confidential." So we'll happily tell you who leaked it... as long as you don't tell the public. Audit The Fed!!!

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With NIRP having turned traditional risk-free assets into guaranteed losers, investors have poured more than $9 billion into junk bond ETFs YTD, and while common sense dictates that buying at the top of an epic HY bubble just ahead of a rate hike cycle and against a backdrop characterized by disappearing liquidity in the secondary market for corporate credit is a fool's errand, most investors feel they have little choice. 

No one stays on top forever, and to be sure, when Bill Gross' long reign at the top of the fixed income universe finally came to a sudden and rather unceremonious end last October, the race to lay claim to the inevitable outflows from PIMCO's Total Return Fund was on. Now, a winner has emerged — and it's not Jeff Gundlach.