"Banks want assurances from U.S. regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multibillion-dollar settlements," Reuters reports, reinforcing the idea that 'guilty' pleas from Wall Street on FX rigging will ultimately mean absolutely nothing because once the fine print is inserted into the settlements and once the SEC grants every bank's request for a waiver, it will back to business as usual.
- The fake: Avon-Offer Hoax Shows It’s Easy to Put One Over on SEC’s Edgar (BBG)
- And the real: US buyout group TPG snaps up UK discounter Poundworld (FT)
- El Niño near-certain to last through summer: U.S. climate center (Reuters)
- Oil Sands Land Becomes Alberta’s Hot Real Estate as Oil Rebounds (BBG)
- SEC a stumbling block in banks' forex guilty pleas: sources (Reuters)
- Pimco’s Stocks Chief Maisonneuve to Leave as Funds Closed (BBG)
- Bank of America’s Woes Test ‘Fixer’ CEO (WSJ)
- Puerto Rico Governor, Lawmakers Agree on Revenue Proposal (BBG)
"UBS officials are confounded by the outcome, some of the people familiar with the negotiations said. The bank believes it provided early cooperation which helped prosecutors break open the foreign-exchange investigations and, as a result, was promised immunity by the antitrust division of the Justice Department."
- Amtrak train in Philadelphia wreck was traveling at twice speed limit (Reuters)
- The engineer has no recollection of the crash and “no explanation” for what happened (WSJ)
- Taliban claim attack on Afghan guesthouse that killed 14 (Reuters)
- Chicago’s Junk Rating From Moody’s Puzzles Investors (BBG)
- House votes to end spy agencies' bulk collection of phone data (Reuters)
- Wesley Clark: The Penny-Stock General (BBG)
- AOL’s Armstrong to Leave $213 Million Richer After Verizon Deal (BBG)
"Mark Dearlove, a Barclays Plc executive who was involved in the manipulation of the London interbank offered rate, was named as the U.K. lender’s head of markets for Asia-Pacific," Bloomberg reported earlier today, proving once again that not only do those involved in rigging, fixing, and otherwise manipulating every benchmark rate and market on the planet not go to prison, they in fact get promoted.
Following yesterday's turbulent bond trading session, where the volatility after the worst Bid to Cover in a Japanese bond auction since 2009 spread to Europe and sent Bund yields soaring again, in the process "turmoiling" equities, today's session has been a peaceful slumber barely interrupted by "better than expected" Italian and a German Bund auction, both of which concluded without a hitch, and without the now traditional "technical" failure when selling German paper. Perhaps that was to be expected considering the surge in the closing yield from 0.13% to 0.65%. Not hurting the bid for 10Y US Treasury was yesterday's report that Japan had bought a whopping $23 billion in US Treasurys in March, the most in 4 years so to all those shorting Tsys - you are now once again fighting the Bank of Japan.
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.
- Bonds Extend Global Rout as Europe Stocks Slide, Dollar Weakens (BBG)
- Verizon Communications to Buy AOL for $4.4 Billion (BBG)
- Fresh Nepal earthquake kills dozens, triggers panic (Reuters)
- Sen. Shelby to Unveil Legislation Heightening Fed Scrutiny (WSJ)
- Bill Gross: The Amount of Money I'll Give Away 'Is Staggering, Even to Me' (BBG)
- U.S. rejects notion that Gulf rulers snubbing Obama summit (Reuters)... what about AIIB?
- In Asia, Debt Market Gets Tougher (WSJ)
- Iran’s Mahan airline defies sanctions in shadowy aircraft deal (FT)
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.