There is much new info in the just released Bloomberg profile on the infamous ex-JPMorganite Blythe Masters, among which the disclosure that she had made it clear that she had wanted to go along with the disposable JPM physical commodities unit (which as was reported recently, was sold to Swiss commodities giant Mercuria) and "and continue as the group's chief", a plan which did not work out as she had planned since she has no plans to "join the unit’s purchaser" (although joining Glencore is another matter entirely, and one which looks increasingly plausible) but what we find most striking is the following revelation: "Masters is under investigation by federal prosecutors in Manhattan, according to two people with knowledge of the matter. That probe was opened following a settlement with regulators that alleged JPMorgan manipulated power markets in the Midwest and California."
European partners have left Russia with "no alternative" but to halt supplies of gas to Ukraine and Europe, according to a letter from Russian president Putin to European leaders. The remarks, as Reuters reports, were the strongest sign yet that Russia could curtail supplies of gas to (and through) Ukraine affecting supplies of gas to Europe (as they fear Ukraine will siphon off Russian gas meant for Europe). Russia is getting angry, and an angry Russia can simply turn the gas switch to the "Off" position and hibernate for a bit.
So from MF Global's "vaporized" commingled client assets to Basel's "evaporated" toughened derivatives rules, the banks are indeed "very happy." And now back to perpetuation the illusion that the system is stable.
"Fear Of Missing Out" - that is the only way one can explain the irrational idiocy with which asset "managers" are scrambling to allocate other people's money into today's "historic" Greek (where unemployment just printed at 26.7%) return to the bond market, and which according to Greek PM Venizelos was eight times oversubscribed, or far more demand than for the Facebook IPO. Ironically, while we joked earlier this week, when the Greek 5Y was trading in the 6% range that the new bond would issue at 3%, we were not too far off on the final terms which were largely expected in the mid-5% range. Instead, Greece shocked everyone when it announced that the avalanche of lemmings had made it possible for Greece to issue debt at a sub-5% yield, and a 4.75% cash coupon! Here is the final term sheet.
Another week, another Chinese default. A month after Chaori Solar's default turned on its head a long-held assumption that even high-yielding debt carried an implicit state guarantee, yet another Chinese firm has succumbed to the inevitable logic of lack of cash flows. As a reminder, a technical default late last month by a small construction materials firm, Xuzhou Zhongsen Tonghao New Board Co Ltd, was the first in China's high-yield bond market. However, in that case the guarantor of that bond eventually agreed to fund the required interest payment, resulting in the first bailout of the first high yield default. Still if Xuzhou doesn't want the distinction of the first Chinese HY default, many are lining up for that particular prize - such as a small manufacturer of polyester yarn based in China's wealthy Zhejiang province has declared bankruptcy, threatening its ability to meet an interest payment on a high-yield bond due in July.
It took Virtu's idiot algos some time to process that the lack of BOJ stimulus is not bullish for more BOJ stimulus - something that has been priced in since October and which sent the USDJPY up from 97.000 to 105.000 in a few months, but it finally sank in when BOJ head Kuroda explicitly stated overnight that there is "no need to add stimulus now." That, and the disappointing news from China that the middle kingdom too has no plans for a major stimulus, as we reported last night, were the final straws that forced the USDJPY to lose the tractor-beamed 103.000 "fundamental level", tripping the countless sell stops just below it, and slid 50 pips lower as of this moment to overnight lows at the 102.500 level, in turn dragging US but mostly European equity futures with it, and the Dax was last seen tripping stops below 9400.
Remember CDOs? Murky, illiquid investments, backed by bulge-bracket firms that offered lots of yield over similar-rated corporates - just don't ask questions. As SCMP's Shirley Yam reports, China's so-called "trust" products, promise high returns with big-name backing, but a scheme touted at Ping An Bank highlights just how murky the world of mainland investment offerings is. After reading this, we suspect, that last trace of faith that the PBOC has the Chinese shadow banking system under control (and a growth renaissance is due any moment) will be eviscerated.
In recent years a good part of the monetary debate has become a simple war of words, with much of the conflict focused on the definition for the word "inflation." Whereas economists up until the 1960's or 1970's mostly defined inflation as an expansion of the money supply, the vast majority now see it as simply rising prices. Since then the "experts" have gone further and devised variations on the word "inflation" (such as "deflation," "disinflation," and "stagflation"). And while past central banking policy usually focused on "inflation fighting," now bankers talk about "inflation ceilings" and more recently "inflation targets". The latest front in this campaign came this week when Bloomberg News unveiled a brand new word: "lowflation" which it defines as a situation where prices are rising, but not fast enough to offer the economic benefits that are apparently delivered by higher inflation. Although the article was printed on April Fool's Day, sadly we do not believe it was meant as a joke.
A mere two weeks since former JPMorgan banker, Kenneth Bellando jumped to his death, Bloomberg reports that the former CEO of Dutch Bank ABN Amro (and his wife and daughter) were found dead at their home after a possible "family tragedy." This expands the dismal list of senior financial services executive deaths to 12 in the last few months. The 57-year-old Jan Peter Schmittmann, was reportedly discovered by his other daughter when she arrived home that morning. Police declined to comment on the cirumstances of his (and his wife and daughter's) death. This is not the first C-level ABN Amro banker to be found dead. In 2009, former CFO Huibert Boumeester was discovered with (assumed self-inflicted) shotgun wounds.
Is there any hope that we might actually elect a president with the mandate and courage to take down Wall Street instead of kissing its rear end in humiliating obeisance? The 2016 presidential election may be far away to those obsessed with the news cycle, but it's not too early to express one single hope: that we finally elect a president who doesn't kiss Wall Street's rear end every single day for four/eight years running. Either the next president issues an executive order (or whatever it takes) to enact these four administrative rules, or he/she is kissing Wall Street's rear end every single day of his/her administration.
Update: in direct flashback from the summer of 2011 when the ECB leaked news only to retract it within minutes, this just happened: CONSTANCIO: DOESN'T KNOW ABOUT 1 TLN-EURO QE MODEL REPORT
When in desperate need to crush your currency (being bought hand over fist by the Chinese), so urgently need to boost German exports, since you are unable to actually do QE as per your charter, what do you do if you are Mario Draghi? Well, you leak, leak, leak that you are contemplating QE, and then you leak some more. Such as today.
- ECB HAS MODELED BOND PURCHASES UP TO 1 TLN EUROS, FAZ SAYS
- ECB TESTS SHOW INFLATION COULD BE BOOSTED 0.2% TO 0.8%: FAZ
Like US inflation soared on the $1 trillion QEternity? Can't wait. In other news, expect zero reaction from gold on this latest news that another $1.4 trillion in fiat is about to flood the market. If only inbetween Mario Draghi's jaw bones.
- Why did Yellen use criminals in her employment case studies? Hilsenrath explainz (Hilsenrath)
- GM avoided defective switch redesign in 2005 to save a dollar each (Reuters)
- Xuzhou Zhongsen Said to Avert Bond Default on Guarantor Aid (BBG)
- France's New Finance Minister Faces Fiscal Challenge (WSJ)
- The magic is gone: Draghi’s Attempt to Talk Down Euro Lost on Traders (BBG)
- Another John Kerry smashing success: U.S. Gambit on Mideast Peace Talks Falters (WSJ)
- Combat-Ready China Military Seen as Xi’s Goal in Graft Battle (BBG)
- Huge earthquake off Chile's north coast triggers tsunami (Reuters)
- Pressure rises on Gross as investors pull $3.1 billion from Pimco's flagship fund (Reuters)
Nikkei 225 (+1.04%) outperformed overnight, buoyed by S&P 500 posting a new all-time high, a dovish BoJ's Tankan inflation survey and reports that the GPIF is to invest in funds specializing in Japanese stocks with high returns. Overall, another quiet session this morning as market participants continued to position for the upcoming ECB meeting, with Bunds under pressure amid further unwind of expectation of more policy easing by the central bank. According to ECB sources, there is no clear consensus at present on policy action, intense debate seen on Thursday after March HICP data, adding that it fears "over-interpretation" by market of QE possibility.
In the middle of 2012, to much yield chasing fanfare, China launched a private-placement market for high-yield bonds focusing on China's small and medium companies, that in a liquidity glutted world promptly found a bevy of willing buyers, mostly using other people's money. Less than two years later, the first of many pipers has come demanding payment, when overnight Xuzhou Zhongsen Tonghao New Board Co., a privately held Chinese building materials company, failed to pay interest on high-yield bonds, according to the 21st Century Business Herald.
Among the key overnight events was the February Euro area unemployment report, which was unchanged at 11.9%, lower than the 12% median estimate; in Italy it rose to a record 13% while in Germany the locally defined jobless rate for March stayed at the lowest in at least two decades Euro zone PMI held at 53 in February, unchanged from January and matching median estimate in a Bloomberg survey HSBC/Markit’s China PMI fell to 48 in March, the lowest reading since July, from 48.5 in February; a separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month NATO foreign ministers meet today to discuss their next steps after Putin began withdrawing forces stationed on Ukraine’s border Gazprom raised prices for Ukraine 44% after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.