Fitch

Yen Soars, Stocks Slide After Kuroda Says "No Need Or Possibility For Helicopter Money"

In a surprising rejection of Ben Bernanke, BOJ governor Haruhiko Kuroda said that there will be no helicopter money in Japan, amid increasing speculation over monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates."

So What Did The ECB Buy? "In Short, Almost Everything"

"So what did they buy? In short, almost everything. The ECB bought “topical” credits such as VW, Glencore and EdF. They showed little concern with taking credit risk by buying a range of low-BBB names. They bought “high yield” credits such as Telecom Italia and Lufthansa. They bought corporate bonds from US, UK and Swiss companies, and ironically, the ECB’s most popular purchase has been Deutsche Bahn – an issuer where bond yields are the most negative."

Piling On To The "Surreal" Response To Turkish Turmoil: Here Comes The Central Bank

In less than half an hour, the Turkish central bank will steal the public spotlight, if only very briefly, from Erdogan when it announces whether it will cut rates by 50 bps, 25 bps, (or - less likely - it won't cut at all). But in light of the recent stunning transformation in the country's political landscape, does this decision really matter? According to the market yes; according to Bloomberg's Richard Breslow, it is simply one more indication of how surreal the response to the Turkish turmoil has become.

Helicopter Money - The Biggest Fed Power Grab Yet

The Cleveland Fed’s Loretta Mester is a clueless apparatchik and Fed lifer, who joined the system in 1985 fresh out of Barnard and Princeton and has imbibed in its Keynesian groupthink and institutional arrogance ever since. So it’s not surprising that she was out flogging - albeit downunder in Australia - the next step in the Fed’s rolling coup d’ etat...“So it’s my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative." It’s the ultimate in 'something for nothing' economics.

"All-Time-Highs"

"...central bankers seem to view elevated security valuations as “wealth.” The longer this fallacy persists, the worse the subsequent fallout will be. I have little doubt that future generations will look at the reckless arrogance of today’s central bankers no differently than we view speculators in the South Sea Bubble and the Dutch Tulip-mania. Unfortunately, there is no mechanism by which historically-informed pleas of “no, stop, don’t!” will penetrate their dogmatic conceit. Nor can we change the psychology of investors."

With Over $13 Trillion In Negative-Yielding Debt, This Is The Pain A 1% Spike In Rates Would Inflict

There is now $13 trillion of global negative-yielding debt. And, as the WSJ writes, even a small increase in interest rates could inflict hefty losses on investors. With the 2013 "taper tantrum" the Fed sparked a selloff as it discussed ending its bond-buying program known as quantitative easing. A repeat "would be very painful for a lot of people" said J.P. Morgan. This is just how painful.

Sovereign Credit Is Deteriorating At A Record Pace

Culminating with the tipping of the UK's numerous real estate fund "dominoes" and the subsequent fallout in the wake Brexit, Fitch has been on a ratings-slashing spree, having cut the credit ratings on 14 nations so far in 2016, most recently that of the United Kingdom - a record downgrade pace for the rating agency.

Italy Just Bailed Out Another Failed Bank, May Use Pension Funds For Future Bank Rescues

Overnight, yet another failed Italian bank was bailed out. As the FT reports overnight, Atlante, Italy's privately backed €5bn bank bailout fund which was created in April to stem the threat of contagion from struggling lenders and whose assets turned out to be woefully inadequate, took control of Veneto Banca after a €1bn capital increase demanded by EU bank regulators attracted zero interest.

Frontrunning: June 29

  • Global stocks gain as Brexit nerves settle (Reuters)
  • Draghi Wishes for a World Order Populists Will Love to Hate (BBG)
  • Merkel Says No Way Back From Brexit as Cameron Regrets Loss (BBG)
  • EU leaders meet without UK to plot Brexit response (FT)
  • Division, confusion as EU rethinks future without Britain (AP)

Global Stocks Rebound, US Futures Jump On Expectation Of "Coordinated Intervention By Central Banks"

After a historic two-day selloff, which as shown yesterday slammed European banks by the most on record the wildly oversold conditions, coupled with hopes for yet another global, coordinated central bank intervention, coupled with modest hope that David Cameron's trip to Brussels today may resolve some of the Article 50 gridlock, have been sufficient to prompt a modest buying scramble among European stocks in early trading, with the pound and commodities all gaining for the first time since the shock Brexit vote.

Developed Market Bond Yields Crash To Record Lows

In the last year, developed market bond yields have been cut in half with the last 2 days seeing a safe-haven flight that crashed yields to a new record low. With UK Gilts 10Y under 1% for the first time, Bunds crashing to record lows, Treasuries back below 1.50%, and JGBs smashed -22bps. With peripheral bond risk spiking and default risk surging, amid ratings downgrades, as Bloomberg's Mark Cudmore notes, "gilts may prove worthy of their name, offering a superficial coating of reward that masks significant threat."

Brexit: All The Latest News, What Happens Next And How To Trade It

Sterling drops, banking stocks tumble and peripheral EGB and credit spreads widen after the U.K.’s vote to leave the EU; verbal and direct intervention by central banks help currencies off earlier lows. U.K. PM David Cameron has resigned, announcing there needs to be a new prime minister in place by October.

Here Is Why One Credit Rating Agency Believes Russia Is Safer Than The US

If posed with the question who has the better credit rating, the United States or Russia, most people would presumably pick the United States. However, that is not the case for Dagong Global Credit Rating Co, one of the three biggest credit rating companies in China. Here's why...