Fitch

Frontrunning: May 17

  • As Brexit vote looms, U.S. banks review their European commitments (Reuters)
  • Oil’s Strength Continues to Boost Global Stocks (WSJ)
  • Trump closing gap with Clinton, poll shows (Hill)
  • In Adjacent Pennsylvania Counties, Republicans Are Split on Donald Trump (WSJ)
  • Make America Gold Again: Calls for Everyone's Favorite Standard Are Back (BBG)

Spain Sells 3x Oversubscribed 50-Year Bond

Following a scramble by European nations to issue ultra long-dated government paper, which saw France and Belgium sell 50-year bonds last month, while Ireland and Belgium went all the way and issued century bonds, with even Switzerland locking in 42-year paper yesterday, moments ago Spain was the latest to extend maturities all the way to 2066 when it sold €3 billion in 50 year bonds at Midswaps+50. According to MarketNews, the issue was over 3 times oversubscribed with the orderbook closing at €10.5 billion.

China Stops Trying To Fool The World; World Is Sorry

China is the latest in a growing line of “command and control” economies that have risen to prominence, captured the imagination of people who find free markets too messy for comfort, and then blown up when it turns out that dictators have no idea how to allocate capital.

Frontrunning: May 9

  • China stocks plunge again as hopes for economic recovery fade (Reuters)
  • European Stock Gains Defy China Data That Hurt Metals; Oil Rises (BBG)
  • Yen falls after Tokyo warning (Reuters)
  • Soros Chart Signals BOJ Bond Buying Already Enough to Weaken Yen (BBG)
  • Dollar Jump Catches Traders Short in One More Currency Calamity (BBG)
  • Even China's Party Mouthpiece Is Warning About Debt (BBG)

Obama: TTIP Necessary So As To Protect Megabanks From Prosecution

On May 7th, Deutsche Wirtschafts Nachrichten, or German Economic News, headlined, "USA planen mit TTIP Frontal-Angriff auf Gerichte in Europa” or “U.S. Plans Frontal Attack on Europe’s Courts via TTIP,” and reported that,America’s urgency to sign TTIP with Europe has solid reason: Megabanks must protect themselves from claims by European investors who allege that they were cheated during the debt crisis. … The U.S. Ambassador to Italy has now let the cat out of the bag on this — probably unintentionally.

The Energy Junk Bond Default Rate Just Hit An All Time High

Following this weekend's bankruptcies of Ultra Petroleum and Midstate Petroleum which added $3.1 billion to the mushrooming high-yield energy bond default volume tally, in addition to the $1.5 billion of credit facility defaults, the energy high-yield default has soared to a record 13% rate, surpassing the 9.7% mark set in 1999, according to Fitch Ratings.

Soros Warns China Credit Cycle Has Gone "Parabolic" Just To Keep Zombies Alive

After warning last year of a "practically unavoidable" hard-landing to come in China, George Soros unleashed his central-planner-crushing self last night on the great red ponzi. As we noted last night, Soros warned the "parabolic" rise in credit  is very worrisome, and "eerily reminiscent of US in 2007-8," specifically adding that "most of the money that banks are supplying is needed to keep bad debts and loss-making enterprises alive." Soros' full discussion can be found below...

Futures, Crude Unchanged Ahead Of Draghi As Parabolic Move In Steel, Iron Ore Continues

One day after stocks were this close from hitting new all time highs on what have been either ok earnings, if looking at non-GAAP data, or atrocious earnings, based on GAAP, and where any oil headline is now immediately translated as bullish by the oil algos, so far futures are relatively flat, while European stocks were at their moments ago in anticipation of the latest ECB announcement due out in just one hour.  However, unlike last month's "quad-bazooka", this time the market expects far less from Draghi. “Having pulled put the monetary bazooka in March, the market is sensibly expecting no further policy measures from the ECB,”

$14 Billion In Junk Bond Defaults Push April Total To Highest Since 2014

Following yesterday's bankruptcy of Peabody Energy and today's Chapter 11 filing of XXI Energy, defaults among American junk bonds just topped $14 billion in April, the highest monthly volume in two years according to Fitch calculations, and that is only for the first two weeks. April's surge in bankruptcy filings is not unexpected: according to JPM's default tracker, the number of bankruptcies was on a tear in both the month of March and the first quarter.

A "Massive" New Headache For Banks Has Emerged

It's not just the shale drillers who are in danger as they see their liquidity evaporate. As the WSJ writes today, and as covered here since January, it is the lenders themselves whose unfunded revolver exposure may suddenly become funded and expose them to even greater risks from the energy sector should oil not rebound far more forcefully and put US oil and gas companies back in the black. How big is the exposure? Very big: $147 billion.

Bad - But Better Than What's Coming

Very simply, if you borrow too much money life gets harder and the things that used to work stop working. For a country, lower interest rates no longer induce businesses and individuals to borrow and spend, and government deficits no longer translate directly into more full-time private sector jobs. Growth slows, voters get mad, politics gets crazy, and generally bad times ensue. The only question is why this is a surprise to the people whose choices brought us to the edge of the abyss.