- Tsipras Tamed as Economists Declare Greece Loses Austerity Fight (BBG)
- Greece readies reform plans to first sign of leftist unrest (Reuters)
- Yellen Faces Congress Amid Direst Threat to Fed Since Dodd-Frank (BBG)
- The war must go on: Kiev says cannot withdraw heavy weapons as attacks persist (Reuters)
- Ukraine fears spread of war after blast in eastern city (Reuters)
- Denmark Dismisses Report It Could Consider Capital Controls (BBG)
- Deadline Nears on Homeland Security Funding Impasse (WSJ)
- Gross Fund Hurt by Oil’s Plunge Amid Bets on Energy Bonds (BBG)
With the recent collapse of Treasury yields, the massive short position in bonds has been dramatically unwound (though there is still plenty left). However, there is the other "most crowded" trade in the world - Long The USDollar - that remains... but is starting to show some cracks in the armor. Despite the highest levels of Short EUR, Long USD since the very peak of the EU Crisis in 2012 and still massively long net dollar positions across sell-side OTC indications and CFTC exchange-traded positions, the last 2 days have seen the biggest drop in the USD Index since September 2013... is the world's most crowded trade about to unwind?
Something stunning and unexpected took place in the third quarter: Citigroup, or rather its FDIC-insured Citibank National Association entity, just surpassed JPM and is now the biggest single holder of total derivatives in the US. Furthermore, as the charts below show, while every other bank was derisking its balance sheet, Citi not only increased its total derivative holdings by $1 trillion in Q2, but by a whopping, and perhaps even record, $9 trillion in the just concluded third quarter to $70.2 trillion!
As investors and market participants become increasingly aware of the regulatory failures that allowed for manipulation of LIBOR, FOREX, municipal bond bidding and certain commodities markets, regulatory sources are increasingly expressing concern that they have paid too little attention to potential manipulations of an arguably larger, more systemically important and less regulated market – the CDS market as self-governed, through ‘regulatory license’, by the International Swaps and Derivatives Association (ISDA).
- Christmas rally enters sixth day in Europe (Reuters)
- Downing North Korea's Internet not much of a scalp (Reuters)
- North Korean Internet Access Restored After Hours-Long Outage (BBG)
- At U.N. council, U.S. calls life in North Korea 'living nightmare' (Reuters)
- Ukraine Cuts Gold Reserve to Nine-Year Low as Russia Buys (BBG)
- De Blasio Seeks to Heal Rifts With Police After Officers Slain (BBG)
- Oil steady around $60 on hopes of strong U.S. data (Reuters) - so it fell below $60 because...
- Australian Dollar Hits Four and a Half Year Low on Chine Growth Worries (Reuters)
Belarus In Full-Blown Hyperinflation Panic: Blocks News, Online Stores; Bans All FX Trading For 2 YearsSubmitted by Tyler Durden on 12/22/2014 15:33 -0500
Just because Russia has managed to stabilize its currency, that certainly does not mean the soaring dollar tantrum-cum-crude crash episode is anywhere near over, nor that stability has returned to the rest of the oil-exporting countries. Case in point, crude-exporting powerhouse Nigeria, where things are going from worse to #REF! Bid and ask prices for the naira were quoted from 162 to 190 per dollar with only 16 trades by 1 p.m. in Lagos [yesterday], compared with more than 170 by the same time yesterday, according to data compiled by Bloomberg. The naira fell 12 percent against the dollar this quarter, the worst among 24 African currencies tracked by Bloomberg after Malawi’s kwacha. Investors dropped Nigerian assets as the outlook for Africa’s biggest oil producer worsened with Brent crude prices almost halving since late June. “The banks can’t stop trading because of the circular,” the Deputy Central Bank of Nigeria Governor Sarah Alade said. “It is not supposed to close the market. We have told them we’ll continue intervening in the market, so there is no need to panic.”
As we noted previously, counterparty risk concerns (and thus financial system fragility) are starting to rear their ugly heads. In the mid 2000s, it was massive one-way levered bets on "house prices will never go down again." When the cracks started to appear, the mark-to-market losses in derivatives led to forced liquidations and snowballed systemically. In the mid 2010s, it is massively levered one-way asymmetric bets on "commodity prices [oil] will never go down again." Meet WTI-structured-notes: the convenient transmission mechanism for oil-price-shocks blowing up the financial system.
Phibro could have the ability to mask its activity in Occidental’s hedging activity. Speaking with traders within the oil complex, I learned that there has been heavy trading activity on the OTC market on the backend of the oil curve.
Who says macroprudential regulation doesn't work: according to the BIS, notional amounts of outstanding OTC derivatives contracts fell by 3% to "only"
$691 trillion at end-June 2014. This is also roughly equal to the total derivative notional outstanding just before the Lehman collapse, when global central banks volunteered taxpayers to pump a few trillion in capital to meet global variation margin calls. Clearly the system, in the immortal words of Jim Cramer, is "fine."
- Banks Had Unfair Advantage From Commodity Units (Bloomberg)
- Report Notes Deals Between Goldman, Deutsche and Others Drove Up Aluminum Prices (WSJ)
- Goldman, Morgan Stanley Commodity Heyday Gone as Units Faulted (BBG) - because when you can no longer manipulate, you move on...
- Lenders Shift to Help Struggling Student Borrowers (WSJ)
- Immigrants face major hurdles in signing up to new Obama plan (Reuters)
- Distressed Debt in China? Ain’t Seen Nothing Yet, Buyers Say (BBG)
- Banking culture breeds dishonesty, scientific study finds (Reuters)
- Amazon Robots Get Ready for Christmas (WSJ)
Moments ago, Bloomberg released a stunning update that Europe's largest bank is exiting the single-name, both IG and HY, CDS product line, which for years was one of its biggest revenue generators and a product in which DB was for a long time one of the best and deepest CDS trade axes. As Bloomberg reports, Deutsche Bank AG will stop trading investment-grade and high-yield credit default swaps on single credits and will instead focus on trading corporate bonds, according to a spokeswoman.
This may not quite be the blow-off top in the merger bubble as companies rush to frontrun the ECB and buy whatever still isn't nailed, but it is getting close. Because while earlier today Baker Hughes announced it would accept the Halliburton offer to buy it unchallenged in a $35 billion transaction leading many to wonder just how much lower the price of oil is still set to drop, moments ago the Allergan "White Knight" swooped from up on high, and as had also been leaked in recent weeks, Actavis agreed to buy the botox- maker which Ackman and Valeant had been so eagerly chasing for months in order to let the roll-up pharma pad its non-GAAP books with another 2-3 years of pro forma "synergies" add backs. This means that between Halliburton and Actavis, today we have had the first $100 billion "Merger Monday" in over a decade.
On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a "bank run."