Primary Market

Tumbling Dollar Sends USDJPY Under 100, Oil Over $46 As Gold Spikes; Futures Flat

Overnight, John Williams' latest uberdovish paper "Monetary Policy in a Low R-star World", which we profiled yesterday, and which suggests lower rates for far longer, made the rounds and has led to a steep 0.8% drop in the Bloomberg Dollar spot Index, which sank to its weakest since June while the yen strengthened 1.2 percent, slipping briefly below 100 against the greenback for the first time since June 24, pushing oil and gold higher, and Asian shares lower.

Full BOE Preview, And A Look At What UK Corporate Bond QE Will Look Like

  • Bank of England are widely expected to cut rates to 0.25% with a 25bps rate reduction fully priced in OIS markets.
  • The central bank is also touted to expected to announce further stimulus measures including the potential restart of its QE programme, the LFP Scheme, or corporate QE.
  • 2017 GDP growth forecast is likely to see a significant downgrade amid early signs of a deterioration in the UK economy, while GBP depreciation is likely to support 2017 Inflation forecasts.

World Stocks Drop For Third Day On Growing Concerns About Central Bank Policy, Tumbling Oil

After 7 consecutive drops in the Dow Jones, the Industrial average is set for an 8th decline with US equity futures modestly lower in the premarket as risk-averse sentiment persists overnight. Oil’s continued slide and recent plunge into a bear market, despite some stabilization this morning just south of $40, has finally rekindled global growth concerns, and is keeping a lid on bullishness. European stocks are little changed, while Asian stocks and S&P futures fall.

Another Ugly Auction: Treasury Sells $34BN in 5Y Paper With Big Tail, Lowest Bid To Cover Since 2009

The hits just keep on coming. After yesterday's ugly 2 Year auction, and following last month's less than stellar, tailing 5 Year auction, moments ago the Treasury sold $34 billion in 5 Year paper in what was another woeful issuance, one where the high yield of 1.18% was a substantial tail of 1.6bps to the 1.164% When Issued, and whose Bid to Cover dropped again, reaching 2.27, the lowest since September 2009.

"We've Never Had A Shock To The System Like This" - Global Selloff Accelerates On Brexit, Italy, "Unknown" Fears

The flight to safety following last week's quarter-end window dressing is accelerating, with constant news and flashing red headlines of record low yields across DM government bonds once the norm, and as of moments ago Denmark's 10Y bonds joined the exclusive club of sub-zero yields; gold has soared to fresh multi-year highs above $1,370, the risk-off currency, the Yen, soaring and sending the USDJPY just above 100, while sterling crashed overnight once again below 1.27, levels not seen since 1985.

Day 3 Of Global Post-Brexit Rally: European Stocks, US Futures At Session Highs

Day three of the post-Brexit rally continues, and after some initial weakness due to concerns about Chinese currency devaluation, both European stock and US equity futures were trading at session highs, facilitated by yesterday's stress test results which saw dozens of US banks unleash a tsunami of stock buyback announcement which in turn pushed S&P futures to new post-Brexit highs.

Futures Flat Ahead Of Strike-Impacted Jobs Report; Commodities Approach Bull Market

After yesterday's two key events, the ECB and OPEC meetings, ended up being major duds, the market is looking at the week's final and perhaps most important event of the week: the May payrolls report to generate some upward volatility and help stocks finally break out of the range they have been caught in for over a year.

"The High Yield Bond Rally Won't Last" BofAML's 9 Reasons To Sell Any Strength In Junk

BofAML's Mike Cantopoulos' distaste for corporate fundamentals, displeasure with the efficacy of QE and easy monetary policy on spurring growth and inflation, and concerns that a further deterioration in credit conditions will create deeper economic troubles not appreciated by many have left credit markets with poor default adjusted valuations and little room to absorb a negative shock. He highlights nine key reasons below why BofAML believes this rally won't last (and in fact may have already seen its end).

The SPV Loophole: Draghi Just Unleashed "QE For The Entire World"... And May Have Bailed Out US Shale

"The ECB stands ready to buy bonds from Euro Area issuers even when their parent companies are outside of the bloc. Already we can find a number of US, UK and Swiss headquartered names that issue out of SPVs incorporated in the Euro Area. If this trend to SPV issuance catches on, then the ECB’s policies will likely be very reflationary for all credit markets across the globe, and because of a likely refinancing wave – equity markets too."

ECB Releases Full Details Of Its Corporate Bond Buying Program

  • The CSPP aims to further strengthen the pass-through of the Eurosystem’s asset purchases to the financing conditions of the real economy.
  • Purchases will start in June 2016.
  • The CSPP will be carried out by six national central banks acting on behalf of the Eurosystem, coordinated by the ECB.
  • In combination with other non-standard measures, the programme will provide further monetary policy accommodation and help inflation rates return to levels below, but close to, 2% in the medium term.

Futures Wipe Out Most Overnight Losses Following Dramatic Rebound In Crude

Following yesterday's OPEC "production freeze" meeting in Doha which ended in total failure, where in a seemingly last minute change of heart Saudi Arabia and specifically its deputy crown prince bin Salman revised the terms of the agreement demanding Iran participate in the freeze after all knowing well it won't, oil crashed and with it so did the strategy of jawboning for the past 2 months had been exposed for what it was: a desperate attempt to keep oil prices stable and "crush shorts" while global demand slowly picked up.  And whether it is central banks, or chronic BTFDers, just 12 hours after oil opened for trading with a loud crash, the commodity has nearly wiped out all losses, and both brent and WTI were down barely 2%, leading to both European stocks and US equity futures virtually unchanged on the session. 

"There Is A Lot Of Fear In The Market" - Stocks, Futures Slide After Yen Soars

Two days after stocks slid in a coordinated risk-off session, and one day after a DOE estimate of US oil inventories sent US stocks surging while the failed Allergan-Pfizer deal unleashed torrential hopes of a biotech M&A spree leading to the single best day for the sector in 5 years, sentiment has again shifted, this time due to a violent surge in the Yen as the market keeps testing the resolve of the Japanese central bank to keep its currency weak, and so far finding it to be nonexistent.