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China continues to export a lot of deflation to the rest of the world, including the U.S., causing producer price inflation to remain much colder than they were 2 years ago. Core PPI inflation came in at a meager +1.2% YoY in May, and although the highest since February 2015, remains well off the 2% waterline.

Despite much higher oil and energy prices, PPI inflation remains muted as producers seem to be much better at hedging for higher crude prices than consumers are. The gasoline component of the PPI posted its largest 3-month increase since 2009, as a result of the ballistic rally in spot prices, almost doubling from their February lows.

#Forex #Stocks #Trading #Investing #Money #Economy #China #Oil #Inflation

We're just 4 minutes before the release of the June FOMC statement and interest rate decision, so we present this chart plotting the VIX (S&P 500 implied vol) against its underlying market.

Here you can see that the SPX is trading very rich to where the VIX implies it should. Put another way, implied volatility is much higher than where it usually should be trading given the price action of stocks. This could be a dislocation, or a sign of massive demand for protection as hedgers bid up downside protection via short term VIX calls.

There might also be speculative interest as traders bet that stocks will see more downside and are levering up on inverse-risk plays. We shall see in a few minutes time of the VIX is right.

#Forex #Stocks #Trading #Investing #Money #FOMC #QE

As expected, the Fed left its target rate unchanged at 0.25-0.50% in June.

Dollar knee jerks lower in the statement release. Markets are awaiting Yellen's presser and Q&A session in 30 minutes time.

#Forex #Stocks #Trading #Investing #Economy #Money #FOMC #NIRP #QE

[Zoom in for ultra large image]

Post the uneventful June FOMC meeting where the Fed kept rates unchanged as expected, markets are going berserk. In short, the initial reaction has been broad based dollar weakness, strength in anti-dollar assets such as precious metals (gold, silver, ect...), bonds heavily bid as yields crash, and equities rather confused on their trajectory.

We'd say this was a dovish June statement. Below are some key headline bulletins:

• FED SAYS IT EXPECTS LABOR MARKET INDICATORS `WILL STRENGTHEN'
• MEDIAN FED FUNDS EST. 1.6% END-2017 VS 1.9% IN MARCH
• FED SAYS PACE OF LABOR MARKET IMPROVEMENT HAS SLOWED
• FED MEDIAN 2016 GDP GROWTH FORECAST 2% VS 2.2% IN MARCH EST.
• FED MEDIAN ESTIMATE CONTINUES TO FORECAST TWO 2016 RATE HIKES
• 6 FED OFFICIALS SEE ONLY 1 HIKE IN 2016
• ONE PARTICIPANT DID NOT SUBMIT L-TRM RATE FORECAST
• FOMC DOES NOT MENTION BREXIT, OTHER SPECIFIC GLOBAL RISKS
• FOMC: REPEATS, WILL MONITOR INFL, GLOBAL ECON, FIN DEVELOPMENTS
• FOMC: MKT INFL MEASURES 'DECLINED,' L-T EXPECT LITTLE CHANGED
• FOMC: INFL CONTS TO RUN BELOW 2% GOAL PARTLY ON ENERGY
• FOMC: HOUSING SECTOR 'CONTINUED TO IMPROVE'
• FOMC: DRAG FROM NET EXPORTS EASED, BIZ INVESTMENT SOFT
• FOMC: ECON GROWTH PICKED UP, HOUSEHOLD SPENDING STRENGTHENED
• FOMC: LABOR MKT IMPROVEMENT SLOWED, DESPITE UNEMP DROP
• FOMC: KEEPS POLICY RATE UNCH AT 0.25-0.5%, VOTE 10-0

More to come as we see it. Meanwhile, Yellen will start speaking in 2 minutes...

#Forex #Stocks #Trading #Investing #Economy #Money #FOMC #NIRP #QE

Updated market reaction after no hike decision in June FOMC. In this case, it's obvious that dollar weakness doesn't equate to strength in risk as stocks are fading after spiking initially. USD containers to be weak while gold and bonds March strongly higher.

FF futures implied rate hike odds for July and September both plunge as the market seems to view the June statement as more dovish than hawkish, with added elements of caution and apprehension by some FOMC members.

#Forex #Stocks #Trading #Investing #Economy #Money #FOMC #NIRP #QE

As you analyze the latest Fed "dot plot", Yellen is busy jawboning markets into a frenzy, doing what she does best: Baffling with bulls*** when things get tough.

What she cannot jawbone over is the fact that FOMC members are now collectively more dovish than in March. Besides the emergence of an unknown uber dove, who so daringly affixed a 0.6% projected rate for both 2017 and 2018, most members have projected at least a notch lower, bringing 2016's (June FOMC) projected FF target rate to a median of 0.9% and a midpoint of 0.6%.

The "dot-plot" curve is also more gentle as compared to in March (notice the green lines). Other than the Fed's own projections (which will most likely be moot come July and September), the market is still expecting the effective FF target rate to be significantly lower than what the Fed expects (see violet line). In fact, the OIS forward rate for 2017 is 0.6%, exactly that of the mysterious uber dove's projection!

In other news, here are some of the key headlines from Yellen's press conference:

• YELLEN: EXPORTS BEEN SOFT REFLECTING SUBDUED FOREIGN DEMAND
• YELLEN: 1Q SLOWDOWN IN HHLD SPENDING SEEMS TO BEEN TEMPORARY
• YELLEN: MAY DECLINE IN UNEMPL B/C LESS PEOPLE SEEKING WORK
• YELLEN: IMPORTANT TO NOT OVERREACT TO ONE, TWO EMPLOY REPORTS
• YELLEN: CAN'T TAKE STABILITY OF LONG RUN INFL EXP FOR GRANTED
• YELLEN: MEDIAN GROWTH EXPECTATION SLIGHTLY LOWER FOR NEAR TERM
• YELLEN: CAUTION APPROPRIATE GIVEN RATES STILL NEAR ZERO
• YELLEN: VULNERABILITIES IN GLOBAL ECONOMY REMAIN
• YELLEN: NUMBER OF PARTICIPANTS REVISED DOWN '16 FFR PROJECTION
• YELLEN Q/A: BREXIT SOMETHING DISCUSSED, FACTORED INTO DECISION
• YELLEN: BREXIT COULD HAVE CONSEQUENCES FOR US ECONOMY
• YELLEN: GREAT DEAL OF UNCERTAINTY AROUND SEP FFR FORECASTS
• YELLEN: NEUTRAL RATE QUITE DEPRESSED BY HISTORICAL STANDARDS
• YELLEN: PRODUCTIVITY GROWTH COULD STAY LOW FOR LONG TIME
• YELLEN: STATE OF LABOR MARKET STILL HEALTHY; LOSS OF MOMENTUM
• YELLEN: EVERY MEETING IS LIVE, CLD MAKE DECISION AT ANY MTG

#Forex #Stocks #Trading #Investing #Economy #Money #FOMC #NIRP #QE

Like how "smart money" flipped to net buyers of U.S. equities 2 week ago only to flip back to become net sellers last week, U.S. crude production has declined once again after posting its first weekly increase in 21 weeks (last week's DoE report). It seems like these ephemeral sprites of pseudo inflection points have been a complete farce...

According to the DoE report on last week's activity (published today), the fundamentals have once again turned lower for the American oil market. Total stock of crude saw a lower than expected draw, while Cushing saw a pretty large build widely missing expectations of a 600,000 bbl draw. Distillates also missed expectations, posting a build. The only component that beat was gasoline, posting its largest draw since April this year and beating estimates. This was enough to send spot prices sharply higher, only to retrace mosh of the move layer.

As mentioned earlier, the rise in crude production see 2 weeks ago has turned out to be nothing more than a blip on the screen. Production formed fresh 2016 lows and back at September 2014 levels. What next?

#Forex #Stocks #Trading #Investing #Economy #Oil #OPEC #Energy #Money

As it seems, China's tremendous credit expansion from the first quarter of 2016 is now ancient history. As Zero Hedge reports, "after the creation of $1 trillion in aggregate credit, or Total Social Financing, in just the first three months of the year, last month China slammed the brakes on new credit creation, when every aspect of credit growth came solidly below expectations."

We have said countless times that do emerging markets the likes of China, Brazil, and S.Africa, credit creation (credit growth) is perhaps the single most crucial factor that could mean expansion or recession for those economies. China is the world's most prime example of an economy that grows by increasing indebtedness. In fact, Corporate China is one of the world's most highly leveraged.

Today, after the publication of May's official state credit and money growth figures, we can say with increased certainty that China's credit binge in the first quarter has ended. In May, TSF (total social financing, the most important measure of overall credit extended to the economy by the state) fell from April's RMB 751bn to the current RMB 660bn, majorly missing expectations of RMB 1,000bn. For even more context, TSF stood at nearly RMB 3,500bn (that's 3.5 trillion with a "t&quot in January this year, which is the highest in recorded history. Just let that sink in for a moment. The magnitudes of those swings put even the wildest of penny stocks to shame.

Other than TSF, the Chinese shadow banking market (shadow banking market in China is probably the second largest in the world, if not the largest) continue to get hammered hard recording the largest ever contrition in May of RMB 507bn of the so-called "banker acceptance bills", which are essentially "short-term debt instruments issued by a firm thats part of a commercial transaction and thats guaranteed by a commercial bank"; these are a pseudo currency used by companies for payments, and have been the subject of several instances of massive fraud involving both businessmen and politicians.

While it might be hard for Chinese officials to hold their head up as high as before, bared down by the weight of ending economy growth and activity plus the fragility of the financial system, the government might actually be doing the right trying to limit the amount of credit that is injected into the economy, in a fine and precarious game of moderating growth, inflation, and longer term financial stability (the later posing the biggest threat).

We now turn to Goldman for the entirety of this data set release; try to appreciate the weight of these figures:

"May money and credit data were mixed. RMB loan data surprised the market on the upside but the broader measures of M2 and TSF data were substantially below expectations. Within the strong loan data, a large portion (Rmb 528 bn) was long-term household loans, which are usually mostly mortgage loans. While there are signs of weaker property sales in recent weeks, loan supply often lags contract sales so May credit data likely partially reflected this earlier strength in property sales. As some investors tend to focus considerable attention on RMB loan growth as a gauge of policy stance, June monetary data may ease their concerns about the potential for overly aggressive tightening following the People's Daily editorial by an authoritative person in early May.

However, RMB loans are no longer the main source of liquidity for the real economy and therefore it is more important to look at the broader measures.

Here, the adjusted TSF growth shows a clear deceleration from the April level. While M2 sequential growth rebounded from the exceptionally low April figure, it is still at the sub-10% level. Both TSF and M2 suggest somewhat tighter liquidity conditions, at least compared with a very loose 1Q. As we noted in previous comments, the government already started to tweak its policy stance in April, and the People's Daily article was released in May. (An analogy for this, in our view, is the driver of a car making a turn before flashing the signal). Still, we view the article as important because it may have changed the policy expectations of economic players such as commercial banks and firms in the real economy.

Tighter monetary conditions, lower future policy expectations, and less administrative pressures within the government were likely the key drivers of slower FAI growth after 1Q. The deceleration in FAI growth in the May data suggests its earlier rebound was totally dependent on policy supports. Meanwhile, FAI from the private sector has continued to decelerate throughout the year.

Overall economic growth has held up well in May, mainly because export growth was no longer a large drag on the economy as it was the case in 1Q. April and May growth tracked at 6.6-6.7% yoy in terms of GDP growth. As growth appears to be just on target, we expect policy stance to be kept largely stable until there are clear signs of significant deviation from the target."

#Forex #Stocks #Trading #Investing #Money #Economy #Brexit #EUref #China #Japan #FOMC #Debt

The aftermath 2 hours after a more dovish than expected Fed, no rate hike, increasingly cautious language, heightened ambiguity, dangling they of a potential hike at any and every "live" FOMC meeting...

Everything started to turn when Yellen opened her mouth. The U.S. dollar is now higher than where it was pre-FOMC. Believable?

As we warned, Yellen is the biggest troll of all and she wants to get at us!

#Forex #Stocks #Trading #Investing #Economy #Money #FOMC #NIRP #QE

What happens on the first 100 days should the UK vote to leave the European Union? Everywhere you look, there are potential consequences if Brexit happens. Is this why the fear is so real in Europe?

Bloomberg has the full story of analysis:

Before dawn on June 24, if an exit vote becomes clear, the EU’s top brass from Berlin to Brussels will be forced into damage control. In echoes of the Greek debt crisis, euro-area finance ministers may hold an emergency meeting as soon as that evening. Wild swings in the pound, more aggressive interventions by the Swiss National Bank and a ratcheting up of global instability rank as likely market reactions.

Currency markets haven’t priced in the U.K.’s exit from the EU, so if it happens, “a crash is pretty likely,” Lothar Mentel, chief executive officer of Tatton Investment Management in London, said on Bloomberg Television. “We would have to brace ourselves for quite a rough awakening on that Friday.”

The political fallout may be even more fraught. Europe’s traditional counterweights, France and Germany, whose enmity the EU was set up to banish, will seek to gain some of the initiative. They are planning a response as early as June 24 that could include a commitment to deeper euro-area integration as well as a declaration that the EU dream remains alive, according to three people familiar with the plans.

“The European Union will need to have a credible strategy,” said Guntram Wolff, of the Brussels-based policy group Bruegel. “To avoid a gradual disintegration of the EU, political leaders will need to strengthen the attractiveness of the EU and especially the Franco-German alliance.”

As the weekend begins and the reality dawns in the U.K. that it has voted to leave the world’s largest trading bloc, the rest of Europe will have their own questions to answer. Amid fears that a “Leave” vote could further fuel populist and anti-establishment sentiment throughout Europe, the EU’s leaders could choose to take the unprecedented step of calling an emergency summit without British representation as early as Saturday, June 25.

The reason would be two-fold: send a message to Spanish voters who go to the polls June 26 that the EU remains strong; and to work out what to offer -- or, more likely, what not to offer -- the U.K. in areas such as free movement of people and access to the EU’s single market.

There will be divisions to overcome even without the British. In France, where opinion polls say the euroskeptic National Front may make it through to the runoff in next year’s presidential elections, President Francois Hollande will have cause to show the electorate that leaving the bloc carries negative consequences. Other leaders, such as those of the Netherlands and Denmark, where anti-EU feeling is also growing, may consider it more politically beneficial to offer support to Britain, their traditional ally.

Nations outside the euro area, especially those where anti-EU sentiment has been on the rise, such as Hungary, Poland and Sweden, could form a group of countries resisting any French and German attempts to move the EU in a more integrationist direction. With Britain’s exit, non-euro countries would lose their crucial partner -- they would represent only 14 percent of the EU’s gross domestic product. David Cameron is scheduled to meet the other 27 EU leaders at a summit in Brussels the following week. It’s at this gathering that the prime minister is likely to trigger the EU’s Article 50 -- the never-before-used law that catapults nations out of the club.

That would set a deadline of two years -- until the end of June 2018, during which time the U.K. would have to negotiate its exit. Will Cameron want the U.K. to become like Norway or Iceland and maintain a close working relationship with the bloc as part of the European Economic Area? Or could there be another set-up that means the U.K. would have to trade with the EU under the World Trade Organization framework?

EU chiefs fear the referendum will spark similar demands across the continent. With elections due in the Netherlands, France and Germany in 2017, there’s reason to discourage others from following the U.K.’s course, and this could weaken Britain’s hand in negotiations. It could also divert the EU’s attention away from other issues, including Greek finances, the refugee crisis and tackling instability in Ukraine, according to Michael Leigh, senior fellow at the German Marshall Fund.

By this time, the political mist in the U.K. may be clearing. The EU could find itself dealing with another prime minister -- someone like former London Mayor Boris Johnson, who supported Brexit and whom bookmakers have installed as the favorite to lead the Conservative Party. Whoever it is, the new British leader would probably have to extricate the U.K. from the EU while facing the prospect of a further referendum, on Scottish independence.

The U.K. would start talks to renegotiate EU agreements in areas as diverse as fishing quotas, financial-services legislation and health and safety standards established over more than 50 years, simultaneously having to start negotiating its own trade deals with the rest of the world. Talks would also have to begin on the relocation of EU bodies headquartered in the U.K., such as the European Banking Authority. Each step of the way must be agreed upon by the EU’s other members and the European Parliament, a process lasting at least seven years and with no guarantee of success, EU President Tusk told Germany’s Bild newspaper.

“No one can predict the long-term consequences,” Tusk said in the interview. “I fear that Brexit could be the beginning of the end not only of the EU, but of the entire western political civilization.”

#Forex #Stocks #Trading #Investing #Money #Economy #UK #EUref #Europe #Brexit #Euro #EU

Just like the Fed chose to do nothing 15 hours ago, the Bank of Japan (BoJ) followed closely in the same footsteps by choosing also to maintain its current stance of loose monetary policy, keeping rates negative as they already were and maintaining the size and scope of asset purchases.

While the consensus expected no change in BoJ policy, the market's reactions tell a completely different story — one that seems to resonate with the "hopefully the BoJ eases more" meme. When they got nothing from the world's maddest and most aggressive (in monetary stimulus) central bank earlier today, the yen exploded across the board sending risk assets deep into the red.

As seen, Japanese stocks were murdered, dragging global markets down with it. The real story is with the yen, which traded at a low of 103.50 against the greenback, down more than 250 pips from the day's highs! The yen has been the largest mover (beta adjusted) compared to Japanese stocks and bonds. Traders seem to be targeting cash more than safety or risk.

Also, JGB yields are actually unchanged post BoJ and remains the one of the world's lowest yielding, with yields negative up to 10 years. The 5Y is yielding less than the 2Y (both are negative), making the front end of the JGB curve inverted! As we can appreciate, this occurrence is extremely rare, and speaks volumes about how mangled the financial markets are in the developed economies (especially Japan's).

Key bulletin headlines from the BoJ event:

•BOJ Board Votes 7-2 to Keep Neg Rate Unchanged - Sato, Kiuchi Dissented on Vote on Negative Rate

•BOJ Board Votes 8-1 to Keep monetray base target

•BOJ: Production Continues to Be More or Less Flat After Quake

•BOJ: Japan's Economy Continues to Recover Moderately

•BOJ: Needs to Be Mindful of Risks to Price Trend

•BOJ slightly more bearish on price outlook, admitting that CPI might be "a little negative'' or around 0% for the time being

•BOJ says inflationary expectations have weakened recently, yet no action

•55 percent of economists forecast a BOJ move at the next BOJ meeting on July 29, in a June 6-10 Bloomberg survey

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #FOMC #Gold #Japan #Economy #Finance

The post June FOMC market madness is still ongoing. The U.S. dollar has been a volatile mess against other currencies, but a one way street lower against the precious metals complex (gold & silver the prime examples). Bond yields have crashed, with the 10-year UST yield back to its February lows (a period when risk aversion and flight to safety was at their climatic highs).

The June FOMC statement provided little guidance as to when the Fed might hike again, citing that the labor market has certainly slowed down and markets should expect lower employment figures as the U.S. economy closes in on full employment. The inflation message was generally similar as April's, as the Fed projects long term inflation to reach 2% over the coming years.

As we forewarned, the Fed (staring Yellen as the biggest troll of all) has once again fooled markets into making wild gambles on when it might next hike rates, directing the market's focus to macro as the Fed claims it will continue to be data dependent (even more so now given the extremely bad jobs reports of late).

When Yellen said during her presser that every upcoming FOMC meeting would be a "live" on from now on, and that the Fed can hike at any given moment, we knew that the ongoing crappy chop in the markets will likely persist.

Good luck try to ride this out folks!

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #FOMC #Gold #Japan #Economy #Finance

USDJPY alongside other yen crosses are absolutely tanking this Thursday. We have already reported much about the BoJ's inaction in today's press conference, and it isn't exactly the first time the bank has stunned markets by its stubbornness in easing further (lowering interest rates more & boosting QQE size) despite the yen having strengthened 17% agains the greenback since the highs USDJPY made in May 2015. Thanks to today's explosion of yen strength, global risk markets are sharply down.

Kuroda had better learned not to stoke the market's wrath, especially not when Japan's underlying economy is dangling on a thread and sitting on a knife's edge with stagnation on one side and a recession on the other.

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #FOMC #Gold #Japan #Economy #Finance

For the first time ever, 30-year Swiss government bonds trade at a negative yield. What more do we need to say other than "good luck in diffusing this time bomb"?

Deutsche Bank's Jim Reid follows up with yesterday's note describe what the credit strategist sees as a manifestation of a broken finances system:

"How can I get virtually guarantee to get 100 back on an investment in the middle of this century? Well one way would be to spend 231 CHF today and buy the Swiss 2049 maturity Government bond. You have the luxury of an annual 4% coupon to ease the pain of the ginormous capital loss but over the last couple of days, this 32.5 year bond joined the negative yield club (on the ask side). Yesterday we said that the chart we published on 10 year bund yields back to 1807 was an excellent way of showing a broken financial system well maybe the chart in today's PDF showing this Swiss 2049 bond yield is even more appropriate. You now have to pay the Swiss government for the privilege of lending to them for nearly 33 years. I wonder what the real return on that investment will be over its lifetime? All guesses welcome."

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #Finance #Economy

May's Philadelphia Fed composite index shows confined sluggishness in the U.S. economy, as both new orders and employment fell last month. The index is now lower YTD. Both metrics are in their respective downtrends since 2014 and are currently deep in negative territory.

On inflation, the headline CPI figure came in at +0.2% MoM for May, meeting expectations. When annualized, CPI inflation read +1%, missing expectations for a +1.1% print. The core figure continued higher in May posting a sizable +2.2% gain over May last year. This is above the Fed's own 2% core inflation threshold and has been for he last 7 months...

Ever wondered if the Fed even takes inflation into account? Now that oil prices have nearly double (so have gasoline prices)...

#Forex #Stocks #Trading #Investing #Money #Economy #Inflation #Business #Finance

In the her press conference for the June FOMC meeting held yesterday, Yellen mentioned that markets should expect slower progress in the labor market as a whole as the U.S. economy inches closer towards full employment. While there might be some truth to that, we feel it's mostly a convenient excuse for the Fed to coverup negative developments in the jobs market.

Why? Because when one stands back and looks at the border spectrum of labor market indicators, such as the Fed's very own Labor Market Conditions Index, the medium trends seem to have turned to the downside.

Case in point. For the entirety of 2016 so far, labor market conditions have deteriorated; the speed of said deterioration has also been increasing, putting the pace of decline at the highest since 2009, where we know the global economy was deep in a Great Recession. So how is the labor market improving when conditions for hiring have worsened this badly?

And then we have the weekly initial jobless claims indicator which is still hovering above 33-year lows, and just refuses to head higher. We have reported on this epic divergence between initial claims and just about every other labor market indicator there is. Anyone able to square this circle yet?

#Forex #Stocks #Trading #Investing #Money #Economy #Inflation #Business #Finance #Jobs #NFP

The only, and perhaps the most direct chart you'll need to realize that the Fed has lost credibility. Tightening and acting all "hawkish" when its FOMC members have actually projected LOWER long-term rates since mid-2015 (when the rhetoric of a liftoff started to heat up in earnest, if you remembered).

Regular followers will know how we have mocked at the Fed for its whimsical dexterity when it comes to decision making. We're not the only ones of course. Below, we present without alteration, the words and commentary of professionals in the industry. It bears reading.

Steve Liesman, CNBC anchor:

"I think the first rate hike cycle is over. What Janet Yellen said in response to my question, and if you look at what has happened to the rate hike cycle, is pretty profound. It's as close to the Fed getting to capitulation as I've ever seen, about the efficacy of Fed policy, about the outlook for the economy."

Jeff Gundlach, hedge fund manager:

"The 'rate hike cycle' has left the building. They are not preparing the markets for a rate hike at all. Yellen sounds like she doesn't have confidence anymore. She is backing away from any forecast. She is simply saying, 'I really don’t want to forecast anymore.' We are done with this forecasting game. The subtext is that 'we've been so wrong forecasting the data, we should stop'."

Michael Contopoulos, BofAML credit strategist:

"Chair Yellen made one thing clear today: there is unlimited uncertainty in the Fed’s forecast for the economy, inflation, and path of growth. Since 2012 the long-term median dot projection has plummeted from 4.25% to 3% with 50bp of reduction so far this year.

In our view, it is no good to talk about rate hike projections in 2018 or beyond when there seems to be just as good a likelihood of secular stagnation or recession by then. Alternatively, if the goal is to increase inflation expectations, explicitly say that the FOMC will opportunistically reflate -as our economists expect is their real policy. The current rhetoric, in our opinion, is frankly too candid, showing little to no conviction and thereby creating little confidence in just the metrics the Fed wants to nudge higher.

Though we don’t expect a recession in 2016 (that is neither our economists’ nor the High Yield strategy house view), we do think that the underappreciated risk is that the consumer begins to rein in spending as job security becomes more of an issue later this year. Additionally, we have already seen that the steady increase in negative yielding assets has done little to affect high yield over the last 6 weeks. And should oil fall and fear replace a search for yield mentality, we think outflows, ETF selling and profit taking is likely to ensue.

As it relates to the Fed, in our opinion there is only downside. Hike and the market’s reaction to the substantial divergence of global central bank policy likely causes yields to go lower, uncertainty to increase and spreads to widen. Stay on hold and the reasons for not hiking (global uncertainty, low inflation, poor economic growth and weak corporate fundamentals) ultimately leaves risk assets vulnerable to shocks. In either environment we continue to recommend barbelling portfolios: high quality duration, preferably IG paper, fallen angels and new issues with lower quality issuers that have “already realized” their event."

Trading a Fed hike has become a game of gambling...

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #FOMC #Gold #Japan #Economy #Finance

As reported earlier on, U.S. treasuries continue to rally hard as yields fall across the board (especially at the long end) post a dovish June FOMC event. Nothing surprising here. The treasury yield curve is the flattest it has been since 2007, so what kind of recovery are we really taking about here?!

As expected, the topic of ultra low (record low actually) interest rates (should we say negative?) has been of hot discussion since the start of June. We like to think of it as a ticking time bomb waiting to be detonated.

Very interestingly, after the U.S. close post FOMC yesterday, the USD started to reverse higher and eventually traded higher that pre-FOMC levels... What is strange is that while gold has been the strongest asset since the start of Wednesday, we are seeing both the dollar and gold (anti-dollar) rally in cohesion today. What gives?

#Forex #Stocks #Trading #Investing #Money #NIRP #QE #FOMC #Gold #Japan #Economy #Finance

German, Japanese, and Swiss government bonds are at rock bottom depths when it comes to negative rates (NIRP). Everything under that blue line is negative. Meanwhile, negative Fed Fund rate bets via Eurodollar options have surged as open interest rises to record high for both 2016 and 2017 series (call) options; traders are betting ED rates fall in the future.

U.S. treasury yields may have fallen in a flattening manner (long bond outperforming), but they are still one of the highest in the DM world, accounting for about 75% of all positive yielding debt in the DM sphere. And finally an update on the market-implied Fed rate hike odds — 7%, 16%, 20% for July, September, and December respectively.

Good luck gambling at the Fed's table.

#Forex #Stocks #Trading #Investing #Money #Economy #Finance #Business #Friday #FOMC #QE #NIRP #Brexit #UK #Europe #Euro #UK

If the economy was that good as the powers that be wishes to peddle such a message to the masses, then explain this. Delinquencies and bankruptcies amongst American businesses and companies have surged in the last 12 months. The sectors that are most vulnerable to being burnt by this trend (according to Moody's) are listed here.

It doesn't take a rocket scientist to figure out that we are in a fresh cycle of rising bankruptcies and defaults. Like we earned a good 2 months back, this is the corporate default cycle most investors and traders are oblivious to, until it happens and they're caught without their pants on...

#Forex #Stocks #Trading #Investing #Money #Economy #Finance #Business #Friday #FOMC #QE #NIRP #Brexit #UK #Europe #Euro #UK