Bond Trader Up $10 Million by Joining Bets Yield Curve Too Flat (Game of Drones)

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Big futures trade adds to steepening momentum amid selloff.
(Bloomberg) – Traders in the $14.1 trillion Treasuries market are signaling that the persistent flattening of the yield curve this year has gone far enough.
The outperformance of longer-maturity debt has been a dominant theme in the market for months. Now, open interest data show investors are unwinding wagers that the slope of the yield curve from five to 30 years will fall, after it turned the flattest in nearly a decade.

This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 28, 2017.

“How Much Further” Can The Dollar Rally, And Why Some Are Already Hedging The Next Drop

Whether due to Yellen’s renewed hawkish push and sudden optimism Trump’s tax reform will pass, or – as SocGen suggested yesterday – Chinese FX policy driving both the USD and 10Y yields….

… the dollar has seen a dramatic rebound since the first week of September after hitting a 2017 low at the start of the month. But how much longer can this recent spike persist?
That’s what Bloomberg’s FX strategist David Finnerty seeks to answer in his latest Macro View note, in which he says that the dollar’s “amazing fourth-quarter comeback – the sort that would leave sports fans and Hollywood producers weak at the knees – could well founder.”

This post was published at Zero Hedge on Sep 29, 2017.

28/7/17: Climbing the Deficit Mountains: Advanced Economies in the Age of Austerity

Just a stat: between 2001-2006 period, cumulative Government deficits across the Advanced Economies rose by SUD 5.135 trillion. Over the subsequent 6 years period (2007-2012) the same deficits clocked up USD 14.299 trillion and over the period 2013-2018 (using IMF forecasts for 2017 and 2018), the cumulated deficits will add up to USD 8.197 trillion. On an average annual basis, deficits across the Advanced Economies run at an annual rate of USD0.86 trillion over 2001-2006, USD 2.375 trillion over 2007-2012 and USD 1.385 trillion over 2013-2017 (excluding forecast year of 2018).

This post was published at True Economics on Thursday, September 28, 2017.

Dollar Ends Best Week Of The Year With A Whimper As Global Stocks Push All Time Highs

The dollar rally paused on Friday and looked poised to finish its best weekly gain of the year with a whimper, when in a repeat of the Thursday session the, Bloomberg dollar index first rose more than 0.1% during Asia hours before slumping around the European open as month and quarter-end flows came into play again.
U. S. stock-index futures were little changed as investors awaited data on personal spending, which however is likely to be distorted by Hurricanes Harvey and Irma, while both European and Asian shares were in the green. European equities drifted higher, headed for the best month this year, while stocks in Asia also followed the S&P 500 higher earlier. Treasuries were steady after a selloff that saw yields jump 18 basis points this week, the most since Donald Trump’s U. S. election victory in November. Emerging-market assets rallied, with stocks rising and most currencies strengthening against the greenback.
After an initial bout of euphoria over Trump’s tax plan – which still needs approval from Congress although it currently lacks detail, leaving investors guessing which parts of the package will be prioritized by the administration – the renewed “Trump trade” paused as profits were taken on some of the recent reflation trades. Though with the chances of higher U. S. interest rates by the end of the year now at about 65%, they have driven equities higher and taken money out of gold, which was on track for its worst month this year, suggesting that the Fed has once again failed to send a tightening message to markets.
‘Trump’s fiscal package continues to drive markets,’ said Societe Generale analyst Guy Stear. ‘U. S. bond yields have climbed both as a direct response to tax cut fears and as the market’s wider risk appetite returned.’ He said the sharp rise in 10-year Treasury yields, which hit a two-month high of 2.36% on Thursday, was driving the dollar higher.

This post was published at Zero Hedge on Sep 29, 2017.

Gold Standard Resulted In ‘Fewer Catastrophes’ – FT

Editor Mark O’Byrne
– ‘Going off gold did the opposite of what many people think’ – FT Alphaville
– ‘Surprising’ findings show benefits of Gold Standard
– Study by former Obama advisor in 1999 and speech by Bank of England economist in 2017 make case for gold
– UK economy was ‘much less prone to extremes’ under than the gold standard – research shows
– ‘Gold standard seems to have produced fewer catastrophes for Britain’ – data shows
– FT still wary of gold standard arguing ‘stability can be overrated and growth is worth having’
– Finding is not surprising and joins a wealth of evidence and research that shows gold’s importance as money, a store of value and safe haven asset
300 years ago last week on the 21st September, 1717 Sir Isaac Newton, Master of the Royal Mint of Great Britain, accidentally invented the gold standard.
Last month it was the 46th anniversary of President Nixon ending the gold standard. Since then the world has existed on a system of fiat paper and digital currency. It works so badly that it has lead to the global financial crisis, unending debt issues and a dramatic devaluation in sovereign currencies.
Despite this, much of the media and central banking system remain supporters of the current financial and monetary status quo.

This post was published at Gold Core on September 28, 2017.

LBMA Silver Price Benchmark – Changes, but no Wider Participation

LBMA Silver Price Benchmark – Changes, but no Wider Participation On 21 September, ICE Benchmark Administration (IBA) announced that it will take over the administration of the daily LBMA Silver Price benchmark auction beginning Monday 2 October. This LBMA Silver Price auction is the successor to the former London Silver Fix auction. The auction takes the form of trading unallocated silver positions on an electronic platform. The resulting price from the daily auction provides a daily silver price reference rate or benchmark which is used widely throughout the global precious metals industry. It is also now a Regulated Benchmark, regulated by the UK Financial Conduct Authority.
Bizarrely, even though it has now been more than 3 years since this new LBMA Silver Price auction was launched, there are still only 7 direct participants in the auction, a fact which flies in the face of all the previous promises from the LBMA that the rejuvenated silver auction would allow dramatically wider auction participation. These 7 participants are HSBC, JPMorgan, Morgan Stanley, Bank of Nova Scotia – ScotiaMocatta, UBS Toronto Dominion Bank, and China Construction Bank.
Even more surprisingly, from 2 October, ICE states that only 5 of these 7 bullion banks, namely HSBC, JP Morgan, the Bank of Nova Scotia, Toronto Dominion Bank, and Morgan Stanley, will continue to participate, with UBS and China Construction Bank staying on these sidelines because they do not currently have the IT systems in place to process cleared auction trades, a clearing procedure which ICE will be introducing to the auction. Two other commodity trading companies INTL FCStone and Jane Street, will however, join the auction on 2 October. INTL FCStone and Jane Street also recently joined the LBMA Gold Price auction as direct participants.
Beyond the continued exclusion of the vast majority of global silver participants from the auction, the very fact that a new administrator has had to be drafted in to run this LBMA Silver Price auction is itself noteworthy, as is the ultra-secretive way in which ICE has been selected as the new auction administrator.

This post was published at Bullion Star on 28 Sep 2017.

Is The Bubble About To Burst? Student-Loan Delinquency Rates Rise For First Time In Years

Since the financial crisis, most market observers and economists have cheerfully ignored the aggregate student-debt load in the US, which recently swelled to an economy-threatening $1.4 trillion. Even as student-debt, which can’t be discharged in bankruptcy, grew to represent 10% of the total US debt burden, defenders of the status quo pointed to declining default rates as evidence that the government-backed student loan industry wasn’t in danger of imploding.
But that may soon change.
As Bloomberg reports, the student-loan default rate in the US ticked higher during the second quarter for the first time since 2013. While it’s only one quarter of data, it should send a chill down the spine of government and private lenders, who have every reason to worry that this could be more than a temporary blip.
To wit, the share of Americans at least 31 days late on loans from the U. S. Department of Education ticked up to 18.8% as of June 30, up from 18.6% during the same period a year ago, according to new federal data. Meanwhile, about 3.3 million Americans have gone more than a month without making a required payment on their Education Department loans – up about 320,000 borrowers.
The rise interrupts a period of 12 straight quarters of declines in delinquency rates, according to numbers dating to 2013. It also comes at a time when US economic growth is nominally expanding (the BEA announced earlier today that the US economy expanded by 3.1% during the second quarter, an improvement over its previous estimate).

This post was published at Zero Hedge on Sep 28, 2017.

The Stock Market Is Seriously Overvalued Based On This Benchmark

As Americans place a record amount of bets into a stock market that continues to rise towards the heavens, few realize how much the Dow Jones Index is overvalued. While some metrics suggest that the Dow Jones Index is very expensive, there is another indicator that shows just how much of a bubble the market has become.
If we compare the Dow Jones Index to the price of oil, we can see how much the market has to fall to get back to a more realistic valuation. For example, if the Dow Jones Index were to decline to the same ratio to oil back to its low in early 2009, it would need to lose 14,500 points or 65% of its value.

This post was published at SRSrocco Report on SEPTEMBER 28, 2017.

Social destruction by the abuse of money

In Britain, the top 1% of earners pay over a quarter of all income tax collected, and while super-rich British residents perhaps don’t have the tax breaks the Macklowes enjoy, the bulk of the burden falls on lawyers, bankers, company executives and owners of successful private enterprises. And it should, say the collectivists…. One of the juicier stories doing the rounds in New York society is the Macklowe divorce. Harry, the husband, kept a French mistress for two years before seeking a divorce from his wife of 58 years. So far, this is a run-of-the-mill marital split. But what made it the subject of gossip is the extraordinary lifestyle of the Macklowes, the mud being slung, and the expectations of the wronged 79-year old wife, seeking a billion or so to see out her remaining days.
They say hell hath no fury, and all that. Here is one of New York’s richest couples, washing their laundry in public, and it emerges that Harry has not paid tax since 1983. Harry’s lawyer bluntly stated in court that ‘people in real estate don’t pay taxes’. It echoes Leona Hemsley’s infamous quote that emerged at her trial thirty years ago, when the Queen of Mean said ‘We don’t pay taxes, only little people pay taxes.’

This post was published at GoldMoney on September 28, 2017.

The Wile-E-Coyote Market

Debt doesn’t matter — right up until it does.
So goes the chestnut.
In actual practice, however, it’s much worse: Increasing debt tends to make equity valuations go up right until it matters, then it makes them crash.
There is exactly zero attention being paid to this. But the truth of it is found in every recent, and in fact all the nasty historical drawdowns in the market. Let’s just go through a few of the really bad ones, specifically:
1873
1929
2000 and
2008
All of them shared the same basic paradigm.
In 1873 it was long-term railroad debt centered on the premise of silver mining. When that blew up it put the US into Depression and destroyed market valuations in a form and fashion deep enough that it became known as the “Long Depression”; a moniker and derisive standard that stood unchallenged until the 1930s.
In 1929 of course it was both stock market margin debt along with real estate, much of it in Florida, that led to the 1929 crash and the government’s intervention led to the 1930s Great Depression.

This post was published at Market-Ticker on 2017-09-29.

Does “More Europe” Mean More Government?

‘And I will pray to a big god, as I kneel in the big church’
– Peter Gabriel
Imagine for a moment that you are a British citizen with doubts about Brexit. You turn on the television and listen to the President of the European Commission, Jean-Claude Juncker, state the following:
That the 27 countries of the Union should adopt the euro and be in Schengen by 2019. That ‘we are not naive defenders of free trade’. That Europe needs a European superminister of Economy and Finance who is also Vice-President of the Commission and President of the Eurogroup. That a European Monetary Fund should be created Probably, at that moment, many doubts will dissipate. Unfortunately, for those who would like the UK to remain in the European Union, in the opposite direction of their wishes. You would probably think ‘thank God we are out’.
Juncker’s speech on September the 13th did not seek to find elements for an agreement with the United Kingdom, but to strengthen the current model of the Eurozone at all costs. It was presented as an opportunity to remind us all of his real project for the European Union, clearly based on the French interventionist economic and financial ‘dirigisme’, and very far from the UK, Finnish, Irish or Dutch open model of economic freedom.

This post was published at Ludwig von Mises Institute on September 28, 2017.