• Tag Archives BoE
  • Ray Dalio Is Shorting The Entire EU

    A point BOE Governor Mark Carney made recently may be the biggest cog in the European Union’s wheel (or is it second biggest? Read on). That is, derivatives clearing. It’s one of the few areas where Brussels stands to lose much more than London, but it’s a big one. And Carney puts a giant question mark behind the EU’s preparedness.
    Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks
    Carney explained why Europe’s financial sector is more at risk than the UK from a ‘hard’ or ‘no-deal’ Brexit. [..] When asked does the European Council ‘get it’ in terms of potential shocks to financial stability, Carney diplomatically commented that ‘a learning process is underway.’ Having sounded alarm bells about clearing in his last Mansion House speech, he noted ‘These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.’
    Calling into question the continuity of tens of thousands of derivative contracts , he stated that it was ‘pretty clear they will no longer be valid’, that this ‘could only be solved by both sides’ and has been ‘underappreciated’ by Europe . Carney had a snipe at Europe for its lack of preparation ‘We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.’
    In Carneys view ‘It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…

    This post was published at Zero Hedge on Oct 19, 2017.

  • Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks

    This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony.
    Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a ‘hard’ or ‘no-deal’ Brexit. We wonder whether Juncker and Barnier appreciate the threat that a ‘no-deal’ Brexit poses for the EU’s already fragile financial system?
    When asked does the European Council ‘get it’ in terms of potential shocks to financial stability, Carney diplomatically commented that ‘a learning process is underway.’ Having sounded alarm bells about clearing in his last Mansion House speech, he noted ‘These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.’
    Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was ‘pretty clear they will no longer be valid’, that this ‘could only be solved by both sides’ and has been ‘underappreciated’ by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation ‘We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.’

    This post was published at Zero Hedge on Oct 18, 2017.

  • The Best And Worst Performing Assets In September, Q3 And 2017 YTD

    While September and Q3 were the latest solid month for US risk assets, which ended the month and quarter at all time highs, across the globe returns were relatively more mixed for the sample of assets tracked by Deutsche Bank. That said, a large number of assets (21 of 39 in local currency terms) finished with a total return between -1% and +1% which in part reflects another month of incredibly low volatility with the VIX in particular spending much of it trading between 9.5 and 11.0. In the end, excluding currencies 19 out of 39 assets finished the month with a positive total return in local currency and USD hedged terms.
    As Deutsche Bank’s Jim Reid reports this morning, in terms of the movers and shakers, commodities dominated the top of the German bank’s leaderboard with Wheat (+9%), WTI (+9%) and Brent (+8%) all finishing with a high single digit return. It’s worth noting however that this does follow heavy falls for the price of Wheat and WTI in August. Equities generally had a strong month, particularly in Europe where a slightly weaker euro (-1%) aided local currency returns. The DAX (+6%), FTSE MIB (+5%), Stoxx 600 (+4%), Portugal General (+4%) and IBEX (+1%) all finished firmer – the latter underperforming however reflecting elevated tension around the Catalan referendum. Returns in USD terms were 0% to +6%. It’s worth also noting the return for European Banks (+5% local, +4% USD) which got a boost from the slightly higher rate environment. There were two standout underperformers in equity markets however. The first was the Greek Athex which tumbled -8% in local terms although still remains up an impressive +19% YTD. The other was the FTSE 100 which fell -1% under the weight of a strong month for Sterling (+4%) following the BoE signalling an imminent rate hike as well as some progress around Brexit talks. Indeed in USD terms the FTSE 100 was up +3%.

    This post was published at Zero Hedge on Oct 2, 2017.

  • Albert Edwards: “Citizen Rage” Will Soon Be Directed At “Schizophrenic” Central Banks

    Perhaps having grown tired of fighting windmills, it was several weeks since Albert Edwards’ latest rant against central banks. However, we were confident that recent developments out of the Fed and BOE were sure to stir the bearish strategist out of hibernation, and he did not disappoint, lashing out this morning with his latest scathing critique of “monetary schizophrenia”, slamming all central banks but the Fed and Bank of England most of all, who are again “asleep at the wheel, building a most precarious pyramid of prosperity upon the shifting sands of rampant credit growth and illusory housing wealth.”
    Follows pure anger from the SocGen strategist:
    These of all the major central banks were the most culpable in their incompetence and most prepared with disingenuous excuses. And 10 years on, not much has changed. The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere. The credit bubble is everyone’s fault but theirs.
    First, some recent context with this handy central bank holdings chart courtesy of Deutsche Bank’s Jim Reid which alone is sufficient to make one’s blood boil.

    This post was published at Zero Hedge on Sep 21, 2017.

  • World Stock Markets Weaker; U.S. Inflation Data, BOE Meeting In Focus

    Kitco News) – Global stock markets were mostly weaker overnight. Some weak economic data coming out of China dented investor risk appetite. Industrial production, fixed-asset investment and retail sales were all lower than expected in August. U. S. stock indexes are pointed toward slightly lower openings when the New York day session begins.
    Gold prices are near steady in pre-U. S. day-session trading.

    This post was published at Wall Street Examiner on September 14, 2017.

  • Goldman “Unexpectedly” Exempt From Venezuela Bond Trading Ban

    When the White House announced on Friday that Trump had signed an executive order deepening the sanctions on Venezuela, and confirming the previously rumored trading ban in Venezuelan debt that earlier in the week had sent VENZ/PDVSA bonds tumbling, we made what we thought at the time was a sarcastic comment that in light of the recent scandal involving Goldman’s purchase of Venezuela Hunger Bonds, that Lloyd Blankfein’s hedge fund, which now controls the presidency and next year will also take over the Fed courtesy of Gary Cohn, would be exempt from the trading ban:
    So all bonds owned by Goldman are exempt from the Venezuela sanctions until Goldman can sell them?
    — zerohedge (@zerohedge) August 25, 2017

    And, as it so often happens in a world controlled by Goldman (as a reminder, in 2018 the world’s three most important central banks, the Fed, the ECB and the BOE will be run by former Goldman employees: Gary Cohn, Mario Draghi and Mark Carney), sarcasm has a way of chronically turning into truth, and as Bloomberg confirmed overnight, one of Venezuela’s largest bondholders is “breathing a sigh of relief.”
    That would be Goldman Sachs Asset Management, which infamously bought $2.8 billion of notes issued by state oil company PDVSA in May, and has since faced sharp criticism for a deal that appeared to supply fresh funds to President Nicolas Maduro. Confirming our initial “sarcastic” reaction, while observers thought the Goldman bonds would be a prime target for new penalties, they were exempt from the order. In fact, the only bonds covered by the trading ban are notes due in 2036 that appear to never have been sold outside Caracas.

    This post was published at Zero Hedge on Aug 26, 2017.

  • Albert Edwards: “The Last Time This Happened Was In January 2008”

    Two days ago, we were the first to point out that in a striking case of data revisionism, the Bureau of Economic Analysis, in an attempt to retroactively boost GDP, revised historical personal incomes lower, while adjusting its estimates of personal spending much higher, resulting in a sharp decline in personal savings, which as a result, was slashed from 5.5% according to the pre-revised data, to just 3.8%, in one excel calculation wiping out 30% of America’s “savings”, and cutting them by a quarter trillion dollars in the process, from $791 billion to $546 billion, a level last seen just before the last US recession.
    Today, SocGen’s grouchy bear Albert Edwards, commented on this drastic revision which disclosed that contrary to previous conventional wisdom that US consumers had been hunkering down in recent years and saving up for a rainy day, the surge in spending in late 2016 may have been the only catalyst that prevented the US from collapsing into outright contraction. Edwards also reminds us that such a dramatic savings slump last occurred in 2007, just before all hell broke loose.
    As Edwards writes, “very recent data confirms slumping household saving ratios in both the US and UK. This was last seen in 2007, just before the bursting debt bubble blew the global economy and financial system to smithereens. The Fed and BoE should surely hang their heads in shame having presided over yet another impending disaster. Why will politicians and the people tolerate this incompetence? Indeed they won’t.”

    This post was published at Zero Hedge on Aug 3, 2017.

  • BOE Preview: Whispers Of 25bps

    All eyes are now on the midday announcement from the BoE, where a 25bp rate rise is only expected by a very few, but more anticipating signals that a move is forthcoming later this year.
    The vote split will tell is whether Haldane – or anyone else – has moved to the hawkish camp, but with Forbes having left the commitee, a 6-2 split is also likely. Comments from Messrs McCafferty and Saunders suggest there is little or no chance that they have changed their stance from the previous meeting.
    Looking at the PMIs, the data is relatively healthy at the present time, with both manufacturing and services up on expectations as well as June levels, but for consideration at the MPC will be the growth rate, which has slipped from 2.0% in Q1 to 1.7% in Q2.
    Wage growth is also a concern, but although earnings were down on May levels, Jun was not as soft as expected.

    This post was published at Zero Hedge on Aug 3, 2017.

  • Pound Plunges After BOE Votes 6-2 To Keep Rates Record Low, Cuts Growth Forecast

    MPC holds #BankRate at 0.25%, maintains government bond purchases at 435bn and corporate bond purchases at 10bn. pic.twitter.com/ccUHh8b2IG
    — Bank of England (@bankofengland) August 3, 2017

    The whispers about a potential rate hike by the recently hawkish BOE ended up being wrong, when moments ago the Bank of England announced that in a 6-2 decision it kept rates unchanged at 0.25%, largely as expected. Saunders and McCafferty dissented in favor of an immediate interest-rate increase, with Haldane refusing to join the dissenters.
    In separate unanimous decisions, the central bank also kept its bond purchase programs unchanged at GBP10BN and GBP435BN for corporate and government bonds respectively.
    The pound tumbled on the news…

    This post was published at Zero Hedge on Aug 3, 2017.

  • “You Know What You Did”: Scaramucci Punked By Email Spoofer Pretending To Be Priebus

    The first two times infamous email spoofer @SINON_REBORN struck, the UK was scandalized when first Barclays CEO Jes Staley, then the head of the BOE, Mark Carney himself, were duped into lengthy email conversations with the “prankster” as the FT reported at the time. Staley, thinking he was being emailed by Barclays chair John McFarlane, offered his effusive praise to his respondent, saying among other things that he had “all the fearlessness of Clapton.” Carney, in turn, responded to emails from the imposter pretending to be Anthony Habgood, the chairman of the court of the BoE.
    Then, in June, the spoofer extended his winning streak by also punking Goldman’s Lloyd Blankfein and Citi’s Michael Corbat into believing he was someone else.
    Now, the same prankster, a 38-year-old web designer from Manchester according to the FT, has struck again, this time fooling several highly placed White House officials on several occasions, most remarkably Anthony Scaramucci, into thinking he was someone else.
    As CNN reports, the exchange between the prankster and the Mooch may have played a role in the tensions between the now former White House Communications Director and the since-fired White House Chief of Staff, Reince Priebus, who replacement Gen. Kelly fired Scaramucci.

    This post was published at Zero Hedge on Aug 1, 2017.

  • Key Events In The Coming Week: Payrolls, Central Banks, China And More

    As many traders quietly leave for summer break soaking up even more liquidity as they go, a busy US calendar unfolds in the week ahead, with ISM, PCE price data and, of course, payrolls in the spotlight.
    Key Events, courtesy of RanSquawk
    Monday: Eurozone CPI (Jul, P), China Official PMIs (Jul) Tuesday: RBA MonPol Decision, Eurozone GDP (Q2, Initial) Wednesday: ADP, Fed’s Mester, Williams speak Thursday: BoE MonPol Decision, Meeting Minutes & Quarterly Inflation Report Friday: US Labour Market Report (Jun), Canadian Labour Market Report (Jun), RBA SoMP In North America, June’s US Labor Market Report headlines the docket next week. Analysts expect the Nonfarm Payrolls headline to print at 187,000, with the unemployment rate expected to tick down to 4.3%, while hourly earnings are expected to remain subdued. The H1 average for the Nonfarm Payrolls release sits at 180,000. Following its latest statement, the Federal Reserve noted that ‘job gains have been solid, while household spending and business fixed investment have continued to expand.’ The main worry is wage growth, which has remained muted, and is perhaps keeping a lid on the Federal Reserve’s hiking cycle at present, as inflation has been kept in check.

    This post was published at Zero Hedge on Jul 31, 2017.

  • Why Surging UK Household Debt Will Cause The Next Crisis

    – Easy credit offered by UK banks is endangering ‘everyone else in the economy’
    – UK banks are ‘dicing with the spiral of complacency’ again
    – Bank of England official believes household debt is good in moderation
    – Household debt now equals 135% of household income
    – Now costs half of average income to raise a child
    – Real incomes not keeping up with real inflation
    – 41% of those in debt are in full-time work
    – 1.537 trillion owed by the end of May 2017
    Editor: Mark O’Byrne
    Why UK household debt will cause the next crisis
    ‘Household debt is good in moderation,’ Alex Brazier, executive director of financial stability at the Bank of England (BoE), told financial risk specialists earlier this week. But, it ‘can be dangerous in excess.’
    The problem with ‘in moderation’ is that no-one knows what a moderate measure of something is until they have had too much of it. Sub prime borrowers in the U. S. and property buyers in Ireland and the UK did not know they would contribute to a global debt crisis. Central bankers in Germany in the early 1920s and more recently in Zimbabwe never thought they were doing something that would be as detrimental as it ultimately was.

    This post was published at Gold Core on July 26, 2017.

  • Breslow: “Normal, Violent Or Extreme Political Events Are Now Taken To Be Fully Tradable Affairs”

    Taking a break from his “big picture” macro observations, and – at least recently – bashing of complacent traders, algos and central planning, overnight Bloomberg’s macro commentator focused on the FX market in general, and why he believes it is the “best” market for those “politically bent”, noting five particular reasons for his adoration of FX trading:
    everything is fair game: “in today’s world there’s nothing local about almost any aspect of the process” and FX is the only place where one can short with impunity“ there are no negative connotations associated with shorting: “Every trade involves doing so. You get to attack things without someone questioning your couth. After the U. K. referendum the currency got killed on perceived relative value, but that was all right because the FTSE did just fine. You didn’t see the BOE bemoan the lower pound” so simple, Mrs Watanabe can do it: “In equities and bonds it’s best to first ask how an individual market works and what paperwork is needed. In FX it’s point and click and your prime broker takes care of everything else” all that matters is speed: “It’s in the DNA of FX traders to feast on a headline and then ask what it’s made of. Speed is of the essence.“ and, best of all, you get to trade first, ask questions later: “currencies the perfect vehicle to get involved in issues one may or may not actually know anything about.”

    This post was published at Zero Hedge on Jul 19, 2017.

  • BOE Warns Popular 35-Year Mortgages Shackle Consumers With “Lifetime Of Debt”

    Consumers in the UK have been on a credit binge since the Bank of England cut its benchmark interest rate to an all-time low as investors braced for the widely anticipated economic shock of Brexit – a shock that, unsurprisingly, has yet to arrive, despite warnings from the academic establishment that a “leave” vote would trigger an imminent economic catastrophe. And now, with total credit growth rising at 10% a year, the BOE is warning that the increase in unsecured lending is becoming increasingly unsustainable.
    While the central bank is less concerned with mortgage debt than credit-card debt and other types of consumer credit, some at the bank are beginning to worry that the growing demand for long-term mortgages will shackle borrowers with a lifetime of debt, according to the Telegraph.
    ‘British families are signing up for a lifetime of debt with almost one in seven borrowers now taking out mortgages of 35 years or more, official figures show. Rapid house price growth has encouraged borrowers to sign longer mortgage deals as a way of reducing monthly payments and easing affordability pressures.

    This post was published at Zero Hedge on Jul 17, 2017.

  • ‘Bigger Systemic Risk’ Now Than 2008 – Bank of England

    – Bank of England warn that ‘bigger systemic risk’ now than in 2008
    – BOE, Prudential Regulation Authority (PRA) concerns re financial system
    – Banks accused of ‘balance sheet trickery’ -undermining spirit of post-08 rules
    – EU & UK corporate bond markets may be bigger source of instability than ’08
    – Credit card debt and car loan surge could cause another financial crisis
    – PRA warn banks returning to similar practices to those that sparked 08 crisis
    – ‘Conscious that corporate memories can be shed surprisingly fast’ warns PRA Chair
    Editor Mark O’Byrne
    Stark warnings have been issued by the Bank of England and its regulatory arm, the Prudential Regulation Authority (PRA).
    In less than one week the two bodies issued papers and speeches to warn industry members that many banks are showing signs of making the same mistakes that led to the 2008 financial crisis – the outcomes of which are predicted to be worse than those seen just nine years ago.

    This post was published at Gold Core on July 17, 2017.

  • London Property Bubble Bursting? UK In Unchartered Territory On Brexit and Election Mess

    – London property bubble bursting? UK in unchartered territory on Brexit and election mess
    – Evidence of downturn in London housing market
    – Over 75% of London homes now selling below asking price
    – Prime north London property down 6 per cent annually
    – House prices have not fallen for three consecutive months since the 2009 crisis
    – Bank of England report expresses worry over UK property market
    – ‘Adverse shock’ to UK economy may amplify negative feedback loop
    – Increased political and economic uncertainty has weakened fragile London buyer sentiment
    – Bank of England Financial Stability Report: ‘Mortgages are the largest loan exposure for UK lenders’
    – BOE FSR refers to a ‘self-reinforcing feedback loop’ that, if triggered, would cause another 2008-style crisis in the UK
    Is the London property market heading for tough times? The most recent housing figures and a new Bank of England report suggest it may well be.
    Recent figures show that 77% of London houses sold in May went at below asking price, up from 72% in April. London as the capital of UK reflects international market but international investors have major concerns over uncertainties namely Brexit and the current state of the government. As a result London house prices are rising at their weakest rate in five years (if they are rising at all).
    In prime estate London things are particularly bad, with prices in prime north and north west London falling by 6% in the last year.

    This post was published at Gold Core on June 29, 2017.

  • Bank Of England Orders Banks To Boost Capital To “Protect From Rising Risks”

    In addition to the previously noted fireworks from Mario Draghi, also on Tuesday the Bank of England ordered banks to build greater capital cushions in the coming months to protect the U. K. financial system from risks ranging from Brexit to China to booming consumer borrowing. In its twice-annual financial stability report, the BOE’s Financial Policy Committee said that there are ‘pockets of risk’ in the financial system, and to address them the BOE set the countercyclical capital buffer at 0.5% of risk-weighted assets for U. K. loans effective in June 2018, and if nothing material changes the central bank plans to increase the level again to 1% in November.
    Each increase of 0.5 percent will swell banks’ cushion of common equity Tier 1, the highest-quality capital, by 5.7 billion pounds, according to the BOE’s Financial Stability Report. The BOE opted for a staggered approach because it’s less likely to result in banks tightening lending in response.
    Additionally, next month regulators will publish new guidelines for consumer lending to ensure risks are priced and managed appropriately.
    ‘We want to move the levels of capital back up to the level they should be — any time you move into more benign credit conditions there have been fewer defaults,’ which can lead to complacency, Governor Mark Carney said on Tuesday. Regarding Brexit, ‘there are risks around that process, so contingency planning needs to be not only put in place but also activated.’

    This post was published at Zero Hedge on Jun 27, 2017.

  • Week in Review: June 24, 2017

    While the Federal Reserve is desperate to depict an optimistic vision for the global economy, their fellow central bankers aren’t buying it. Earlier this week Mark Carney of the Bank of England shutdown talk of the BOE possibly following the Fed’s lead in raising interest rates. Meanwhile, as Fed officials are openly worrying about whether technological advances are undermining their misguided war against deflation, the ECB is desperately looking for people to blame if Europeans begin to feel the pain from rising prices.
    On Mises Weekends, Jeff is joined by Dr. Ed Stringham, a Mises associated scholar and the author of the book Private Governance. More and more Americans are waking up to the reality that the US criminal justice system is hopelessly broken, riddled with bad incentives and bad actors. In the wake of recent police shootings Jeff and Ed discuss how and why private security firms could create vastly better outcomes for crime victims, society, and even perpetrators. This is a fascinating discussion you won’t want to miss.

    This post was published at Ludwig von Mises Institute on June 24, 2017.

  • One “Data-Dependent” Trader Is “Looking At The Bounce In Gold As Sentiment Indicator”

    As US (and global) economic data has disappointed at a rate not seen since Bernanke unleashed Operation Twist and QE3, so traders are shrugging off declining earnings expectations and weak macro data in favor of the continued belief that The Fed (or ECB or BoJ or BoE or PBOC or SNB) has their back. So, as former fund manager Richard Breslow notes below, it appears the ‘data’ that everyone is ‘dependent’ upon is very much in the eye of the beholder…
    Via Bloomberg,
    We’re all data-dependent. It’s not just the central banks that hide behind that aphorism. Traders and investors operate that way too. It’s just that data is a very poorly defined word and concept. The dictionary speaks of facts and specifics. But in reality it includes, biases, positions and a whole lot of other subjective factors. You and I can, quite properly, look at the same data and react differently.
    So while it’s a universally held concept that is proudly used to denote dispassionate rationality, it’s in fact a meaningless one.

    This post was published at Zero Hedge on Jun 23, 2017.

  • Pound Surges As BOE Chief Economist “Leans Toward” Hiking Rates In 2017

    Here we go again.
    One week after the pound surged following the BOE’s unexpectedly hawkish 5-3 vote split, then tumbled after Mark Carney’s speech yesterday which suggested no rate hike is coming any time soon, today, for the third time in almost as many days, all GBPUSD stops were taken out after BoE Chief Economist, Andy Haldane, surprised the market with unexpectedly hawkish comments in his speech in Yorkshire. He said he was leaning toward joining the hawks on the Monetary Policy Committee and considered a vote for a rate increase as early as June. He also said he favors withdrawing some of the August 2016 stimulus in the second half, and that the partial withdrawal of additional stimulus put in place last year would be ‘prudent relatively soon, provided the data come in broadly as expected in the period ahead.’

    This post was published at Zero Hedge on Jun 21, 2017.