• Tag Archives ECB
  • Krona Sinks After Swedish PM Refuses To Resign, Reshuffles Cabinet Over “Disastrous Leak”

    A brief (ECB/Fed-driven) sigh of relief yesterday in the Krona has ended as Sweden’s embattled PM has refused to resignover the government’s “disastrous leak” of the nation’s citizens’ information. Lofven has instead chosen to reshuffle his cabinet, ading “I don’t want political chaos in Sweden, that’s not what we need right now, I will take responsibility and ensure we don’t get a political crisis.”
    However, as Bloomberg reports, opposition members were already signaling they weren’t satisfied with the steps taken, and Lofven’s government remains far from secure.
    The prime minister said Home Affairs Minister Anders Ygeman and Infrastructure Minister Anna Johansson will leave the Cabinet, as parties representing a majority in parliament prepared no-confidence motions against them.
    Defense Minister Peter Hultqvist will stay, Lofven told reporters in Stockholm on Thursday, arguing the specific motion against him was ‘not serious.’
    The announcement follows speculation the prime minister would himself be forced to resign, or call an early election, in response to the deepening scandal. With the reshuffle, Lofven is buying himself time to negotiate with parliament.

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


  • Five Years Ago Today…

    ime flies when you are printing money.
    As Citi’s FX desk is kind enough to remind us, it was five years ago today that Donald Trump was a businessman and TV personality, and ECB President Mario Draghi vowed that:
    ‘The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.’
    He then compared the common currency to an insect:
    ‘The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now — and I think people ask ‘how come?’– probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.’

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


  • Who Bought The New Greek Bonds: Here Is The Answer

    After triumphantly returning to the bond market three years after it last issued a euro-denominated long bond (which one year later nearly defaulted when only a third bailout prevented Grexit), this morning Bloomberg has provided details of who the lucky buyers of the just priced 3BN bond offering were. And not surprisingly, the biggest source of new funds for the Greek government (which will then use most of this to pay interest owed to the ECB) were US buyers.
    As Bloomberg notes, just under half, or 1.425BN of the 3BN deal was new money with 1.57b of existing paper rolled, with the following geographic distribution of new sources of cash:
    U. S. 44% U. K./Ireland 26% Greece 14% France 7% Spain/Portugal/Italy 3% Germany/Austria 3% Others 3% By investor type:
    Fund managers 46% Hedge funds 36% Banks/private banks 13% Others 5%

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


  • When Will The ECB Run Out Of German Bunds To Buy: Here Is The Math

    Speaking earlier on Monday, ECB governing council member Ewald Nowotny said that despite growing market concerns, the ECB “sees no need to set a timetable to end bond buying” adding that “the question is not when but how to continue. That will depend on the economic projections for 2018, which we will have in the fall […] It’s not about an abrupt halt, but about registering that we are no longer confronted by such an acute crisis as we were when we implemented the measures. I consider it wise to step off the gas slowly.”
    In other words, just like all other central bank pronouncements, this too was meant to instill confidence in the economy. There is just one problem: the question which Nowotny tried so hard to ignore is precisely the one that matters as we most recently explained in “Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy.” The question is even more relevant considering it has been the ECB’s purchases of corporate (and government) bonds that has led to a record drop in European credit spreads as we showed yesterday.

    This post was published at Zero Hedge on Jul 25, 2017.


  • New Age Mandate — Doug Noland

    There is no doubt that central bank liquidity backstops have promoted speculation, securities leveraging and derivatives market excess/distortions. I also believe they have been instrumental in bolstering passive/index investing at the expense of active managers. Who needs a manager when being attentive to risk only hurts relative performance? And the greater the risk associated with these Bubbles – in leveraged speculation, derivatives and passive trend-following – the more central bankers are compelled to stick with ultra-loose policies and liquidity backstops.
    After all, who will be on the other side of the trade when all this unwinds? Who will buy when The Crowd moves to hedge/short bursting Bubbles? This is a huge problem. Central bankers have become trapped in policies that promote risk-taking and leveraging at this precarious late-stage of an historic Global Bubble. These days, central bankers cannot tolerate a ‘tightening of financial conditions,’ and they will have a difficult time convincing speculative markets otherwise.
    I’m reminded of the Rick Santelli central banker refrain, ‘What are you afraid of?’ Yellen and Draghi seemingly remain deeply concerned by latent market fragilities. How else can one explain their dovishness in the face of record securities prices and global economic resilience. A headline caught my attention Thursday: ‘Bonds: ECB Gives ‘Green Light’ to Summer Carry Trades, BofA says.’ It’s been another huge mistake to goose the markets this summer with major challenges unfolding this fall – waning central bank stimulus, Credit tightening in China and who knows what in Washington and with global geopolitics.

    This post was published at Credit Bubble Bulletin


  • The ECB’s Impact On The Bond Market In One Chart

    Earlier today, the ECB updated the list of corporate bonds it bought in the latest week. While no individual bond purchase amounts were given, the ECB has bought into 980 issuances with a total of 683bn in amount outstanding (from 245 issuing entities). For the week ending 21st Jul, bond purchases stood at 0.7bn across sectors, bringing total Corporate Sector Purchase Program holdings to 101.1 Billion, an increase of 720MM in the past week. The complete list of ISINs can be found here courtesy of UBS. According to Dealogic, for week ending 21st Jul, 8.8bn was issued in EUR IG space, of which 3.2bn was CSPP eligible. In the month of Jun, the central bank purchased 7bn of corporate bonds, versus 7.6bn in May. 85.6% of the 96.6bn total CSPP holdings were purchased on the secondary market.

    This post was published at Zero Hedge on Jul 24, 2017.


  • Oslo Housing & Trade Balance Say: Tipping Point in Norway

    Traditionally, July is a slow month in Norway. Receiving sizable vacation pay in June, most Norwegian take three to four weeks off in July, enjoying most of their five-week annual vacation. If you worked overtime, you could add a few extra weeks, taking back those extra hours worked, turning that holiday into a sabbatical. However, while Norwegians live it up in Spain, Thailand, Croatia, and even America, trouble awaits them when they return home this fall.
    While housing prices may have finally reached the long-anticipated tipping point and the monthly trade balance posted a deficit for the first time since December 1998, the Norwegian Krone gained substantial strength, closing at 8.07 against the US Dollar. Going against the wishes and needs of exporters, that is well below the USDNOK=8.45 YTD average (July 23, 2017).
    However, Norges Bank indicated that rate cuts are over, following the ECB’s and US Federal Reserve Bank’s lead. Considering the importance of housing in the Norwegian economy and the need to boost exports, compensating for a fading oil sector, we can expect new and more exotic policies to push the NOK back down are already on the way.

    This post was published at Wolf Street on Jul 24, 2017.


  • Doug Noland: New Age Mandate

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    A journalist’s question during Mario Draghi’s ECB post-meeting press conference: ‘… There was a sharp reaction from financial markets to your Sintra speech. You must have looked at the Fed experience of 2013. Is there any concern in the Governing Council that the so-called tantrum or a similar reaction can happen in the eurozone when you start discussing changes in your stance?’
    Draghi: ‘I won’t comment on market reactions, but let me give you the bottom line of our exchanges: basically, inflation is not where we want it to be, and where it should be. We are still confident that it will gradually get there, but it isn’t there yet, and that’s why the Governing Council reiterated the forward guidance, the asset purchase programme, the interest rates and all this package of monetary accommodation; and reiterated that the present very substantial monetary accommodation is still necessary. Let me read the introductory statement: ‘Therefore a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term.’
    Draghi continued: ‘But let me just make clear one thing: after a long time, we are finally experiencing a robust recovery, where we only have to wait for wages and prices to move towards our objective. Now, the last thing that the Governing Council may want is actually an unwanted tightening of the financing conditions that either slows down this process or may even jeopardise it; and that’s why we retain the second bias, or let’s call it, reaction function. ‘If the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration.’ And I think the Governing Council has given enough evidence that when flexibility is needed to achieve its objectives, it has been very able to find all that was needed. So that’s why we keep this bias.’
    This exchange gets to the heart of a momentous issue. Recall the swift market reaction to ‘hawkish’ Draghi’s comments from Sintra (June 26-28 ECB Forum on Central Banking) and, soon after, ECB officials expressing that markets had misinterpreted his remarks. Markets this week were awaiting ‘dovish’ clarification. Draghi soundly beat expectations.

    This post was published at Wall Street Examiner on July 22, 2017.


  • Dollar Slide Continues

    The US dollar lost ground against all the major currencies, save sterling, over the past week, and also fell against most emerging market currencies. There is little from a technical or fundamental perspective, including next week’s FOMC meeting, that suggests a reversal is at hand.
    Investors accept that the US economy rebounded in Q2 from another below average Q1 performance. They accept that the jobs market is still healthy. What they doubt is that the Federal Reserve will raise interest rates in the face of price pressures that have moderated. The fiscal course of the Trump Administration is also doubted. Not to put too fine a point on it, but the mess over health care, has left investors with a bad taste of what the legislative meal will look like.
    At the same time the trajectory of the US policy mix moves away from the very supportive tighter monetary/looser fiscal policy, negative considerations for Europe have been lifted or substantially reduced. Looking at the charts, the turn came in late April when it became clear the National Front challenge in was going to be repulsed. The political threat in Europe dissipated. The regional economy is enjoying the broadest and strongest expansion in a decade. Given the improvement in the balance of risk, the ECB began adjusting its communication to help prepare the markets for an adjustment in the accommodation. This spurred rise in market rates.
    The Dollar Index fell for a second consecutive week. It has fallen in six of the past seven sessions. The week’s 1.25% decline took it blow 94.00, its lowest level since June 2016. This area is important from a technical perspective, and a convincing break could open the door to another 3-5% decline. Daily and weekly technical indicators are over-extended as one would imagine, but only the Slow Stochastics have stopped falling. Given the pace and extent of the Dollar Index slide, and the positioning, we want to be sensitive to any reversal pattern in the coming sessions, but our point is that there is not much nearby chart-based support.

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


  • Nobody told the euro that Mario Draghi was dovish

    If Mario Draghi was trying to talk down the euro, it didn’t go so well.
    The European Central Bank president attempted to strike as dovish a stance as was possible given the circumstances in his news conference Thursday. He emphasized the lack of a pickup in underlying inflation, insisted the Governing Council won’t really think about tapering until the fall, and banged away on how the central bank could actually ramp up its quantitative easing program, should conditions deteriorate.
    The performance was seemingly a disappointment to anyone looking for reassurance when the ECB will lay out what it plans to do with its quantitative easing program in 2018. The ECB is committed to continuing it program of 60 billion a month in bond purchases through the end of the year, ‘or beyond.’
    But euro bulls didn’t appear to care. The shared currency EUR/USD, -0.0086% jumped during the news conference and then extended gains, topping $1.16 versus the dollar and trading at its highest level since August 2015.
    The news conference performance was in contrast to a speech in Portugal late last month that got investors primed for a QE wind-down. At that conference, Draghi’s emphasis on how reflationary pressures were replacing deflationary pressures was the trigger.

    This post was published at Market Watch


  • Market Talk- July 21st, 2017

    We did eventually see a mixed close in US with the NASDAQ setting new gains but the late rally failed to convince Asian markets of the rally and having seen ECB unchanged, we saw Asian indices small down. It was a reasonably light session to close the week as main core markets drifted. The Nikkei watched the yen trade better (last seen trading towards the 110 handle) so having a negative effect on stocks resulting in a negative -0.2% close. Shanghai and Hang Seng gave a little back also after the recent consistent positive momentum, which is a fair performance when considering recent currency strength. Top talking points were surrounding the disconnect between the bond and stock markets, but also the weakness in the USD and the strength in gold. The USD has been losing support as we approach an almost 2% decline against the Euro but that is having a significant effect on European stocks.
    As Mario Draghi has kept the currency going the negative effects are being seen on equities, and a resurgence of bond spread tightening. It appears the fixed-income market is being the adult in the room seeing the road clear to continue the carry tightening play. That said, US stocks have held in well as earnings plays its supporting role but we should have a clearer picture next week when we hear from the Federal Reserve. Core markets closed with almost 2% declines which for foreign investors is really starting to hurt even providing for the recent euro rally.

    This post was published at Armstrong Economics on Jul 21, 2017.


  • Why the Gold Price Could Continue Beyond Today’s 4-Week High

    This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
    Over the last week, the gold price has bounced back above the $1,200 threshold. With the metal currently trading at $1,251, it’s set to post a weekly gain of 1.7%. The price of gold’s rally this week to its highest level since June 23 came mostly on the back of comments from Mario Draghi, president of the European Central Bank (ECB). Draghi said during the bank’s policy meeting on Thursday that the ECB had not yet formalized plans to roll back monetary policy stimulus.
    The Bank of Japan (BoJ) also said its inflation expectations were not meeting targets, with the current 1.1% inflation rate below the previous forecast of 1.4%. The BoJ noted that a dovish monetary policy would persist for some time.
    And that echoed what U. S. Federal Reserve Chair Janet Yellen said in her Congressional testimony last week, when she admitted the global inflation slowdown could call for an ‘adjustment’ to the Fed’s policy.

    This post was published at Wall Street Examiner by Peter Krauth ‘ July 21, 2017.


  • The Elephant in the Room: Debt

    It’s the elephant in the room; the guest no one wants to talk to – debt! Total global debt is estimated to be about $217 trillion and some believe it could be as high as $230 trillion. In 2008, when the global financial system almost collapsed global debt stood at roughly $142 trillion. The growth since then has been astounding. Instead of the world de-leveraging, the world has instead leveraged up. While global debt has been growing at about 5% annually, global nominal GDP has been averaging only about 3% annually (all measured in US$). World debt to GDP is estimated at about 325% (that is all debt – governments, corporations, individuals). In some countries such as the United Kingdom, it exceeds 600%. It has taken upwards of $4 in new debt to purchase $1 of GDP since the 2008 financial crisis. Many have studied and reported on the massive growth of debt including McKinsey & Company http://www.mickinsey.com, the International Monetary Fund (IMF) http://www.imf.org, and the World Bank http://www.worldbank.org.
    So how did we get here? The 2008 financial crisis threatened to bring down the entire global financial structure. The authorities (central banks) responded in probably the only way they could. They effectively bailed out the system by lowering interest rates to zero (or lower), flooding the system with money, and bailing out the financial system (with taxpayers’ money).
    It was during this period that saw the monetary base in the US and the Federal Reserve’s balance sheet explode from $800 billion to over $4 trillion in a matter of a few years. They flooded the system with money through a process known as quantitative easing (QE). All central banks especially the Fed, the BOJ and the ECB and the Treasuries of the respective countries did the same. It was the biggest bailout in history. As an example, the US national debt exploded from $10.4 trillion in 2008 to $19.9 trillion today. It wasn’t just the US though as the entire world went on a debt binge, thanks primarily to low interest rates that persist today.

    This post was published at GoldSeek on Friday, 21 July 2017.


  • The ECB Morphs into the Mother of All ‘Bad Banks’

    As part of its QE operations, the ECB continues to pour billions of freshly created euros each month into corporate bonds – and sometimes when it buys bonds via ‘private placements’ directly into some of Europe’s biggest corporations and the European subsidiaries of non-European transnationals. Its total corporate bond purchases recently passed the 100 billion threshold. And it’s growing at a rate of roughly 7 billion a month. And it’s in the process of becoming the biggest ‘bad bank.’
    When the ECB first embarked on its corporate bond-buying scheme in March 2016, it stated that it would buy only investment-grade rated debt. But shortly after that, concerns were raised about what might happen if a name it owned was downgraded to below investment grade. A few months later a representative of the bank put such fears to rest by announcing that it ‘is not required to sell its holdings in the event of a downgrade’ to junk, raising the prospect of it holding so-called ‘fallen angels.’
    Now, sixteen months into the program, it turns out that the ECB has bought into 981 different corporate bond issuances, of which 34 are currently rated BB+, so non-investment grade, or junk. And 208 of the issuances are non-rated (NR). So in total, a quarter of the bond issuances it purchased are either junk or not rated (red bars):

    This post was published at Wolf Street by Don Quijones – Jul 20, 2017.


  • Has The Fed Used The Same Tactic To Fool The People Again? – Episode 1337a

    The following video was published by X22Report on Jul 20, 2017
    As the Greek crisis continues to spiral downward, the housing market gets hit and value of homes decline dramatically. Rental growth declines, following a similar pattern in 2007 going into the 2008 recession. Philly Fed slumps. Corporate media reports that to many Americans are purchasing homes they can’t afford, it begins. ECB is ready to push stimulus if the economy starts to decline and falter. The central banks know that the collapse is headed our way, this is why they are prepared with stimulus. The Fed, like they have done in the past has fooled the American people, they will be rising rates, to bring down the economy.


  • ECB Keeps Rates, QE Unchanged; Ready To Increase QE “In Size And Duration”

    While nobody was expecting much from the ECB’s policy statement this morning, with all eyes on Draghi’s press conference in 45 minutes, judging by the disappointed market reaction to what were largely canned remarks by the ECB which sent the EURUSD in kneejerk reaction lower, positioning is indeed stretched and unless Draghi comes out with hawkish bazookas blazing, the EURUSD may slide bigly.
    Back to the ECB’s decision, it announced that it kept both its rates and QE unchanged, with QE expected to run at 60BN per month until end of December or beyond if needed, ‘and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.’ The ECB said it was also ready to extend QE ‘in terms of size and/or duration’ if economic outlook worsens or financial conditions ‘become inconsistent with further progress towards a sustained adjustment in the path of inflation.’
    On rates, the central bank expects these to stay at present levels ‘well past’ QE horizon
    Main refinancing rate unchanged at 0.00% Deposit facility rate unchanged at -0.40% Marginal lending rate unchanged at 0.25% Full statement below:

    This post was published at Zero Hedge on Jul 20, 2017.


  • “ECB Or Not To Be”: A Preview Of What Mario Draghi Will Say

    Looking at today’s main event, the much anticipated ECB announcement in which Draghi may (or may not) announce a hawkish shift to the cental bank’s policies and/or reveal the bank’s tapering plans, Citi (whose titled we borrowed) gives the 30 second summary, and says that the market seems quite split on whether the ECB will remove the asset purchase program easing bias, but thinks that there’s room for mild disappointment. After all, it says, this meeting is just a warm up for the September meeting (and Jackson Hole). CitiFX Strategist Josh O’Byrne points out that the biggest market fear at the moment appears to be long positioning and “this risks morphing into FOMO for the next leg higher.” For the press conference, Citi expects Draghi to slightly tweak some of the language from Sintra to lean a little bit more towards the dovish side.
    The bank’s expectations are summarized in the following handy cheat sheet:

    This post was published at Zero Hedge on Jul 20, 2017.


  • World Stocks Hit Record High For 10th Consecutive Day In “No-Vol Nirvana”

    The relentless risk levitation continued overnight, as global shares extended their stretch of consecutive record highs on Thursday for a 10th day after a cautious BOJ lifted Asian stocks to a decade high with a dovish announcement that offered no surprises, while pushing back Kuroda’s 2% inflation target to 2020, the 6th consecutive delay. With all eyes on the ECB in just over an hour, US equity futures are in the green, following solid gains around the globe. European stocks extended their biggest gain in a week while Asian equities maintained their rally. Microsoft, Blackstone, Philip Morris and Ebay are among companies reporting earnings. Initial jobless claims data due.
    Traders – so mostly algos – are riding a global risk “high” in stocks as Asia’s and then Europe’s early 0.4 percent gains ensured MSCI’s 47-country All World index was up for a 10th straight session. This is the longest winning streak in global stocks since February 2015 and shows little sign of fatigue even as bond yields edged modestly higher again. The Stoxx Europe 600 Index rose 0.3 percent as of 9:53 a.m. in London. The U. K.’s FTSE 100 Index rose 0.5 percent to near the highest in a month. The MSCI Emerging Market Index fell 0.1 percent, the first retreat in almost two weeks. The VIX index closed below 10 for a record fifth consecutive day. Appropriately, Bloomberg dubbed the move a “no-vol” nirvana, in which stocks and bonds keep rallying as volatility evaporates.

    This post was published at Zero Hedge on Jul 20, 2017.