What’s Next for the Dollar and Gold?

One reason markets tend to get a little nervous in September is that it’s time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Let’s look at what’s next for the dollar, gold, and currencies.
A couple of highlights:
Equity markets are at or near record highs; Measures of complacency are near record levels (for example, the VIX index, a measure of implied stock market volatility, is near historical lows). 10 Year U. S. Treasuries are yielding around 2.4%, near record lows. The theory is that with the U. S. pulling ahead, the greenback must win. A couple of caveats to this theory:
The U. S. recovery might not be as healthy as it appears: the housing market remains vulnerable; many retailers have challenges; inventory stuffing might be happening at some tech firms; and how can the U. S. recover when Europe and parts of emerging markets are slowing down? U. S. real interest rates are increasingly more negative than Eurozone real interest rates. With the Fed all but promising to be late in raising rates, odds are that the differential will increase. In this context, the notion of an exit appears absurd. There is no historical correlation between a rising interest rate environment and a stronger dollar. That’s because U. S. Treasuries might lose in value as rates rise, providing a disincentive for foreigners to hold the greenback. In our analysis, the Fed’s actions have made risky assets appear, well, less risky, causing everything from stock prices to junk bonds to be more expensive. This is referred to as a compression of risk premia. We go as far as arguing that our recovery is based on asset price inflation. As such, should the Fed truly pursue an ‘exit’, risk premia might expand once again, putting not only asset prices, but the entire recovery at risk. As a result, we have warned investors about a potential crash.

This post was published at Silver Bear Cafe on September 12, 2014.

Doug Noland: ‘King Dollar and the Peripheries’

An interesting week saw that Brazilian real get hammered for 4.2%, as Brazil’s stocks sank 6.2%. Venezuela Credit default swap (CDS) prices surged 158 bps to 1,464 bps (lagging Argentina at 1,840!). Turkish stocks were hit for 5.3%, in what Bloomberg called the emerging-market stocks’ “steepest decline in 15 months.” Commodities currencies were also pummeled. The Australian dollar dropped 3.6%, the South African rand 3.0%, the New Zealand dollar 2.1% and the Canadian dollar 1.9%. The Goldman Sachs Commodities Index was hit for 2.4%, trading this week to the lowest level since the tumultuous summer of 2012. Brent crude fell to a two-year low, wheat to a 50-week low and gold to an eight-month low. Spanish yields jumped 30bps, with Italian yields up 20 bps and France’s 17 bps. U.S. junk bond CDS jumped 21 bps this week. In the face of unsettled global risk markets, 10-year Treasuries jumped 15 bps this week.
Market and macro analysis remains extraordinarily challenging. The U.S. economy shows momentum and financial conditions remain ultra-loose. Wall Street strategists are universally bullish. A recent survey (Investors Intelligence) had the smallest reading of bears since 1987. Sentiment is buoyed by the view that it will be years before the Fed raises rates to the point where they would weigh on risk asset prices.
It’s no surprise that I see the greatest financial Bubble in history. I believe asset market inflation and Bubbles have been fueled by speculative leverage exceeding pre-2008 crisis levels. I see global financial and economic imbalances that have been exacerbated by six years of the most extreme monetary policy measures. By now, this type of analysis has been completely discredited. Few will care that I discern acute vulnerabilities.

This post was published at Prudent Bear

BofA Warns “Everyone Should Pay Attention To Treasury Vol”

US 5Y Treasury yields are approaching a key level, but as BofAML’s Macneil Curry warns, the MOVE Index (the Treasury market equivalent of equity’s VIX) is more important to focus on…
As BofAML’s Macneil Curry explains,
Key levels approach in US 5yr Treasuries, but the Move Index might be more important.
US 5yr Treasury yields are approaching key long term support.

This post was published at Zero Hedge on 09/11/2014.

Futures Slide On Renewed Catalan Indepdence Jitters, Disappointing Chinese Inflation

Following yesterday’s confusing exuberance, which saw the sluggish market rise in the last hours of trading as the latest Scottish poll showed a reverse of the “Yes” momentum (and fading Gartman’s latest reco of course), overnight European jitters have re-emerged once more following a speech by Catalonia’s Artur Mas, who has long pushed for independence of the region, and who said that while there are different ways Catalonia can vote, the important issue is that Catalans vote somehow. Mas says Spanish govt will likely try to block Catalan vote “the reasons why the central government is blocking the vote are political not legal”, which in turn has once again brought attention to Europe’s artificial, unstable and temporary political and monetary union, which threatens a reversion of the nightmare days from 2012 when Mario Draghi was promising he would do everything in his power to send the EUR higher (as opposed to now).
Additionally, the latest inflation data overnight from China, with the CPI missing expectations of 2.2% to just 2.0%, while producer prices contracted once more, this time by 1.2%, down from -0.9% and below the 1.1% consensus, which was a record 30th consecutive month of PPI declines in China, signaling overcapacity in China’s factories and weaker commodities prices.. The main driver, as we have been noting recently, was the clobbering in the commodity sector but also lower food prices. And while deflation for a country which creates a little under a trillion in new loans per quarter is an absolute disaster, BofA was quick to point out the silver lining: “Benign inflation in August and probably September should allow adequate room for further policy easing including targeted monetary easing.” Great: so more of the same monetary stimulus which has failed to fix the world for the pastr 6 years will be unleashed and this time everything will be fixed.
And while US equity futures are broadly lower for now, this time something is different because even as the USDJPY soars to new multi-year highs touching 107.14 moments ago, this time it has failed to pull TSY yields higher with it, and as a result treasuries gain for first time in six sessions with the 10Y yield trading at 2.514%, rising through both 50-DMA (2.467%) and 100-DMA (2.527%) this week amid speculation Fed may be closer to signaling rate increase.

This post was published at Zero Hedge on 09/11/2014.

Scottish “No” Poll Sends Nasdaq Green On Week

Today’s v-shaped recovery in US equities was brought to you by the number 107 (USDJPY target) and the words “Scottish poll” which showed a majority of “no”s this afternoon. Early weakness in stocks (but not in Treasuries) reversed almost perfectly as Europe closed and JPY started to ramp towards the next logical stop run at 107.00. Nasdaq led the way (as AAPLites swept back in) and pushed into the green for the week (while the rest are still red). Treasury yields rose on the day, led by the long-end (30Y 3bps) stalling some of yesterday’s flattening (5Y 9bps on the week). GBP rallied notably after the “no” poll which kept pressure on the USD (closing practically unch on the day). Gold, silver, and oil slipped lower as US woke up then stabilized. Credit spreads compressed on the day but not as exuberantly as stocks even as VIX dropped back under 13 again. For the 2nd day in a row, the S&P 500 closed below 2,000 – turmoil?

This post was published at Zero Hedge on 09/10/2014.

Preparing To Asset-strip Local Government? The Fed’s Bizarre New Rules

In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA). That means banks that are the largest holders of munis are liable to start dumping them in favor of the Treasuries and corporate bonds that do satisfy the requirement.
Muni bonds fund the nation’s critical infrastructure, and they are subject to the whims of the market: as demand goes down, interest rates must be raised to attract buyers. State and local governments could find themselves in the position of cash-strapped Eurozone states, subject to crippling interest rates. The starkest example is Greece, where rates went as high as 30% when investors feared the government’s insolvency. Sky-high interest rates, in turn, are the fast track to insolvency. Greece wound up stripped of its assets, which were privatized at fire sale prices in a futile attempt to keep up with the bills.
The first major hit to US municipal bonds occurred with the downgrade of two major monoline insurers in January 2008. The fault was with the insurers, but the taxpayers footed the bill. The downgrade signaled a simultaneous downgrade of bonds from over 100,000 municipalities and institutions, totaling more than $500 billion. The Fed’s latest rule change could be the final nail in the municipal bond coffin, another misguided move by regulators that not only does not hit its mark but results in serious collateral damage to local governments – maybe serious enough to finally propel them into bankruptcy.
Why this unprecedented move by US regulators? It is not because municipal bonds are too risky, since corporate bonds with lower credit ratings are accepted under the new rules. Nor is it that the stricter standard is required by the Basel Committee on Banking Supervision (BCBS), the BIS-based global regulator agreed to by the G20 leaders in 2009. The Basel III Accords set by the BCBS are actually more lenient than the US rules and do not include these HQLA requirements. So what’s going on?

This post was published at Washingtons Blog on September 9, 2014.

QE3’s Ominous End Looms

The Federal Reserve’s third quantitative-easing campaign is on track to wind down in late October. At that point the Fed will likely stop printing new money to buy bonds, a sea-change shift with ominous implications for the stock markets. Their entire surreal levitation during QE3 mirrored the huge growth in the Fed’s balance sheet from QE3′s bond monetizations. When they cease, another major selloff is likely.
QE3′s impact on the global financial markets has been vast beyond belief. The Fed launched QE3 in September 2012, just before the important United States elections. This goosed the US stock markets in that critical final couple months ahead of the elections, right when they were on the verge of selling off dramatically. Odds are very high that the Fed’s brazen market manipulation gave the election to Obama.
In the 28 presidential elections since 1900 prior to that 2012 one, the stock markets rallied in September and October 16 times. The incumbent party won 15 of those elections! And during the 12 times when the stock markets fell in September and October, the incumbent party lost 10. The Fed choosing to launch a stock-market-boosting QE campaign in those pre-election months forced stock markets higher.
If the S&P 500 (SPX) had dropped as it was set to do in September and October 2012, Obama would’ve almost certainly been a one-term president. The Fed’s colossal market and political manipulation was no accident. Since QE2, Republican lawmakers had been highly critical of the Fed’s money printing to buy bonds. The low interest rates that spawned enabled Obama’s record debt-fueled spending binge.
Since the Fed faced serious challenges to its independence all the way up to its very existence from a Republican president and Congress, it massively intervened in the markets to sway an election. And QE3 just got worse from there. The Fed expanded it to include direct monetizations of US Treasuries a few months later in December 2012. That forced rates lower, farther fueling Obama’s epic deficit spending.
QE3 was far different from QE1 and QE2, which were finite from their births. QE3 was the Fed’s first open-endeddebt-monetization campaign, with no prescribed limits. This potentially unlimited scope of QE3 helped create an exceedingly unfortunate side effect in the stock markets. Since QE3 had no defined end, stock traders figured it would be around to backstop stock markets more or less indefinitely.
Led by uber-inflationist Ben Bernanke, the Fed’s dovish communications fanned this popular belief among traders. Over and over during QE3 the Fed implied that it was ready to act, in effect to increase the scale of QE3′s monthly money printing to buy bonds, if the stock markets slid. This incessant Fed jawboning left stock traders utterly fearless, as they figured the Fed would arrest any major stock-market selloff.
So every dip was quickly bought, leading to the stock markets soaring. The SPX blasted 29.6% higher in 2013, the only full year of QE3! And this flagship index is up 39.5% since QE3′s birth. And it wasn’t like the stock markets were low before the Fed hatched its QE3 scheme. As of the day before, the SPX had powered 112.3% higher over 42 months in a very large cyclical bull. Stock markets were already lofty.

This post was published at ZEAL LLC on September 5, 2014.

ECB Now a Hedge Fund; 1T Bazooka; ECB Promotes Euro Carry Trade; Draghi Has it Backwards

Draghi Has it Backwards
A director at a global financial company with offices worldwide pinged me in response to my post ECB’s 40bn Stimulus Gamble: ECB Pulls Out Bazooka, Cuts Rates, Buys Assets; Will this Stimulate Lending?.
Hello Mish,
Mario Draghi is an idiot. Banks create money when they lend. The loans create a requirement for reserves which ultimately reverts back as deposits at the ECB. The negative interest rate is therefore a tax on capital and a tax on lending. This not rocket science.
I’d start a charity whereby every newly appointed central bank board member is sent a free copy of Rothbard’s Mystery of Banking except I am beginning to doubt their ability to read.
Name Withheld by Request
Bond Bubble GrowsI responded to “NW” with “I agree 100%. All they have done is give banks the incentive to park money on sovereign bonds with diminishing yield. The bond bubble grows.“It is ridiculous that Spanish and Italian 10-Year bonds trade at a lower yield than 10-year us treasuries, yet that is the current state of affairs.

This post was published at Global Economic Analysis on Friday, September 05, 2014.

US Dollar Up – Everything Else Down (Except Trannies)

Draghi did it (or didn’t), blame him… From record intraday highs (on vapid volume) to 5-day lows in the S&P 500 as Mario Draghi cut rates even negative-er and promised to do more QEing. EURUSD collapsed over 2 big figures to 14-month lows below 1.2950. The implicit USD strength sparked selling in everything else. Treasuries pushed notably higher in yield (30Y 13bps on the week, 5Y 8bps) and held their yield highs as stocks started to collapse after Europe closed. The standard late-day machine-driven VWAP ramp lifted stocks off the lows, but S&P 2,000 remained elusive. Gold, silver, and oil all pushed lower as USD jerked higher. High-yield spreads jumped most in 6 weeks to 3-week wides and provided a warning to stocks all day. Bottom line – USD up, everything else down… (except Trannies).

This post was published at Zero Hedge on 09/04/2014.

Whats Next for the Dollar and Gold?

One reason markets tend to get a little nervous in September is that it’s time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Let’s look at what’s next for the dollar, gold, and currencies.
A couple of highlights:
Equity markets are at or near record highs; Measures of complacency are near record levels (for example, the VIX index, a measure of implied stock market volatility, is near historical lows). 10 Year U. S. Treasuries are yielding around 2.4%, near record lows. The theory is that with the U. S. pulling ahead, the greenback must win. A couple of caveats to this theory:
The U. S. recovery might not be as healthy as it appears: the housing market remains vulnerable; many retailers have challenges; inventory stuffing might be happening at some tech firms; and how can the U. S. recover when Europe and parts of emerging markets are slowing down? U. S. real interest rates are increasingly more negative than Eurozone real interest rates. With the Fed all but promising to be late in raising rates, odds are that the differential will increase. In this context, the notion of an exit appears absurd.

This post was published at GoldSeek on 4 September 2014.

Volatile Day: Gold, Oil, & Bonds Dump As The Dollar Jumps

Today was a significant day for many markets. For the 7th time in the last 8 months, US Treasuries opened the month with weakness (30Y up 8.5bps, 2Y 3bps from Friday). Significant JPY and GBP weakness pushed the USD Index to fresh 14-month highs ( 0.25% on the week). USD strength smacked gold (-$20 to $1265), silver, and crude oil significantly lower (WTI under $93 and Brent testing towards $100, both down over $3). US equities decoupled (lower) from VIX and JPY-carry around the European close after hitting new all-time highs in the early session (over 2,006 for S&P Futs). Volume was better (but then it was a down day). Despite oil weakness, Trannies took off leading the day (with Dow and S&P closing lower from Friday). Credit traded with stocks for most of the day but ignored the late-day VWAP ramp in the S&P, closing at its wides. The ubiquitous late-day buying panic saved S&P 2,000… because it can.

This post was published at Zero Hedge on 09/02/2014.

US Futures Levitate To New All Time High As USDJPY Surges Above 105; Gold Slammed

Just when we thought centrally-planned markets could no longer surprise us, here comes last night’s superspike in the USDJPY which has moved nearly 100 pips higher in the past few trading days and moments ago crossed 105.000. The reason for the surprise is that while there was no economic news that would justify such a move: certainly not an improving Japanese economy, nor, for that matter, a new and improved collapse, what the move was attributed to was news that Yasuhisa Shiozaki, who has been advocating for the GPIF to reduce allocation to domestic bonds, may be appointed the Health Minister when Abe announces his new cabinet tomorrow: a reshuffle driven by the fact that the failure of Abenomics is starting to anger Japan’s voters. In other words, the GPIF continues to be the “forward guidance” gift that keeps on giving, even if the vast majority of its capital reallocation into equities has already long since taken place. As a result of the USDJPY surge, driven by a rumor of a minister appointment, the Nikkei is up 1.2%, which in turned has pushed both Europe and Asia to overnight highs and US equity futures to fresh record highs, with the S&P500 cash now just 40 points away, or about 4-8 trading sessions away from Goldman’s revised 2014 year end closing target.
Oh, for whatever reason but probably just because “banks are providing liquidity”, both gold and silver were summarily pounded to multi-month lows seconds ago.
In other Asian markets, the Hang Seng, Shanghai Composite, and the KOSPI are 0%, 1.4% and -0.8%, respectively. European stocks advance amid speculation that slower growth will prompt policy makers to accelerate stimulus. German and Italian shares outperform. The yen came close to a five-year low against the dollar, while the pound falls after a survey showed support for Scottish independence increasing. Treasuries drop ahead of reports this week that economists predict will show U. S. manufacturing and employment expanded in August. Oil and gold fall.

This post was published at Zero Hedge on 09/02/2014.

Jared Bernstein Confirms That Austrians Aren’t Paranoid

For years a growing number of self-identified Austrians have been warning that the USD’s days as the world’s reserve currency are numbered. For example, I myself recently wrote:
I believe that the U. S. dollar, U. S. Treasuries, and the U. S. stock market are all overvalued – in a ‘bubble,’ as they say…
If and when the U. S. dollar bubble bursts, we will see prices rise not just because of what Bernanke (and now Yellen) have pumped in since 2008, but because of the rush of dollars flowing back to the U. S. that have accumulated from years of trade deficits. At that point, the Fed will have to decide: Does it wreck the U. S. financial sector and broader economy in order to save the dollar (comparable to what Volcker did in the late 1970s, only on a much grander scale)? Or will it go the way of several other central banks in history, and run the printing press until the game ends? Either way, it’s going to be ugly.
Often in reaction to such dire predictions we Austrians will hear critics say, ‘Oh give me a break, you guys are paranoid! Gold bugs have been warning about hyperinflation since 1971. What other currency are people going to use? The euro? The ruble? The dollar is here to stay.’

This post was published at Mises Canada on August 31st, 2014.

And The Best Performing Asset In August Was…

August is the month in which the third try for a global economic recovery officially snapped, with first China, then Europe and finally Latin America succumbing to pre-recession forces and/or outright contraction. Which, in the New Normal, is great news as it means more hopes for even greater imminent central bank easing and “stimulus” if only for the wealthiest (and also please ignore the fact that 6 years of more of the same has not worked, this time will be different). Which explains why August, otherwise the sleepiest month of the year, proved to be fairly strong with both equities and bonds moving higher in tandem.
In fact, the situation in Europe is so dire, that European government bonds yields reached/retested their record multi-century all time lows. As Deutsche Bank summarizes, the 10yr government bond yields for Germany, France, Italy, Spain, and Switzerland declined by 27bp, 28bp, 26bp, 28bp and 11bp in August to 0.89%, 1.25%, 2.44%, 2.23% and 0.44% respectively. From a total returns perspective, a 2% gain in August was the best monthly performance for Bunds and OATs since January which brings their YTD gains to around 8-9%. Not bad in the context of a 7% and 4% YTD gains in Stoxx 600 and the FTSE 100. Italian and Spanish government bonds are still ahead though on a YTD basis with total returns to date at around 12-13%. Staying in rates, US Treasuries were somewhat of a laggard relative to its European peers in August with a monthly return of around 1.2%. Nonetheless, it was still the biggest gain for Treasuries since January and the outperformance in long bonds has also driven the 10s/30s curve to its flattest since June 2009. The search for yield has also benefited Credit on both sides of the Atlantic. Total returns were positive across the main European, US and Sterling credit benchmarks although the highlight was a rebound in US HY. The asset class gained 1.8% in August after having lost 1.7% in July as outflows steadied and reversed as the month progressed.

This post was published at Zero Hedge on 09/01/2014.

“Unrigged” Close Buying-Panic Saves S&P 2,000 For Long Weekend

For the 6th week of the last 8, Treasury yields declined with 30Y pressing to 3.05% (and 10Y 2.32%) handles to 15-month lows. US equity markets saw volume crater as the early high-stops were run in the EU session and low-stops run in the US session before the ubiquitous EU close ramp lifted futures to VWAP and S&P cash to 2000.xx where it stayed for the rest of the day in a wholly unrigged way. Trannies ended the week red and Russell the best. The USD Index closed at 13-month highs (up 7 weeks in a row). Despite USD strength, gold and silver rose 0.5% on the week but oil was the big winner 2.4% (testing $96) as copper tumbled 2%. Credit markets closed at their wides (as stocks closed at their highs). Interestingly, once the Sept POMO schedule was released, TSYs sold off on the day to close red (but end 4-7bps lower on the week). VIX closed unch today but the ridiculous late-day panic-buying spree in futures grabbed stocks back above the crucial 2000 level for the S&P. Year-to-date, Treasuries lead 16.75% as the S&P ( 8.5%) overtook gold ( 6.7%) in the last few days.

This post was published at Zero Hedge on 08/29/2014.

Foreign Custodial Holdings of US Treasuries continuing to Climb

Just a short set of comments this evening. They deal with the usual, “The world is going to move away from the Dollar any day now” chatter. If it is, it sure isn’t showing up in the Foreign Central Bank holdings of Treasuries that are in custody at the New York Federal Reserve. Here is the chart.

Look folks, I am just as concerned about the US Dollar as the next guy but when I look at the competition, I see one set of assorted problems or another. What that means is that the idea that the world is going to drop the Dollar and move to some sort of as of yet undefined currency in which to conduct the bulk of its trade simply does not carry much weight with me at this time.

This post was published at Trader Dan Norcini on Thursday, August 28, 2014.

The Fed’s “Mutant, Broken Market”

Undermining the Integrity of Financial Markets
Introduction
Financial markets are broken. Fundamental analysis and Modern Portfolio Theory are relics of the past. Investors used to care about maximizing a portfolio’s expected return for a given amount of targeted risk. The goal used to be that prudent diversification through the analysis of security correlations could move the Efficient Frontier Line ‘up and to the left’. In other words, improve returns per unit of risk.
Today, Fed policies have commandeered investor thinking and altered investor behavior. The powerful driver of moral hazard has fueled greed, and imbued more fear of underperforming peers and benchmarks, than fear of downside risks. Some investors are buying the riskiest assets simply because prices have been rising. Some investors say they are buying equities instead of Treasuries because ‘equities have upside, while bonds yields are puny and their prices are capped at par’.
Fed policies have led to (investor) herd behavior that has plunged market volatilities and manipulated asset prices and correlations to lofty levels. The rallying cry has simply become ‘don’t fight the Fed’. Relative return – without regard for risk – is all that matters. As a result, future return expectations have fallen with ever-rising prices; correspondingly, risk levels have risen in parallel. The allure of the Fed’s magic spell has lapsed investors into a soporific state of cognitive dissonance, with them focusing more on trying to justify valuations, rather than on the Upside Downside Capture Ratio.
Markets have thus mutated into one of two possible combustible states. Either financial assets have all transcended into prodigious bubbles, or stocks and bonds are signifying two completely separate outcomes. Either possibility will have dangerous repercussions for the economy, and for portfolios and investors. At the moment, I believe that the Treasury market has it right, signifying concerns about disinflation and future growth.

This post was published at Zero Hedge on 08/28/2014.

De-Escalation Algo Pushes Futures To Overnight Highs

It is unclear exactly why stock futures, bonds – with European peripheral yields hitting new record lows for the second day in a row – gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the “de-escalation” algo as a meeting between Russia and Ukraine begins today in Belarus’ capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn’t say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
Asian equity markets haven’t really followed suit the US/European rally with bourses in Japan, Hong Kong, and China down 0.6%, 0.4% and 1%. The Dollar is softer against the Yen which perhaps added some pressure on Japanese equities. There isn’t much Asian headlines this morning and we suspect parts of the market (HK/China) are still busy with the ongoing earnings season. Asian credits are doing better in relative terms led by sovereigns. Indonesia’s USD bonds continued its march higher (helped by Treasuries) whilst its 5yr CDS spreads are marked 4bps tighter overnight. Asian stocks fall with the Kospi outperforming and the Shanghai Composite underperforming. MSCI Asia Pacific down 0.2% to 148.4. Nikkei 225 down 0.6%, Hang Seng down 0.4%, Kospi up 0.3%, Shanghai Composite down 1%, ASX up 0%, Sensex up 0%. 2 out of 10 sectors rise with health care, energy outperforming and utilities, telcos underperforming

This post was published at Zero Hedge on 08/26/2014.