Archive for July, 2014
Thursday, July 10th, 2014
Via Mark Chandler at Brown Brothers:
The euro and yen's resilience stand out today after both have reported important data that was shockingly weak. Japan reported a whopping 19.5% decline in May machinery orders. The Bloomberg consensus called for a 0.7% increase after the 9.1% decline in April. The year-over-year figure plunged ...
Posted in Uncategorized | Comments Off on FX
Thursday, July 10th, 2014
Prices of Treasury coupon securities are surging in overnight trading as the placid risk off trade trumps the ennui inducing narrow trading range which has prevailed for so long. The proximate cause of the risk off trade is turmoil in Portugal which has prompted profit taking in other European peripherals. ...
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Thursday, July 10th, 2014
I am just putting together my opening piece and bonds are rallying and stocks are cratering. So a quick note here.
European peripherals are in trouble again with Portuguese bank Banco Espirito Santo the proximate cause.
Via Bloomberg:
A gauge of lenders in the region was among the biggest decliners as Banco Espirito ...
Posted in Uncategorized | Comments Off on Before The Open
Wednesday, July 9th, 2014
Via Merrill Lynch Research:
Repo speaks volumes about the Treasury market. Why the surge in Treasury settlement fails matters. In the past month various issues across the US Treasury curve have traded special in the repo market, indicating that the demand to borrow the securities from shorts has increased relative to ...
Posted in Uncategorized | Comments Off on Merrill Lynch Research on Repo market
Wednesday, July 9th, 2014
This is a rather provocative piece from Stephen Stanley at Pierpont Securities who excoriates the FOMC for policies which remind him of the 1970s when FOMC policy was one of the factors which motivated the withering inflation of the late 70s and very early 1980s.
Via Pierpont Securities:
The June FOMC minutes ...
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Wednesday, July 9th, 2014
Via Bloomberg:
Quarterly Repo ‘Risk Dance’ Exposes Negative Forces: Alhambra
2014-07-09 11:11:28.913 GMT
By Alexandra Harris
July 9 (Bloomberg) -- Increased repo market fails have been
a result of pressure of lower UST issuance and “QE silo
mismatch” has left the “window-dressing state of
rehypothecation with fewer options,” Alhambra Investment
Partners’ Jeffrey P. Snider wrote in note yday.
* Quarterly “risk dance” exposes the confluence of two
negative forces:
* Fed and UST issuance has further strained the
“collateral stream,” which never really recovered from
the loss of MBS as a main repo tool
* Add in window dressing and liquidity suffers
“noticeably” from this “odd behavior”
* There’s only so much SOMA inventory that will satisfy “what
the market actually demands at any given moment”
* In the rush to make the system look less risky, there’s
actually an increase in risk as the system creates “what
amount to regulatory-driven bottlenecks”
* “It’s not quite a paradox, but it highlights the
depravity built into the framework”
* Within Basel paradigm banks make themselves look less risky
for their reporting periods by “massaging” short-term
liabilities, “particularly repo”
* To do so in repo liabilities means to “bolster actual
inventory of collateral,” which necessitates “reigning
in the rate of rehypothecation”
* Except increasing “visible inventory of collateral”
and less rehypothecation creates market strains
* Means banks are engaging in “hidden risks, a stretching of
their fractioning of resources,” for “most of their
existence in the shadows of unreported activity”
* “Good portion” of repo now conducted by securities dealers
rather than “simple depository institutions,” which means
a heightened potential for liquidity problems
* Dealer function impairment a “precarious proposition”
since it reduces the system’s ability to “maintain
order in a state of growing disarray”
* Central banks seem content to “simply manage expectations
with the idea that it will be enough to create and maintain
‘resiliency’”
Posted in Uncategorized | Comments Off on Excellent Repo Article
Wednesday, July 9th, 2014
Via CRT Capital;
OVERNIGHT FLOWS: Treasuries were little changed overnight on limited data to inspire trading direction. Overnight volumes were on the strong side with cash trading at 116% of the 10-day moving-average, while TY came in at 106% of norms. 10s were the most active issue with a 36% marketshare ...
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Wednesday, July 9th, 2014
Via Bloomberg:
* 30Y led declines, closing at lowest yield since June 30; 10Y
yield closed below its 50-DMA for first time since July 1
* As curve spreads flattened, 5/30 spread narrowed to its
lowest closing level since Sept. 2009; it remained above its
YTD intraday low of 166.7bps on June 18
* U.S.-German 10Y spread narrowed to 134.8bps; it closed
Friday at 137.5bps, widest since 1999
Posted in Uncategorized | Comments Off on Yield Curve Miscellany Via Bloomberg
Wednesday, July 9th, 2014
Via Brown Brothers
China's inflation readings were the most important data reported today. However, it did not seem to impact the market and Chinese shares, like the region as a whole, fell in the wake of Wall Street (S&P 500) largest decline in nearly a month. After the US ...
Posted in Uncategorized | Comments Off on FX
Wednesday, July 9th, 2014
Interesting observation from my former employer on price action following release of FOMC minutes.
Via TDSecurities:
This afternoon markets will focus on FOMC minutes from the June meeting, where our US team warns, “We know the Fed and Yellen are nevertheless gaining confidence in moving toward both inflation and employment objectives. This ...
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