Jun 19

junk

The Problem With Corporate Debt:

Taking Off Like a Rocket

There are actually two problems with corporate debt. One is that there is too much of it… the other is that a lot of it appears to be going sour.

frank-modell-that-s-harvey-beston-he-s-in-junk-bonds-new-yorker-cartoon

Harvey had a good time in recent years…well, not so much between mid 2014 and early 2016, but happy days are here again!

As a brief report at Marketwatch last week (widely ignored as far as we are aware) informs us: Continue reading »

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Jun 17

Deutsche Bank: “This Chart Is Even More Appropriate To Show A Broken Financial System“:

Yesterday, DB’s credit strategist Jim Reid (whose bank just hit a new record low stock price earlier this morning), said that “If One Wanted A Simple Indicator Of A Broken Financial System, Then This Is It”, and proceeded to show the chart of the 10 Year Bund yield, which is now well in the negative territory. Today Reid, in his quest to show how broken the global “market” has become as a result of relentless central bank tinkering, and has come up with what he believes is an even better example.

This is what he said: Continue reading »

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Jun 16

Question of the Day: When Was the Last Time the Yield on German 10-Year Bonds Went Negative?:

Think back. Many readers have been trading for 10 or 20 years. A few have been trading for 30 or more years. What was it like the last time German 10-year bond yields went negative?

That is sort of a trick question. Most likely you were not alive, no matter how old you are.

As translated from Spanish, my friend Guru Huky posted the answer on his blog today: And the last time the German bond stood negative was …. surprise surprise.

German 10-Year Yield Since 1807

Hyperinflation_10YBund

Huky Comments Continue reading »

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Jun 15

10Y bund DB

Deutsche Bank: “If One Wanted A Simple Indicator Of A Broken Financial System, Then This Is It”:

If there is one bank that is more concerned than any other about global central bank unorthodoxy, it is Deutsche Bank which as we reported yesterday, saw its stock price drop to a record low yesterday. As such it is not surprising that in his overnight note, DB’s Jim Reid focuses on the “broken financial system” and highlights the one indicator that confirms just how broken the system is: the Bund Yield.

This is what he said: Continue reading »

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Jun 08

H/t reader squodgy:

“Very worrying.”


germany invisible crisis

PDF: GPF-germanys-invisible-crisis

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Jun 03

If bondholders were angry with Puerto Rico before, they’ll surely be pissed now that there is a reasonable chance that they’ll end up with nothing at all as 1 17 member audit commission found some of the nation’s debt “unconstitutional.” In other words, the government may now just declare the bonds invalid.


Bondholders Stunned As Puerto Rico Finds $4.4 Billion In Outstanding Debt “Unconstitutional”:

After Puerto Rico defaulted on its $422 million debt payment in May, governor Padilla begged congress to step in and help out, which happened shortly thereafter when a House committee cleared legislation that provided Puerto Rico with a way forward on restructuring its debt.

20160602_padilla_0

As it turns out, on the day the House announced that it planned on taking up the Puerto Rico bill next week, a 17 member audit commission found that two debt issues worth $4.4 billion of the $72 billion in debt outstanding were unconstitutional. Continue reading »

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Jun 03

This surely will NOT end well.


Historic Milestone: Negative Yielding Debt Surpasses $10 Trillion For The First Time:

The world passed a historic milestone in the past week when according to Fitch negative-yielding government debt rose above $10 trillion for the first time, which as the FT adds envelops an increasingly large part of the financial markets “after being fuelled by central bank stimulus and a voracious investor appetite for sovereign paper.” It also means that almost a third of all global government debt now has a negative yield.

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May 31

The Fascinating Story Of How The Petrodollar Was Born And Lived In Secrecy For Over 40 Years:

For decades, the story of Saudi Arabia recycling petrodollars, i.e., funding the US deficit by buying US Treasuries with proceeds of its crude oil sales (mostly to the US), while the US sweetened the deal by providing the Saudis with military equipment and supplies, remained entirely in the conspiracy realm, with no confirmation or official statement from the US Treasury department.

Now, that particular “theory” becomes the latest fact, thanks to a fascinating story by Bloomberg which gives the background and details of secret meeting between then-US Treasury secretary William Simon and his deputy, Gerry Parsky, and members of the Saudi ruling elite, and lays out the history of how the petrodollar was born.

Here is the background: Continue reading »

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May 29

Iceland Has Offered Foreign Bondholders A “Choice”: Sell Now, Or Have Cash Impounded Indefinitely:

Iceland has had a difficult past few months politically, as its Prime Minister Sigmundur David Gunlaugsson became the first casualty of the Panama Papers.

Economically however, the story is more upbeat, as the country has rebounded since the financial crisis. The Icelandic Krona has stabilized against the Euro, the rate of change in inflation has slowed, and the country has recorded year-over-year growth in GDP each year since 2011.

20160528_iceland1

However, in a shocking turn of events, a law passed on May 22 by Iceland’s parliament is offering the foreign holders of about $2.3 billion worth of krona-denominated bonds a choice of either selling out in June at a below-market exchange rate, or have the money they receive upon maturity be impounded indefinitely in low interest bank accounts. In other words, Iceland is trying to kick out foreign investors. Continue reading »

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May 25

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May 21

State Of The States: New Jersey’s Problems Are Not “Mathematically Solvable”:

While the warning flags are raging in Illinois and Connecticut, JPMorgan’s Michael Cembalest states that New Jersey’s problems are “not mathematically solvable.” The stunning admission from a status-quo-sustaining bank that is “very focused on the total indebtedness of US states,” should be worrisome enough but as Cembalest explains the answer to a debt problem is not always piling up more debt – “when debt reaches a certain level, the can kicking is over and difficult decisions need to be made;” the issue is to address the root of the problem, which can be a delicate and at times politically incorrect topic.

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May 19

Republicans, Democrats Agree On A Bill To Bailout Puerto Rico

Republicans, Democrats Agree On A Bill To Bailout Puerto Rico:

It turns out that Puerto Rico’s plan to default on its debt and beg congress for help is working out as planned.

After a slight delay, House Republicans have reached an agreement with the Obama administration to provide a path to restructure Puerto Rico’s $70 billion debt load. The bill would offer the island a legal out similar to bankruptcy and wouldn’t commit any federal money according to the WSJ. Continue reading »

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May 09

trump cnn

Trump On Debt Renegotiation: “You Never Have To Default Because You Print The Money”:

Following Donald Trump’s Thursday comments that rising interest rates would be disastrous for the economy, saying that “we’re paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points?” hinting that the U.S. should “renegotiate longer-term debt” with creditors and that if the economy crashes he “can make a deal”, various media outlets went to town on Trump, most notably the NYT, which took Trump to task: Continue reading »

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May 08

Albert Edwards: “Let Me Tell You How This All Ends”:

The dollar’s recent rapid slide has been accompanied by a constant backdrop of dovish cooing from the Fed. Until this week, SocGen’s Albert Edwards notes that both equity and commodity markets had embraced the weak dollar as the elixir to solve all their ills. That relief, however, has now proved fleeting as fear of weak economic activity has reasserted its influence on investors. The weak dollar, Edwards warns, should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves. Continue reading »

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May 07

Showdown! In Leaked Letter IMF Tells Germany “Debt Relief For Greece Or IMF Drops Out”:

It’s showdown time.

The IMF has threatened it will pull out of the Greek bailout program unless Greece gets debt relief.

German Chancellor Angela Merkel, Austria, Finland, and the other Eurozone creditors will not like today’s development one bit.

Showdown! Continue reading »

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May 05

“Don’t Forget, I’m The King Of Debt, I Love Debt” – Trump Chimes In On Puerto Rico

In an interview with Wolf Blitzer, Donald Trump said that although he is the “king of debt”, and that he “loves debt”, he wouldn’t bail out Puerto Rico.

trump-debt

Responding to whether or not Trump would bail out Puerto Rico as president of the United States…

No I don’t believe they should, and I think frankly Puerto Rico is better if they don’t because they’ll cut the bonds, they’ll cut them way down there’s far too much debt. The problem with Puerto Rico is they are far, far too much in debt. Don’t forget, I’m the king of debt, I love debt

As far as how he would suggest Puerto Rico solve its debt issue, The Donald, of course, has a solution for that. Continue reading »

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May 01

Puerto Rico Says Will Default Tomorrow, Begs Congress For Help “Or Else Crisis Will Get Worse”:

Update: PR Governor Padilla has spoken…

  • *PUERTO RICO GOVERNOR SAYS WON’T PAY DEBT TOMORROW
  • *PUERTO RICO GOVERNOR SAYS ISLAND WON’T PAY DEBT MONDAY
  • *PUERTO RICO GOVERNOR: GOVERNMENT SIGNED MORATORIUM BILL YESTERD
  • *PUERTO RICO NEEDS DEAL W/ CREDITORS AND/OR CONGRESS: GARCIA

And of course, demands a bailout…

  • *PUERTO RICO GOVERNOR CALLS ON U.S. CONGRESS, PAUL RYAN FOR HELP

And then threatens… Continue reading »

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Apr 25

The ECB’s Visible Hand: Unilever Issues Debt With 0% Coupon, 0.06% Yield:

Moments ago Unilever NV was set to raise money in bond markets Monday that will cost the consumer-goods giant almost nothing, in the latest sign of how the European Central Bank’s stimulus measures are slashing funding costs across the continent. In one tranche of a €1.5 billion deal, the Anglo-Dutch company was set to sell €300 million of debt maturing in 2020 with a coupon of 0%, potentially offering investors a yield of just 0.06%,

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Apr 24

Castrated:

Take away Saudi Arabia’s oil and all that’s left are a couple of Islamic shrines and a lot of sand and hot air.

Guest Post by Robert Gore at Straight Line Logic

After three decades of internecine war, Abdul-Aziz bin Saud, allied with the fundamentalist Wahhabist Islamic sect, consolidated the House of Saud’s dominance over Arabia in 1932 with the tacit support of regional imperial power Great Britain. The bedrock of the Saudi Arabian economy, the massive pool of oil in the Al-Hasa region along the Persian Gulf coast, was discovered in 1938 and development began in 1941. Towards the end of World War II, President Roosevelt and Abdul-Aziz reached a handshake deal that has governed relations between the two nations ever since: Saudi Arabia would guarantee the flow of oil to the US at a reasonable price; the US would protect the Saud regime. Continue reading »

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Apr 18

OK, I Get it, this Junk-Bond Miracle-Rally Is Doomed:

And since stocks follow junk bonds….

Junk bonds started to decline in June 2014, and earlier this year threatened to implode. Contagion was spreading from the collapsing energy sector to the brick-and-mortar retail sector, telecom (Sprint), the media (iHeartMedia), and other sectors. It was really ugly out there. Continue reading »

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Apr 18

FYI.

Related info:

SUPER SHEMITAH: Elite’s Jubilee Year Plan To Crash World Economy By October 2016 (Video)


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Apr 17

Hungary Issues Sovereign Bonds Denominated in Yuan; Another Nail in US Reserve Currency Status?:

Hungary has become the first Eastern European country to issue a yuan-denominated sovereign bond.

The deal that shows how currying favor with China may be a more important driver for the market than funding. Continue reading »

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Apr 17

H/t reader squodgy:

“When I studied Accountancy & Economics back in the 60’s & 70’s, common sense told us that Countries were like businesses, buying raw materials & converting them into products which were then sold worldwide.
As third world cheaper cost countries started to take pieces of the cake, we consoled ourselves with what were termed “Invisible Earnings” such as Banking & Insurance & Shipping Fees. That was OK in UK because we had a sudden Oil Boom which filled the gap & kept us buoyant.
That’s all over now, just as it is with U.S. economy. We import the very things we used to make & all our skilled labour has either gone off grid or on benefit, and the “Invisible earnings” are nearly really invisible. A reset is the only answer, default via catastrophe or war. We are all unknowingly sitting waiting for something to happen.”


Jim Grant On The United States Of Insolvency:

$13,903,107,629,266. Can the nation afford this much debt?

This much I have learned about debt after 40 years of writing and study: It is better not to incur it. Once it is incurred, it is better to pay it off. America, we have a problem.

We owe more than we can easily repay. We spend too much and borrow too much. Worse, we promise too much. We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop. Continue reading »

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Apr 16

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

Obama-bows-to-Saudi-King


Saudi Arabia Threatens To Liquidate Its Treasury Holdings If Congress Probes Its Role In Sept 11 Attacks:

Back in January, when the market was watching in shocked silence as oil prices were crashing to decade lows and as concerns emerged that Saudi Arabia may need to commence selling its vast, if unquantified, USD reserves, we wrote a post titled “Attention Finally Turns To Saudi Arabia’s “Secret” US Treasury Holdings” where we noted something very surprising: whereas we do know that Saudi Arabia is the owner of the world’s third largest USD reserves…

SaudiReserves_0

… their actual composition remains as a secret, because while the US discloses the explicit Treasury holdings of all other nations, Saudi Arabia’s holdings, for some unknown reason, are not officially disclosed.
Continue reading »

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Apr 13

peter thiel

Peter Thiel Says Everything Is Overvalued: “Public Equities, Houses, Government Bonds”:

Since the Fed may not, or simply refuses, to see if not a bubble then at least “froth” in any asset class, perhaps it should hire Peter Thiel to be on its macroproduential supervisory committee, because according to the venture capital legend who co-founded PayPal everything is overvalued. Speaking at the LendIt USA Conference in San Francisco on Tuesday, he said that he is “somewhat concerned about the frothiness of the markets” and adds that “startup tech stocks may be overvalued, but so are public equities, so are houses, so are government bonds.

He adds that “if there is a bubble it is probably centered on the zero % interest rates, the quantitative easing, the money printing and that’s a very strange one because it permeates everything.” Continue reading »

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Apr 12

Average German Bond Yield Crashes To Zero For First Time Ever:

“You Get Nothing” is the message for German bond coupon-clippers as for the first time in history, the average yield across the entire bond complex tumbles to zero.

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Apr 10

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules:

Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover. Continue reading »

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Apr 07

In Shock To Wall Street, Puerto Rico Moves To Suspend Payments On $72 Billion Public Debt:

The Puerto Rican Senate and the House of Representatives have both passed an emergency declaration authorizing the governor to suspend payments on $72 billion in public debt — setting up a dramatic showdown between Puerto Rico and hedge funds amid the island’s historic debt crisis. The bill authorizes the Puerto Rican governor to “protect the health, security and public welfare … [by] using government funds first and foremost for public services.” The dramatic move comes one day after a group of hedge funds sued to freeze the assets of Puerto Rico’s Government Development Bank in efforts to stop the bank from spending money on the island that the hedge funds want to go toward upcoming debt payments.

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Mar 01

Japan Sells 10Y Bond At Negative Yield For First Time Ever:

As we detailed earlier, for the first time in the history of crazy, Japan ‘sold’ 10-year government bonds today at a negative yield. Translated into English, this means “investors” agreed to pay the Japanese government 2.4bps per year for the privilege of lending it money for 10 years

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Feb 25

Masonic handshake between Kerry and LavrovKerry-Potatoes

John Kerry Threatens US Banks Over Russia Bond Sale:

Russia wants to sell some bonds and President Obama isn’t happy about it.

Moscow is looking to issue “at least” $3 billion of foreign bonds in what amounts to the country’s first international issuance since the West imposed sanctions on The Kremlin in 2014 after the annexation of Crimea and Russia’s alleged role in “destabilizing” Ukraine (because it was very “stable” before).

Since the sanctions were imposed, relations between Moscow and Washington have only gotten more contentious and when Russia began flying combat missions from Latakia on September 30, it was trotted out as evidence that Vladimir Putin is indeed determined to reassert Russian influence by sheer force. Continue reading »

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