April 8./Greece’s Tsipras meets Putin/ Greek government states that debt acquired during the 2012 bailout as odious/Iran sends war ships to the Gulf of Aden/Oil inventories rise from the DOE report/Cushing OK. at 90%/ Confusion with the reading of the beige book

Good evening Ladies and Gentlemen:



Here are the following closes for gold and silver today:



Gold:  $1203.10 down $7.50 (comex closing time)

Silver: $16.44 down 38 cents (comex closing time)


In the access market 5:15 pm


Gold $1202.50

Silver: $16.52




Gold/silver trading:  see kitco charts on the right side of the commentary.



Following is a brief outline on gold and silver comex figures for today:


At the gold comex today,  we surprisingly had a poor delivery day, registering 0 notices served for nil oz.  Silver comex surprised with  200 notices for 1,000,000 oz .


Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 244.16 tonnes for a loss of 59 tonnes over that period. Lately the removals  have been rising!





In silver, the open interest fell by a tiny 526 contracts, as Tuesday’s silver price was down by 27 cents. The total silver OI continues to remain extremely high with today’s reading at 169,700 contracts. The front April month has an OI of 385 contracts for a gain of 200 contracts. We are still close to multi year high in the total OI complex despite a record low price. This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end.


We had 200 notices served upon for 1,000,000 oz.



In gold the collapse of OI stops. The total comex gold OI rests tonight at 390,571 for a gain of 621 contracts as  gold was down $8.00 on Tuesday. We had 0 notices served upon for nil oz.



Today, we had no changes in gold inventory at the GLD/  Gold Inventory rests at 733.06  tonnes


In silver, / the SLV/Inventory /we have no changes and thus the inventory tonight is 321.839 million oz


We have a few important stories to bring to your attention today…


1. Today we had the open interest in silver fall by a tiny  526 contracts with the 27 cent fall in price on Tuesday.  The OI for gold rose by 621  contracts as the price of gold fell on Tuesday to the tune of $8.00.

(report Harvey/)

2.Greek’s Prime Minister Tsipras meets Russia’s Putin

(zero hedge)

3. Late in the session Greece states that much of its debt acquired during the 2012 bailout is odious and they will “write it off” and put the burden onto the previous administration

(zero hedge)

4. Iranian warships heading to the Gulf of Aden

(zero hedge)

5.Investigations are now ongoing with respect to banks in 4 countries:

Portugal, Spain, Greece and Italy. The banks use an asset such as  deferred tax assets as a tier one asset, upon which the sovereign then guarantees these dubious entries. The competition bureau of Europe is basically stating that this is giving them unfair advantage and they are investigating.

(Wolf Richter/WolfStreet)

6. Oil inventories rise again with today’s DOE report.  Cushing Oklahoma up to 90% of capacity.

(zero hedge)

7. Swiss government issues first Swiss bond with a 10 year span with a negative interest rates.

(zero hedge)

8. German factory orders decline despite the lower euro

(zero hedge)

9. Great commentaries tonight from Bill Holter and Koos Jansen

(Bill Holter and Koos Jansen)

10.  Beige book confusion this afternoon:

zero hedge)

we have these and other stories for you tonight



Let us now head over to the comex and assess trading over there today.

Here are today’s comex results:


The total gold comex open interest rose by 621 contracts from 389,950 up to 390,571 as gold was down by $8.00 on Tuesday (at the comex close).  We are now in the active delivery month of April and here the OI fell by 183 contracts down to 2,807. We had 2 contracts filed upon on Tuesday so we lost another 181 contracts or 18,100 oz will not stand for delivery in April. The next non active delivery month is May and here the OI fell by 183 contracts down to 461.  The next big active delivery contract month is June and here the OI rose by 412 contracts up to 264,589. June is the second biggest delivery month on the comex gold calendar. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 46,992  (Where on earth are the high frequency boys?). The confirmed volume on Tuesday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 91,471 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI fell by 526 contracts from 170,226 down to 169,700 as silver was down by 27 cents, with respect to Tuesday’s trading . We are now in the non active delivery month of April and here the OI rose to 385 for a gain of 200 contracts.  We had 0 notices filed on Monday so we  gained 200 silver contracts or an additional 1,000,000 ounces will stand for delivery in April. The next big active delivery month is May and here the OI fell by 2,682 contracts down to 91,846. The estimated volume today was poor at 20,022 contracts  (just comex sales during regular business hours. The confirmed volume yesterday  (regular plus access market) came in at 39,301 contracts which is good in volume. We had 209 notices filed for 200,000 oz today.  Today somebody was in urgent need of some silver.



April initial standings

April 8.2015



Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz 192.90 oz (6 kilobars)HSBC,Manfra
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)   2807 contracts(280,700) oz
Total monthly oz gold served (contracts) so far this month 676 contracts(67,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   oz

Total accumulative withdrawal of gold from the Customer inventory this month

  163,772.1 oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz



we had 0 dealer deposits


total dealer deposit: nil oz


we had 2 customer withdrawals

i) Out of HSBC:  128.600 oz (4 kilobars)

ii) Out of Manfra:  64.30 oz (2 kilobars)

total customer withdrawal: 192.90 oz (6 kilobars)


we had 0 customer deposit:


total customer deposit: nil oz


We had 1 adjustments

i Out of the Scotia vault:

We had 15,282.836 withdrawn from the dealer account at Scotia to the customer account at Scotia.


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (676) x 100 oz  or  67,600 oz , to which we add the difference between the open interest for the front month of April (2807) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

Thus the initial standings for gold for the April contract month:

No of notices served so far (676) x 100 oz  or ounces + {OI for the front month (2807) – the number of  notices served upon today (0) x 100 oz which equals 348,300 oz or 10.83 tonnes of gold.


we lost 181 contracts or 18,100 oz of gold that will not stand for delivery in April





Total dealer inventory: 631,988.064 or 19.65 tonnes

Total gold inventory (dealer and customer) = 7,849,613.194  oz. (244.155) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 59.0 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real.  I cannot see continual additions of strictly kilobars.






And now for silver


April silver initial standings

April 8 2015:



Withdrawals from Dealers Inventory 486,241.321 oz (Scotia)
Withdrawals from Customer Inventory  1,422,905.46 oz (Delaware,Brinks,CNT,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 1,460,252.961 oz (JPM,CNT)
No of oz served (contracts) 200 contracts  (1,000,000 oz)
No of oz to be served (notices) 185 contracts(925,000 oz)
Total monthly oz silver served (contracts) 201 contracts (1,005,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month486,241.321 oz
Total accumulative withdrawal  of silver from the Customer inventory this month  2,845,810.8 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz


we had 1 dealer withdrawal:

i) Out of the Scotia vault: 486,241.321 oz

total dealer withdrawal: 486,241.321 oz


We had 2 customer deposits:

i) Into CNT:  350,015.110 oz

ii) Into JPMorgan: 1,110,237.851 oz

total customer deposits:  1,460,252.961  oz


We had 4 customer withdrawals:


i) Out of Delaware:  982.80 oz

ii) Out of Brinks:  25,002.32 oz

iii) Out of CNT: 1,336,610.070 oz

iv) Out of Scotia: 60,305.27


total withdrawals;  1,422,905.46 oz


we had 0 adjustments:




Total dealer inventory: 62.705 million oz

Total of all silver inventory (dealer and customer) 176.238 million oz


The total number of notices filed today is represented by 200 contracts for 1,000,000 oz. To calculate the number of silver ounces that will stand for delivery in April, we take the total number of notices filed for the month so far at (201) x 5,000 oz    = 1,005,000 oz to which we add the difference between the open interest for the front month of April (385) and the number of notices served upon today (200) x 5000 oz equals the number of ounces standing.

Thus the initial standings for silver for the April contract month:

201 (notices served so far) + { OI for front month of April(385) -number of notices served upon today (200} x 5000 oz =  1,930,000 oz standing for the April contract month.

we gained another 200 contracts or an additional 1,000,000 oz will stand for delivery in this April delivery month.


for those wishing to see the rest of data today see:

http://www.harveyorgan.wordpress.com orhttp://www.harveyorganblog.com




The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders

ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:

April 8.2015:no changes in the GLD/Inventory 733.06 tonnes


April 7. we had another withdrawal of 4.18 tonnes of gold at the GLD/Inventory rests at 733.06 tonnes

April 6. no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

April 2/no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

April 1/2015/ no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

march 31.2015/ no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

March 30/no changes in gold inventory at the GLD/Inventory at 737.24 tonnes.

March 27/no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

March 26 we had another huge withdrawal of 5.97 tonnes of gold.  This gold is heading straight to the vaults of Shanghai, China/GLD inventory 737.24 tonnes

March 25.2015 we had a withdrawal of 1.19 tonnes of gold from the GLD/Inventory at 743.21 tonnes

March 24/ no changes in gold inventory at the GLD/Inventory 744.40 tonnes

March 23/we had a huge withdrawal of 5.37 tonnes of gold from the GLD vaults/Inventory 744.40 tonnes

march 20/we had no changes in  inventory at the GLD/Inventory at 749.77 tonnes

March 19/we had no changes in inventory at the GLD/Inventory 749.77 tonnes


April 8/2015 /  we had no changes in gold inventory at the GLD/Inventory at 733.06 tonnes

The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).

GLD : 733.06 tonnes.




And now for silver (SLV):

April 8.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz

April 7.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz

April 6. we had a small withdrawal of 136,000 oz/inventory tonight rests at 321.839 million oz

April 2/2015: no changes in inventory/SLV inventory rests this weekend at 321.975 million oz

April 1.2015: we had a huge withdrawal of 1.913 million oz of silver from the SLV vaults/Inventory 321.975 million oz

March 31.2015: no changes in inventory at the SLV/Inventory at 323.88 million oz

March 30.2015: no changes in inventory at the SLV/inventory at 323.888 million oz.

March 27. we had a huge withdrawal of 1.439 million oz leave the SLV/Inventory rests this weekend at 323.888 million oz

March 26.2015; no change in silver inventory/SLV inventory 325.323 million oz

March 25.2015:no change in silver inventory/SLV inventory 325.323 million oz



April 8/2015 we had no changes  in inventory at the SLV/ inventory rests at 321.839 million oz




And now for our premiums to NAV for the funds I follow:

Note: Sprott silver fund now for the first time into the negative to NAV

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded at Negative  8.5% percent to NAV in usa funds and Negative 8.3% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.0%

Percentage of fund in silver:38.6%

cash .4%

( April 8/2015)

Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.09%!!!!! NAV (April 8/2015)

3. Sprott gold fund (PHYS): premium to NAV rises -.24% to NAV(April 8/2015

Note: Sprott silver trust back  into positive territory at +1.09%.

Sprott physical gold trust is back into negative territory at -.24%

Central fund of Canada’s is still in jail.




And now for your more important physical gold/silver stories:


Gold and silver trading early this morning


(courtesy Goldcore/Mark O’Byrne)

U.S. Hegemony and Dollar Threatened By New Chinese Bank

– Chinese Success in Attracting Major Western Countries to New Bank Marks Beginning of New Era
– Diverse members include UK, Israel, Germany, Australia and Russia and Iran
– Demonstrates the degree to which U.S. global influence is declining
– U.S. needs to reform its approach to IMF and World Bank system if it to successfully reassert its influence
– U.S. “Failure of Strategy and Tactics was a Long Time Coming”
Beijing’s challenge to post-World War II financial and monetary order
– New bank shows continuing decline of U.S. hegemony and dollar as reserve currency

China's President Xi Jinping (centre) poses for photos with guests at the Asian Infrastructure Investment Bank (AIIB) launch ceremony at the Great Hall of the People in Beijing October 24, 2014. (Reuters / Takaki Yajima)

The success of China in attracting countries traditionally within Washington’s sphere of influence to join its Asian Infrastructure Investment Bank (AIIB), such as the UK, Israel, Australia and Germany, marks another milestone toward a new multi polar world and a new era in international politics and economics.

The AIIB is seen as a potential rival to established lenders the World Bank, IMF and Asian Investment Bank, which are dominated by the United States.

The era of infrastructure investment and multilateral banks and financial institutions controlled, in large part, by Washington – often as an aggressive strategic policy tool – has come to an end. The AIIB which will be controlled by China will compete with the World Bank and the IMF for infrastructure projects and potentially could become a global lender of last resort to sovereign nations such as Greece.

It is almost certain that the AIIB will begin lending in yuan – another phase in the inevitable demise of the dollar as sole reserve currency and the fulfilment of Chinese ambition to make the yuan an internationally traded currency.

Even the Chinese themselves were reportedly “surprised”at their success in attracting key U.S. allies – particularly Britain – to join the AIIB. The U.S. had exerted pressure on its allies to eschew the new Asian bank. However, when Washington’s closest ally – Britain – broke ranks and announced its application in March it led to a slew of western countries following suit.

It is interesting to note that the World Bank’s US-appointed President has vowed to find “innovative” ways to work with a new Chinese-led global bank, welcoming it as a “major new player” in the world. The positive overtures by Jim Yong Kim comes ahead of next week’s World Bank and International Monetary Fund spring meetings in Washington. It also marks a split with the administration of U.S. President Barack Obama which put him forward to head the World Bank in 2012.

According to the Financial Times, China’s success stems from softening of its diplomacy early last year following tensions with Vietnam with the sinking of a Vietnamese fishing vessel. By the time the APEC conference came around China was negotiating agreements and deals with its neighbours, including Japan.

That Britain, Israel, Australia and Germany have turned a deaf ear to Washington on an issue that is of such vital strategic importance to the U.S. demonstrates the shocking degree to which the influence of the U.S. has declined in the past fifteen years.

While Canada and Japan remain on the sidelines for now – many believe that it is just a matter of time before they too join the new bank.

Former U.S. Treasury Secretary Lawrence Summers  wrote this week that the “failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics.”

Summers is a U.S. and international political insider and was Chief Economist of the World Bank from 1991 to 1993. Summers worked as the Director of the White House United States National Economic Council for President Obama from January 2009 until November 2010, where he emerged as a key economic decision-maker in the Obama administration’s response to the financial crisis.

He was widely tipped as the potential successor to Ben Bernanke as the Chairman of the Federal Reserve, though after criticism from the left, Obama nominated  Janet Yellen for the position.

If the U.S. is to arrest the decline in its influence through the World Bank, Summers identifies three areas that Washington needs to address . Firstly, in its approach to the wider world it must rebuild a bipartisan foundation and “be free from gross hypocrisy and be restrained in the pursuit of self interest.”

The U.S. needs to apply the same standards to its “state regulators, independent agencies and far-reaching judicial actions” that it demands of other countries. He advises against using the dollar as an “aggressive” geopolitical tool such as the attempts to suffocate the Iranian economy by cutting Iran out of the banking system.

“We cannot expect to maintain the dollar’s primary role in the international system if we are too aggressive about limiting its use in pursuit of particular security objectives.”

Ultimately the new global institution will help China knock the U.S. off its pedestal as the world’s pre-eminent economic and military superpower and will likely lead to a further erosion in trust of the debased dollar as the global reserve currency.

The new emerging order should lead to greater geopolitical stability in the long term. The rising economic power of China seeks to work together financially and economically with both NATO members and indeed nations currently at odds with American foreign policy such as Russia and Iran.

Iran has been accepted as a founding member of the AIIB. Interestingly, China said that the decision was made by existing members, including China, Britain, France, India and Italy. The United Arab Emirates (UAE) has also been accepted. China and Iran have close diplomatic, economic, trade and energy ties.

One would hope that this should limit the potential for large-scale conflict involving Israel, the U.S. and certain NATO members and the current black sheep of the international family – Iran and Russia.

In the shorter term however it may lead to greater geopolitical tension as the neoconservative influence in Washington continues to labour under the delusion that the U.S. is still the indispensable nation chosen by history to rule the world unilaterally. Perversely, the decline in U.S. hegemony especially in the financial and economic realms may embolden the neo-conservative militarists who appear desperate to maintain U.S. hegemony … at all costs.

The clear shift in economic power from West to East will put further pressure on the dollar. The recent strong bounce in the dollar will likely be seen as a short term cyclical bull market within a secular long term bear market.

The coming dollar crisis will impact the currency international monetary system and likely lead to an  international monetary crisis. Global property bubbles, leveraged finance and high risk securitization were the elephants in the room in the years prior to the start of global financial and economic crisis in 2007. Many warned but were ignored.

There are similar elephants in the room today which are also being ignored. There is the growing risk of an international monetary crisis due to the real risks posed to the global reserve currency the dollar and to the not so ‘single currency’, the euro.

Gold will continue to act as a safe haven asset and protect people in the event of an international monetary crisis.

Click here in order to read GoldCore Insight –
Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold


Today’s AM LBMA Gold Price was USD 1,211.10, EUR 1,113.66 and GBP 811.40 per ounce.

Yesterday’s AM LBMA Gold Price was USD 1,208.50 , EUR 1,113.82 and GBP 813.63 per ounce.
Gold fell 0.44 percent or $5.40 and closed at $1,210.30 an ounce yesterday, while silver slipped 0.71 percent or $0.12 closing at $16.88 an ounce.

Gold in Euros - 1 Year  

Gold in Singapore was firm at $1,208.95 an ounce near the end of day trading. Comex U.S. gold for June delivery was also steady at $1,209.70 per ounce.

Gold is being supported by dollar weakness today as market participants reassess the likelihood of rate rises.

Today, at 1800 GMT Fed watchers await the release of the U.S. Federal Open Market Committee’s minutes from the March 17-18th meeting. You may recall the Fed’s dovish tone used the word ‘patient’ when referring to monetary policy. At the time officials suggested an interest rate hike as early as June.

But as we expected, poor economic data, especially the very poor payrolls number last Friday which was well below expectations is revising expectations.

Yesterday, Minneapolis Fed President, Narayana Kocherlakota, spoke about waiting until the second half of 2016 to start raising rates, only a day after New York Fed President, William Dudley, said the timing of an increase was unclear.

Kocherlakota also warned of the possibility of more QE which would be very bullish for gold.

The Russian ruble has extended recent gains in its 2 month rally, setting new 2015 highs against the dollar and the euro. The ruble has become very oversold and the rally in oil prices is also helping. Oil is Russia’s main export.

In India, Platinum Guild International said that sales of platinum jewellery grew by 28% in 2014 in India. Platinum jewellery is the second largest consumer of platinum in the world (35%) after the auto-catalyst market (36%).

Gold is trading near a seven week high. In London, in the late morning gold for immediate delivery was trading at $1,210.76 or up 0.15 percent. Silver is at $16.88 or up 0.30 percent and platinum is trading at $1,173.89 or up 0.59 percent.

Breaking News and Award Winning Research Here




How on earth can this little nation lose so much?

(courtesy GATA)

A billion dollars disappears from little Moldova’s banking system


By Mihaela Rodina
Agence France-Presse
via Yahoo News
Wednesday, April 8, 2015

CHISINAU, Moldova — A billion dollars is a lot for Europe’s poorest state of Moldova — particularly when it disappears.

Anti-corruption prosecutors and American auditors have been searching the books for clues about the mysterious transactions, an embarrassment for the ex-Soviet state on track for EU membership.

The scandal has even threatened to destabilise the banking system in the country of 3.5 million people.

The case of the vanishing billion came to light when the Central Bank of Moldova discovered that three banks have given out loans worth a total of $1 billion, or 15 percent of the impoverished ex-Soviet state’s GDP.

The financial establishments — Banca de Economii, Banca Sociala and Unibank — hold about a third of all bank assets in the country, including money for pension payments. …

… For the remainder of the report:





Dave Kranzler talks with David Morgan on silver:

(courtesy Dave Kranzler IRD)


SoT Ep 15 – David Morgan: Silver Is Historically Undervalued

“This market isn’t a nightmare, it’s just plain silly – stupid silly”  – Dave Kranzler, Shadow of Truth

Based on all the data available, serious market analysts –  note: Wall Street robots are not considered serious analysts  –  silver is historically undervalued.  We can point to several metrics, like the gold/silver ratio or the ratio of paper silver claims vs. the amount of available silver to deliver, in order to start making the case.

Instead of going through the monotony of presenting quantitave analysis, the Shadow of Truth hosted David “Mr. Silver” Morgan to make his case for investing in silver right now.   Everyone with one brain cell knows that the silver market is the most manipulated in history.  But  Mr. Morgan makes a very interesting and valid  argument with regard to reasons for not focusing on the the degree to which the market is manipulated.

All of the billionaires I know were buying silver aggressively at $4 when the precious metals bull began. Currently silver, on an inflation-adjusted basis, is back to the $4 – 5 dollar level of 2000/2001. Don’t be afraid. Buy when no one else wants to buy – think like a billionaire. The silver market is a gift right now:



 0  4  0 Google+0
Apr 7, 2015 – 9:25 AM GMT
Turkish imports of silver jumped to the highest on record at 54.6 tonnes in March, according to data from the Borsa Istanbul.The figure is up 67 percent on the previous month’s figure of 32.6 tonnes, and well-above the previous record of 41.6 tonnes in December.  The country imported 227 tonnes of silver in 2014.The metal’s price is currently up around seven percent for the year at $16.82 per ounce, after hitting a three-month low in March at $15.29, and is one of the best perfoming metals in the precious metals complex.Turkey did not import any platinum or palladium in March, while the gold number is still to be released.(Editing by Martin Hayes)

– See more at: http://www.bulliondesk.com/silver-news/focus-turkish-silver-imports-march-jump-to-highest-record-92733/#sthash.XsuSe3dU.dpuf



( courtesy Sydney Morning Herald)

Somebody is regularly profiting by front-running the Reserve Bank of Australia


ASIC Looks at RBA over Currency Trading Anomaly

By Vesna Poljiak
Sydney Morning Herald
Wednesday, April 8, 2015

Unusual trading in the Australian dollar seconds ahead of each of the past three Reserve Bank of Australia policy outcomes could be a result of insider leaks, automated algorithmic trading during a market lull, or shrewd guesses.

The Australian Securities and Investments Commission confirmed on Tuesday it was investigating a spike in the Australian dollar seconds ahead of the RBA’s April policy statement that confirmed that the cash rate would stay on hold at 2.25 per cent. An unchanged decision, all things being equal, would support a higher Australian dollar because of the strong expectation leading into the meeting that the RBA would cut, consistent with its easing bias.

It is not the first time the securities regulator has turned its focus on the RBA. Similar patterns where the Australian dollar has seemingly correctly pre-empted the RBA’s decision were recorded seconds ahead of the February and March meetings, sparking fears the integrity of the central bank’s protocols have been compromised. …

… For the remainder of the report:




Koos Jansen gives a good presentation on the leasing of gold inside the Chinese gold market.

(courtesy Koos Jansen/)


Posted on 8 Apr 2015 by

Zooming In On The Chinese Gold Lease Market

The primary reasons mainstream gold analysts (and the media) don’t use Shanghai Gold Exchange (SGE) withdrawals as an indicator for Chinese wholesale gold demand, are – after a few others have been tested – Chinese Commodity Financing Deals (CCFD). Regarding gold these financing operations can be be conducted through round-tripping or gold leasing. Because of the structure of the Chinese gold market round-tripping gold flows are completely separated from the SGE system – the Chinese domestic gold market, and thus withdrawals from the SGE. There is no need to further investigate round tripping for our understanding of the Chinese domestic gold market.

The Chinese gold market is structured as such that leases are settled on the SGE; lessor and lessee come to an agreement after which gold is transferred from the lessor’s SGE Bullion Account to the lessee’s SGE Bullion Account. As I’ve stated previously it’s most likely lessees will only withdraw gold from the vaults of the SGE when the leased gold will be used in genuine gold business (The World Gold Council agreed with me in email correspondence), as a lessee that’s merely seeking cheap funds has no interets in obtaining physical gold, but rather prefers to sell the leased gold on spot at the SGE for its proceeds. Therefor the latter gold financing deals (leasing gold for acquiring cheap funds) add little distortion to total SGE withdrawals when used as wholesale gold demand indicator.

For more information on the structure of the Chinese gold market and CCFD’s read:

However, to get to the bottom of this, which seems to be my mission in life, we must zoom in on the Chinese gold lease market. Below I present an article written by Minsheng Banking Corp in 2014, translated by Soh Tiong Hum and BullionStar’s Sales Executive See Hong Kang. The article provides essential data on the Chinese gold lease market, for the first time we can read how total lease volume is compounded, what industry segments are leasing how much gold and in what tenors total volume is divided. In a separated post we will analyze these numbers, as I’m still talking to SGE staff and Chinese banks to be positive on the meaning of all numbers. 

If you are confused about what the article states as being Chinese consumer gold demand (1,170 tonnes in 2013), consider this China Gold Association (CGA) estimate is measured at retail level and likely only from sales by CGA members. To familiarize with all demand metrics used in the Chinese gold market read this post.    

Some data handles:

2013 CGA vs WGC

Translation of the Minsheng Banking Corp article, written by Tang Xiang Bin, 2014:

Gold Supply & Demand, Gold Leasing And Shenzhen Market Research Report

Abstract: In 2013, domestic consumer demand for gold reached a record high of 1,170 tonnes for the first time, more than 35 % over 2012. As rationality returns to consumers, 2014 domestic gold demand may retrace back to normal levels after being depleted by last year’s explosive growth. As imports are able to meet gold demand, China’s gold market shall move from shortage to balance. We expect this year’s first quarter gold and jewelry spending year on year growth will drop to 10 – 20 % of the normal level, while second quarter gold consumption demand will slow further. Expected 2014 domestic gold demand should stay between 900 – 1200 tonnes.

2013 ushered in explosive growth in the gold lease market. The domestic gold lease volume grew substantially to 1,070 tonnes, an increase of 268 % y/y. Based on demand, 2013 gold leasing by enterprises and brand makers reached 781.1 tonnes, 73 % of the year’s total volume, which shows that China’s jewelry market is the most important customer segment.From the rate of growth, interbank gold loans grew rapidly. 2013 interbank leasing increased 439 % y/y which indicates that financialization of gold between China’s banks have strengthened.

Because China’s economy and credit market both face risk of deleveraging this year, gold leasing can satisfy banks’ need to expand their business as well as meet financing needs of gold enterprises when there is a credit crunch in the background. Therefore deleveraging is conducive to the growth of the gold lease market.

At the moment, Shenzhen already has the largest domestic gold and jewelry processing base, the largest center of demand for spot gold, the largest gold wholesale center, the largest physical gold settlement and the largest OTC market. In other words, Shenzhen has a competitive advantage for developing gold market activities. Backed by strong demand and an industrial chain, gold leasing in Shenzhen has great potential and space for development.

End of abstract

minsheng gold lease market report 2014

Domestic gold demand in 2013 grew enormously due to substantial fall in the gold price. National gold consumption grew to all-time high of 1,170 tonnes, a 35 % increase y/y. Although last year’s gold demand was not evenly distributed, volatile fluctuation between domestic and foreign gold prices reflected the fluctuation in demand. Large increases in gold imports were able to satisfy this sudden increase in demand. We expect this year’s jewelry consumption growth to retrace to normal levels. Gold consumption in 2014 shall maintain between 900 – 1200 tonnes. Following a rise of gold inventory in recent years, gold leasing enters a phase of explosive growth. 2013 gold leasing reached 1,070 tonnes worth RMB 300.6 billion, 268 % higher y/y. With deleveraging going on in 2014, both banks and clients have stronger interest to push gold leasing. Therefore gold leasing should maintain the trend of high-speed growth, hopefully becoming a bright spot when banks are going through downturn.

After explosive growth in 2013, domestic gold demand should retrace to normal this year

Gold demand in 2013 goes through huge growth

China’s domestic gold demand experienced explosive growth last year, overtaking India as the world’s number one gold consumer. For the whole of 2013, transacted spot gold (AU99.99) at Shanghai Gold Exchange hit 3,188 tonnes, 280 % growth y/y. Explosive growth shows demand for spot gold at the exchange exceeded the 2012 level. Besides the exchange, domestic consumer demand (especially in the first half of the year) also experienced explosive growth. For the whole of last year, Gold jewelry consumption broke a record with RMB 296 billion, 34 % increase y/y. In the second quarter, gold jewelry consumption broke quarterly record with RMB 82 billion, 28 % of the whole year.

Gold imports can satisfy domestic gold demand

Increase in gold imports satisfied explosive growth in gold demand. In 2013, gold demand grew explosively. 2,197 tonnes of physical gold left the SGE that year, a 193 % increase y/y. Because domestic production of gold is unable to meet demand, imports became an effective means. Import from Hong Kong increased significantly. In 2013, gold import from Hong Kong reached 1,498 tonnes, 179% increase y/y. Importing gold can satisfy domestic demand effectively.

As gold imports increased, the ability of commercial banks to supply the gold market increased visibly. Since 2012, China’s import from Hong Kong and SGE’s settlement volume on a monthly basis appeared to be consistent. The logic is really simple: The more gold the commercial banks are able to import, the stronger the ability of other participants in the gold market to provide gold liquidity. Conversely, if the banks lower the volume of gold imports, the ability of participants in the market to provide liquidity for gold would weaken. This year, the banks operating in the gold market have seen a test of their ability to react to a demand growth explosion.

Last April’s drop in the international gold price stimulated an explosive increase in demand for spot gold. Vibrant domestic demand quickly depleted inventory so that SGE’s Au(T+D) settlement dropped rapidly. Inventory dropped to 24.85 tonnes, the lowest level in May that implies power by banks and enterprises to deploy gold nearly withered. Gold imports stabilized domestic supply. Deployment by banks and enterprises recovered shortly, SGE’s Au(T+D) settlement also returned to normal.

After rise in demand, domestic gold demand will retrace to normal

It’s noteworthy that 2013’s explosive demand may be ‘abnormal’ consumption because it was triggered by the major correction in the international gold price since many years. As rationality returns, it is difficult to sustain this demand this year. Fact is consumption demand in the second half of 2013 already began weakening. China’s gold jewelry consumption growth y/y already weakened from July’s 44.7 % to 33.9 % at year-end. Demand at the SGE also weakened visibly. SGE’s monthly spot gold transactions fell from a year-high of 358 tonnes in July to 210 tonnes by October. In addition, SGE’s monthly withdrawals fell from 235 tonnes in July to 139 tonnes in October. We estimate that both figures will continue to slowdown and we should see the growth rate return to its’ normal 10 – 20% and gold demand at between 900 – 1200 tonnes.

The scale of gold lease market will continue to grow quickly

Over the past few years, the gold lease market has developed from nothing till the scale it is today. At last count in 2013, 23 commercial banks have gold leasing operations and the businesses participating in leasing have mushroomed to close to a thousand. In terms of scale, last years leasing market grew explosively with leased volume reaching 1,070 tonnes, a 268% increase y/y. Based on demand, 2013 gold leasing by enterprises and brand makers reached 781.1 tonnes, 73% of that year’s total volume, which shows that China’s jewelry market is the most important customer group.From the rate of growth, interbank gold loans grew rapidly. 2013 interbank leasing increased 439% y/y, which indicates that financialization of gold between China’s banks has strengthened. Because China’s economy and credit market both face risk of deleveraging this year, gold leasing can satisfy banks’ need to expand their business as well as meet financing needs from gold enterprises when there is a credit crunch in the background. Therefore deleveraging is conducive to the growth of gold leasing.

Gold lease market grew explosively in recent years

The gold leasing volume reached 398.06 tonnes in 2012. The breakdown of the lease volume:

  • Interbank leasing was 21.82 tonnes, 5.48% of total.
  • Refining companies leased 72.9 tonnes, 18.31% of total.
  • 110 tonnes was used to produce brand name gold products, ie, gold products with brand names, 27.78 % of total.
  • Leasing for jewelry and industrial use accounted for 192.76 tonnes, 48.42% of total.

In 2013, the gold leasing volume grew substantially to 1,070 tonnes, a 268 % increase. The breakdown of the lease volume: 

  • Interbank leasing was 117.7 tonnes, 11% of total.
  • Refining companies leased 171.2 tonnes, 16% of total.
  • 363.8 tonnes was used to produce brand name gold products, ie, gold products with brand names, 34% of total.
  • Leasing for jewelry and industrial use accounted for 417.3 tonnes, 39% of total.

Based on growth, gold lease demand in 2013 increased by more than 100%. Interbank lending grew by 439 %, refining companies leasing grew 135 % and brand name companies leasing increased 116 %. Increase in loans between commercial banks indicate that rise in demand pushed the growth in activity between commercial peers as well as increasing financialization of gold in China’s banks.Based on demand, 2013 gold leasing by enterprises and brand makers reached 781.1 tonnes, 73% of that year’s total volume, which shows that China’s jewelry market is the most important customer group.

The Chinese gold lease rate reached its top in the second half of 2013 at 10.2 %, the lowest rate was 2.1 %, the average was 4.19 %. Among various tenors of lease contracts, 1 year leasing accounted for 44.26 % of total contracts, 6 to 12 months was 35.24 %, 3 to 6 months was 10.38 % and less than 3 months 10.12 %.

Gold lease market has prospects to be a bright spot in banking that is deleveraging

China’s economy and credit market are facing risk of deleveraging this year. In the deleveraging process, ‘big’ business drivers that banks enjoyed in the past few years are consolidating whereas ‘small’ drivers that have unique proposition have the prospects to become a bright spot.

Firstly, first quarter economic statistics came in below market expectations. Important economic numbers like manufacturing value added, retail sales and investments look weak which leaves hints that first quarter economic growth is likely to come in below government target. Secondly, this year’s M2, new loans, financing numbers are evidently slowing down which indicate that China is undergoing deleveraging. In this macro environment, banks are trapped in a dilemma. On one hand, deleveraging forces banks to be wary of risks associated with ‘big’ businesses that have been expanding tremendously. On the other, banks are pressured to deliver profits. Under pressure from such concerns, banks are more willing to develop businesses that are not constrained, not high-risk and have unique propositions. Gold leasing can satisfy banks’ need to expand their business as well as meet financing needs of gold enterprises when there is a credit crunch in the background. Therefore deleveraging is conducive to the growth of gold leasing.

Along with the flow, Shenzhen has best competitive advantage to develop gold market

Map Shenzhen China

After nearly 2 decades, a multi-layered gold market was shaped in Shenzhen. It’s supported by manufacturing, driven by physical trade and supplemented by leasing. In the 1980s, Shenzhen took over Hong Kong’s jewelry manufacturing by offering lower costs. After 20 years of development, Shenzhen became an integrated production, value-added processing and wholesale chain. According to data from the People’s Bank of China, the value of gold and gem-set jewelry production and processing is 70% of the total (Chinese jewelry production and processing) and the export value for gold jewelry is 30% of the total (Chinese jewelry production and processing). Shenzhen, therefore, qualifies to be the largest processing base, the largest wholesale center and most competitive city. Based on such an achievement, Shenzhen conceived the earliest domestic jewelry retail market, which transformed a very visible gold market.

At the moment the Shenzhen gold market has SGE membership system, commercial banks and OTC gold trading. Products include jewelry, physical gold, paper gold as well as gold leasing. SGE’s historical data shows that Shenzhen physical gold delivery is 45% of national total that makes it the largest delivery location. Data from the Shenzhen Gold and Jewelry Association states that gold usage in Shenzhen city is 90% of national total. Shenzhen is therefore China’s largest spot gold market driven by trading in physical gold. Based on incomplete data, there were 921 finished gold lease deals in Shenzhen in 2013, with an accumulated gold lease volume of nearly 110 tonnes. This number was 26.36% of the total gold lease volume of gold-using enterprises in ChinaAdditionally, Shenzhen has a massive OTC market but lacks sufficient data for evaluation. Based on estimates, OTC market volume in Shenzhen is comparable to spot trading on the SGE. The OTC market comes in 2 parts:

  1. Non-standard physical gold including gold ore, recycled gold etc. This gold comes from domestic gold sources, passes through Shenzhen and Hong Kong and forms a production-supply-retail chain.
  2. Black market speculation including locking in gold prices, downside hedging and simple profiteering from gold spot and futures.

Shenzhen is already China’s most important gold market. It is the largest jewelry-processing base, the largest demand for spot gold, the largest wholesale center, the largest physical gold delivery location and the largest OTC market. Shenzhen has the most competitive advantage to develop gold business. Backed by strong gold demand and manufacturing, gold leasing in Shenzhen also has tremendous potential and room for development.

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com




(courtesy Bill Holter/Miles Franklin)


On deck …QE4(n)evermore


We are again entering a collapse phase similar, yet far worse than we had in 2007-2008.  I will show you a few graphs as illustration of weakness in the real economy and compare them to the financial bubbles we are living.  The point to writing this piece is simple, the Fed has been saying they will raise rates.  They truly need to in order to retain ANY credibility at all …just one minor problem, they cannot!  Not only can the Fed not raise rates, it is my opinion the economy and in particular the markets will force them to embark in another “QE folly” shortly.  I believe this will be the final shot of QE administered and may be seen by historians as “QE 4(n)evermore”.

  You have seen this first chart before but to refresh your memory:
(all charts courtesy of M. Stevens)

This illustrates three of our current bubbles, the following graph breaks down
the home ownership percentage in the U.S. versus the amount of debt supporting home ownership.  The takeaway here is fewer Americans own homes yet those who do are carrying more debt than ever before.  Though not exactly the same, this is quite similar to an American public where stock ownership is less broad than in the past, volume has declined drastically and margin debt is at an all time high

   As you can see, we again sit with record margin debt, you already know what happened in 2000 and 2008, do you really wonder about 2015?
  Now, let’s again look back at what I believe are very good leading economic indicators: inventories, new orders and personal consumption.   All three series have now turned negative.

  Add to the above, some very bad employment numbers and even the Fed’s own forecast growth for Q1 is now only .2%.  Keep in mind, the Fed is using ridiculous inflation numbers well under 2%, if they were using the real number between 5-7%, they would be operating with a growth rate assumption of negative 3-5% or worse!
  I normally try not to “chart you to death” but I have just one more.  The whole purpose of this exercise is to show you how the timing of each “QE” of the past fit in to the economic and financial picture.  QE was used to flood the system with liquidity each time the markets began to weaken or revolt.  QE was not so much timed with the real economy, it has EACH time been more about the markets themselves.  The following chart illustrates the action in the markets preceding, during and after each QE dosage.

    You will notice QE was introduced each time the market was weak, also notice that once QE was ended, the markets would again weaken and be followed by another round of QE.  I believe we are again close to another inflection point.  Stocks have not made new highs for several months, should they begin to weaken from here (they have every reason to), another dose of QE will be announced.  The talk has been all about Fed tightening or raising rates, this is an absolute MUST for the Fed to regain any credibility.  They cannot ever do this, they will be forced to do the opposite.
  Should the stock markets pull back and even approach a 10% correction, the Fed will be forced into QE4.  Please understand why.  Each episode of QE created more debt and more derivatives making the markets that much more levered with thinner margins of error.  The “problems” that QE were originally introduced for in the first place have only been made more severe with each new episode.  QE was never really about the economy at all, it was always about the banks and financial systems not imploding in a daisy chain collapse of the debt and derivatives.  Once the markets sniff out a 10% pullback, QE will again be mandatory to try to reflate the system and push the ultimate ending into the future …kicking the can again so to speak.
  I believe the next QE will be the last one in our lifetimes for several reasons.  The Fed will finally lose ALL credibility.  Add to this, globally central banks and treasuries have destroyed their own balance sheets in their efforts to defy deflation.  They can no longer be the solution as they are part, a very BIG PART of the problem.  QE has distorted so many various markets so far from levels Mother Nature would endorse, something will snap in an out of control fashion …and QE has been all about “control” and not allowing markets to truly function and “set” prices.
  What I am saying is this, the grand experiment of QE is very shortly going to be  “forced” into use again.  I believe this will be a spectacular failure and one which history will remember for 1,000 years!  My term for this last round is “QE4(n)evermore”.  I say this because the monetary system will be broken, trust will be broken.  The world began an experiment of global fiat money back in 1971, this will finally be proven to be the folly it has always been …and everyone on the planet (including Americans) will fully understand it.
  Any new currency which is introduced will by necessity have to have some sort of real backing to have “confidence”, without confidence any new currency will fail.  History has shown us time and time again that the only currencies which retain trust or confidence have some sort of tie to gold and silver …or gold and silver themselves.  No currency backed by gold or silver has ever failed …unless man himself fiddled and cheated with the weights, measures or the actual holdings of the metals themselves.  Quantitative easing is the ultimate in  “fiddling and cheating” …and this with currencies of no real value to begin with!  In the most simple of terms, “It’s all been a scam”!  Regards,  Bill Holter


Early Wednesday morning trading from Europe/Asia


1. Stocks all higher on major Chinese bourses  /Japan higher /yen rises to 119.67

1b Chinese yuan vs USA dollar/yuan  weakens to 6.2032

2 Nikkei up by 147.27  or 0.76%

3. Europe stocks mostly down/USA dollar index down to 97.35/Euro rises to 1.0870

3b Japan 10 year bond yield .37% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.67/

3c Nikkei still  above 19,000

3d USA/Yen rate now just below the 120 barrier this morning

3e WTI  52.83  Brent 58.31

3f Gold down/Yen up

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion.  Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt.  Fifty percent of Japanese budget financed with debt.

3h  Oil down  for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU

Except Greece which sees its 2 year rate slightly falls to 21.45%/Greek stocks down by .60% today/ still expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  11.68% (down by 20 basis point in yield)

3k Gold at 1211.00 dollars/silver $16.85

3l USA vs Russian rouble;  (Russian rouble up 1 1/4  rouble/dollar in value) 53.60 , despite the lower brent oil price

3m oil into the 52 dollar handle for WTI and 58 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees hugh risk of outflows and a currency depreciation.  This scan spell financial disaster for the rest of the world/China may be forced to do QE!!

30  SNB (Swiss National Bank) still intervening again in the markets driving down the SF

3p Britain’s serious fraud squad investigating the Bank of England/ the British pound is suffering

3r the 7 year German bund still is  in negative territory/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s Eurogroup reject Greece’s bid for more euros of bailout funds as proposal is to vague. The ECB increases ELA by .7 billion euros up to 72.0 billion euros.  This money is used to replace fleeing depositors.

Greece agrees to repay the IMF on April 9.2015.  There will be nothing left after that.

3t huge merger in the energy sector:  Shell taking over British Petroleum’s BG group.

4.  USA 10 year treasury bond at 1.87% early this morning. Thirty year rate well below 3% at 2.51%/yield curve flatten/foreshadowing recession.


5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.



(courtesy zero hedge/Jim Reid Deutsche bank)


Futures Flat On Minutes Day; Chinese Bubble Spills Into Hong Kong; Biggest Energy M&A Deal In Over A Decade


While US equity futures are largely unchanged, if only ahead of the now daily pre-open market-wide ramp, things in Asia have continued on their bubbly flurry, where China’s Shanghai Composite briefly rose above 4000 for the first time since 2008, but it was the surge in the Hong Kong stock market that showed the Chinese bubble is finally spilling over, in the form of a blistering rally on the Hang Seng which rose nearly 4% on immense volume which at 250 billion Hong Kong dollars ($32 billion) was three times the average daily volume over the past year and nearly 20% more than the previous record volume day in October 2007, at the height of the pre-financial crisis bubble.

According to the WSJ, there were several causes for the surge in cash leaving the mainland for Hong Kong: “China’s securities regulator announced at the end of March that mutual funds could access the Stock Connect, which was previously limited to wealthy individual investors. More broadly, mainland investors may suddenly see Hong Kong’s stocks as bargains now that their hometown shares have risen so high. Before Wednesday, shares of the exact same company that are dual listed in Hong Kong and Shanghai were trading at an average premium of nearly 35% in Shanghai. Winners Wednesday included companies that trade at a big discount in Hong Kong, such as the major Chinese banks.”

The other main event that comes hours after Saudi Arabia announced it would play hardball and instead of leaving its own production flat, it is boosting production quite sharply to claw back market share, leading to an announcement overnight that Shell would agree UK energy producer BP Group PLC in a whopping $70 billion deal, the 14th largest ever corporate takeover.  The deal is the the latest sign of how tumbling energy prices are shaking up the global oil-and-gas industry, and shows that even further production surges are likely on the horizon as overheads are cut to allow for lower breakeven prices, meaning yesterday’s massive 12.2 million barrel API inventory build will only get worse from here, just as US storage capacity is rapidly approaching its maximum.

As the WSJ describes it, BG shareholders will get 383 pence in cash; and 0.4454 Shell B shares for each share held, giving them 19% of the enlarged group, which will be one of the world’s leading liquefied natural gas firms. The price is a 50% premium to BG’s closing share price of 910.4 pence on Tuesday. The deal brings together two companies that have been buffeted by a sharp drop in oil and gas prices since last summer and would enable the two European energy giants to eliminate overlapping costs to help compensate for the toll that lower oil prices have taken on their top lines.

As a result shares in Shell fell 5% in early trading in London, while BG stock rose 37%. The deal provided a lift to European stocks, with the oil-and-gas subindex of the Stoxx Europe 600 index surging 5.5% in early trade Wednesday.

With the exception of the FTSE 100, European equities currently trade in a relatively mixed manner with no sustained direction amid light newsflow and a scarce economic calendar. The FTSE 100 is the notable outperformer thus far given the blockbuster GBP 47bln takeover deal of BG Group (+37%) by Shell, with the deal being the 14th largest in corporate history and would lead to a combined index weighting of around 9.5%. With this in mind, energy names outperform across Europe with the likes of BP (+3.2%) and Total (+1.2%) also supported by the potential for further M&A activity in the sector. Elsewhere, there is some minor underperformance in the DAX, with auto-names lower after a negative broker move for BMW at Kepler Cheuvreux. In fixed income markets, European paper trades higher this morning with net supply for Europe positive this week, which subsequently saw the German Schatz print a record low yield ahead of the latest 2yr offering from the Buba, which was relatively well received and saw a minor uptick in the Schatz future. In contrast, the lacklustre take-up (b/c 1.19) at the DMOs 5yr auction led to a minor downtick in UK Gilts.

In FX markets, the USD-index has ebbed lower ahead of the FOMC minutes release from the previous meeting which was perceived as dovish at the time after as the committee forecasted slower and more gradual hikes. As such, some of the USD’s major counterparts have been provided some minor support throughout the session with GBP also being lifted by the prospect of Shell changing currency into GBP in order to complete their purchase of BG Group, according to some analysts. Furthermore for GBP, there is a GBP 900mln option expiry in GBP/USD at 1.4900 due to roll off at the 10am NY cut. JPY also remains stronger throughout the European session after the BoJ stood pat on their existing monetary policy despite some outside bets for action by the central bank.

In the energy complex, the sector has failed to benefit from the weaker USD with focus instead on yesterday’s API release saw a 4th straight build in oil stockpiles at 12.2mln vs. Prev. 5.2mln, the biggest build since Feb 18th. In terms of other energy related commentary, Saudi Arabia’s (OPEC’s largest oil producer) oil minister Naimi said the country is ready to bring stability to the oil market. However, the latest production data shows that Saudi output for March is at a record high of 10.3mln bpd. Precious metals markets, spot gold and silver trade relatively unchanged while Industrial metals slipped overnight paring back yesterday’s gains with nickel falling over 3% with growing uncertainty over China’s struggling property sector. Furthermore, iron ore futures remained weak amid growing stockpiles and suppressed demand continuing to weigh down on the raw material

In summary: European shares rise, with oil & gas and basic resources sectors outperforming and autos, tech underperforming. BG accounts for ~75% of the index’s current advance. The U.K. and Swiss markets are the best-performing larger bourses, Dutch the worst. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline. Commodities drop, with WTI crude, natural gas underperforming and nickel outperforming. U.S. mortgage applications, due later.

Market Wrap

  • S&P 500 futures unchanged
  • Stoxx 600 up 0.3% to 405.5
  • US 10Yr yield little changed at 1.88%
  • German 10Yr yield down 2bps to 0.17%
  • MSCI Asia Pacific up 1.4% to 151.1
  • Gold spot little changed at $1209.4/oz
  • Eurostoxx 50 little changed, FTSE 100 +0.4%, CAC 40 +0.2%, DAX -0.2%, IBEX little changed, FTSEMIB little changed, SMI +0.2%
  • MSCI Asia Pacific up 1.4% to 151.1; Nikkei 225 up 0.8%, Hang Seng up 3.8%, Kospi up 0.6%, Shanghai Composite up 0.8%, ASX up 0.6%, Sensex up 0.6%
  • Shell Will Buy BG Group for $70 Billion in Cash and Shares
  • Euro up 0.4% to $1.0857
  • Dollar Index down 0.3% to 97.53
  • Italian 10Yr yield down 0bps to 1.24%
  • Spanish 10Yr yield up 0bps to 1.18%
  • French 10Yr yield down 2bps to 0.45%
    S&P GSCI Index down 0.7% to 415
  • Brent Futures down 1.2% to $58.4/bbl, WTI Futures down 2.2% to $52.8/bbl
  • LME 3m Copper down 0.1% to $6056.5/MT
  • LME 3m Nickel up 1.6% to $12745/MT
  • Wheat futures up 0.1% to 526.8 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • The FTSE 100 outperforms its continental peers following the 14th largest ever corporate takeover after Shell agreed to buy BG for USD 70bln
  • Elsewhere, newsflow remains quiet with the USD-index trading lower ahead of today’s FOMC minutes release
  • Looking ahead, today sees the release of Fed minutes, DoE crude oil inventories and Greece’s PM Tsipras is due to meet with Russian President Putin, with a joint statement expected at 1730BST
  • Treasuries gain before Fed releases minutes of March meeting, week’s auctions continue with $21b 10Y notes. WI yield 1.89%, lowest since May 2013; drew 2.139% in March.
  • German factory orders fell 0.9% in Feb. after a revised decline of 2.6% the previous month; median estimate in Bloomberg survey was for gain of 1.5%
  • Chinese developers target lower growth for new-home sales this year, as prospects for the real estate market remain in doubt even after the government eased monetary policy and lifted curbs on housing purchases
  • Greece hasn’t asked Russia for financial aid; all issues of debt, financing have to be resolved within EU framework, according to a Greek government official
  • The BOJ kept policy unchanged, with Kuroda saying the economy faces less risk now than it did last year when the central bank boosted monetary stimulus to an unprecedented level
  • Royal Dutch Shell agreed to buy BG Group for about GBP47b ($70b) in cash and shares, the oil and gas industry’s biggest deal in at least a decade; could set series of mergers in motion as energy cos look to cut costs The acquisition is the most significant response yet to the slump in oil prices and
  • Saudi Arabia increased oil production in March to the highest in at least 12 years and expects crude prices to rise in the “near future,” according to oil minister Ali al-Naimi
  • Oil prices could tumble $15/bbl next year if sanctions are lifted following a final nuclear deal with Iran, according to the Energy Information Administration
  • China’s anti-graft agency is investigating if former central bank chief Dai Xianglong used his government posts to enrich his family, said people familiar with the matter
  • Rahm Emanuel outdistanced a lesser-known challenger to win a second term and the daunting prize of steering Chicago away from financial collapse, including $20b of unfunded pension debt
  • Sovereign bond yields mostly lower. Asian stocks gain, European equities mostly lower. U.S. equity-index futures higher. Crude oil lower, gold little changed, copper falls


DB’s Jim Reid concludes the overnight event summary


Its FOMC minutes day today and also the unofficial start of Q1 earnings as Alcoa reports after the closing bell. The minutes will be interesting as this was from the meeting a few weeks ago where the Dollar strength perhaps came up more than people anticipated. So it’ll be interesting if we hear more details. Any hawkish comments on rates will likely be tempered by Friday’s weak payroll numbers so the minutes are a little behind the curve but interesting nevertheless. As longstanding proponents of the view that US rate hikes in 2015 will be very difficult to achieve, recent data has gone our way. However we should be aware that Q1 GDP has been consistently poor in recent years and perhaps there is some seasonal distortion that has not been fully factored in the stats. DB’s Joe Lavorgna reminded us yesterday that over the last five years, Q1 real GDP growth has averaged just 0.6% (a still weak 1.3% if we remove last year’s large -2.1% Q1 drop). The averages for the rest of the year have been 3%, 3.1% and 2.6% over the remaining quarters. So food for thought.

On the subject of economic growth, the IMF yesterday warned in their Economic Outlook that they expect a prolonged period of low growth globally, with the slowdown for emerging markets expected to lead. Perhaps more interesting, the IMF suggested that the slowdown in potential output growth goes beyond the financial crisis in 2008, citing an aging population and slowdown in productivity growth in EM’s in particular while also stating that ‘a large share of the output loss since the crisis can now be seen as permanent and policies are thus unlikely to return investment fully to its pre-crisis trend’.

Before we recap yesterday’s price action, the main focus in Asia this morning is on Japan where the BoJ has kept its QE programme on hold at ¥80tn annually as expected, having voted 8-1 in favour of holding (the 1 not in favour voting for a cut to ¥45tn). The associated press statement is due out shortly after we go to print while a Bloomberg survey is showing that expectations are still for further stimulus with 22 out 34 economists expecting stimulus expansion by the end of October. The Nikkei (+0.87%) is higher following the announcement while the Yen is 0.3% firmer versus the Dollar. Elsewhere, markets are mixed. The Hang Seng (+2.38%) is playing catch up having been closed yesterday while the Shanghai Comp (+0.12%) and CSI 300 (+0.21%) have reversed earlier losses.

Moving onto markets yesterday, having traded some +0.4% firmer for much of the day, US equity markets retreated in the last hour of trading to close in the red. Indeed, the S&P 500 (-0.21%) and Dow (-0.03%) closed down to halt two previous days of gains as a late sell off in utility stocks in particular helped drag bourses down. There was no such reversal in the Dollar however as the DXY closed +1.09%, wiping out the weakness seen post payrolls on Friday. Treasuries were a touch more subdued meanwhile, the benchmark 10y yield 1bp tighter at 1.885%. Energy stocks (+0.31%) once again outperformed as WTI (+3.53%) and Brent (+1.69%) extended their gains this week. The latest leg up was supported by the news that the EIA has cut its forecast for US oil production in 2015 to 9.23m barrels a day, a decrease of 120k barrels. On the subject of oil, headlines that Shell is in talks to acquire BG Group also caught our eye late last night. The FT is reporting that the deal could be announced as soon as Wednesday and could be worth over $60bn, rivaling 3G and Berkshire Hathaway’s agreement to buy Kraft foods two weeks ago in a deal which would give the merged company a market value twice that of BP. In fact M&A is proving to be much more of a theme this year with risk appetite clearly on the up. The proposed deal adds to the likes of the Pfizer and Hospira deal and also Hutchinson Whampoa and O2 deal seen so far this year. During the first quarter along, merger volumes in fact rose 24% to $874.1bn.

Data in the US yesterday was supportive on the whole. JOLTS job openings, which are a little outdated given the latest payrolls print, came in at 5.13m in February, up from 4.97m and ahead of expectation of 5m. In the details, the quits rate fell one-tenth of a percent to 1.9%, at the top end of the 12-month 1.7% – 2.0% range. The hiring rate meanwhile was unchanged at 3.5%. Elsewhere, the IBD/TIPP economic optimism print for April came in above market (51.3 vs. 49.0 expected). Consumer credit was also strong with the $15.52bn reading ahead of expectations of $12.5bn. There was more dovish Fedspeak yesterday too, as Minneapolis Fed President Kocherlakota reiterated that the Fed should wait until 2016 to hike while suggesting that a move in the second half of that year might be more appropriate. The non-voter also suggested that ‘it would then be appropriate under my outlook for the FOMC to raise the target range for the fed funds rate thereafter to about 2% by the end of 2017’, making the point that it would be better for the Fed to be ‘late and slow’.

Closer to home yesterday and after returning from holiday’s, markets in Europe appeared to be playing catch up as the Stoxx 600 (+1.64%), DAX (+1.30%) and CAC (+1.52%) all rose. Credit markets also had a better day as Xover finished 6bps tighter. Sovereign bond markets remained well supported. 10y Bunds closed 0.8bps tighter while peripheral yields were 4-7bps tighter. Yesterdays PMI indicators helped support the better tone. The final March reading for the Euro-area composite rose +0.7pts to 54.0, one-tenth of a point down on the flash reading. The final services PMI was also up +0.5pts versus February to 54.2. Regionally, the composite PMI rose in Germany (+1.6pts), Italy (+1.4pts) and Spain (+0.9pts) to 55.4, 52.4 and 56.9 respectively while there were falls in Ireland (-0.9pts) to 59.8 and France (-0.7pts) to 51.5. Our colleagues in Europe noted that both the PMI’s and national surveys point to an increase of +0.4% qoq in Euro-area Q1 GDP. That said, they believe that the Euro-area hard data is consistent with their +0.5% qoq GDP projection. Finally, the UK composite PMI reading of 58.8 was over 2pts higher than the February reading and the highest since August last year.

Elsewhere in Europe, the ECB yesterday announced that it reached its purchase program target of €60bn in March – the first month of operation. Looking at the breakdown, total purchases over the month amounted to €47.4bn of which supranationals accounted for €5.7bn (12% of total). The remainder was made up of purchases of covered bonds and ABS. Digging deeper into the details, our colleagues in Europe noted that of the 19 countries in the Eurozone, the ECB did not purchase any public sector securities in Greece (not eligible collateral), Cyprus (not eligible as review in progress) or Estonia (likely lack of eligible securities). They note that the average maturity of purchases was in fact skewed towards the longer end in the periphery and the front end in core countries.

Based on this, they believe that the details of the purchases suggest a marginally more aggressive stance than they would have anticipated. Firstly, the share of purchases in countries which are either ineligible for the program or do not have sufficient securities has been redistributed towards other countries rather than supranationals. This would suggest that if the programme hits limits for some of the larger core countries (such as Germany), it would imply an increase in proportion of purchases of peripheral securities. Although not relevant for now, it is nevertheless suggestive of a potentially more powerful credit easing if QE needs to be continued for longer than currently anticipated. Secondly, the greater weighted average maturity of purchases relative to the average life of eligible securities in the periphery helps to offset their concern about the impact of the supply response in the periphery.

Staying on the topic, the ECB’s Mersch was yesterday quoted in German press (Boersen-Zeitung) as saying that the ECB is free to adjust the pace of its QE programme if it advances quicker than expected towards lifting inflation. Specifically, Mersch said that ‘if we were to see that this path brings us to our goal faster, we are of course not bound by our decision in a way that we couldn’t adjust it’, noting also that this holds true not reaching the goal too.

Turning over to today’s calendar, it’s a fairly quiet morning data wise with just German factory orders and French trade data and Euro-area retail sales due. With no data due for release in the US this afternoon, attention will of course be on the aforementioned FOMC minutes and the start of Q1 earnings season.




Strange:  the lower Euro is not helping Germany as German factory orders tumble.  Also interesting is the fact that the basket case of Spain sees its bond yields from zero months up to 6 months go into negative territory.


(courtesy zero hedge)


German Factory Orders Tumble By Most In 9 Months, Spanish Bond Yields Turn Negative


Bad news is even better news in Europe. “Core” Germany saw its powerhouse economy suffer the biggest drop in Factory Orders since June (-1.3% YoY) missing expectations for the 2nd month in a row – the first consecutive drop since may 2013(despite German business confidence rising for the 5th month in a row) as apparently devaluing the EU’s currency is not encouraging business. The result… DAX futures surging, bond yields tumbling and Spanish bond yields to 6 months are now negative…

Not pretty…

But that’s great news for stocks…

And now Spanish bond yields are negative to 6 months… (3month has been negative for a week)


Charts: Bloomberg




My goodness:  the Swiss Government issues the first ever bond stretched out for 10 years at a negative yield.  Kind of shows you how ridiculous the economic scene in Europe is performing before our eyes:

(courtesy zero hedge)


Swiss Government Becomes First Ever To Issue 10Y Debt At A Negative Yield

It had to happen sooner or later… in the new normal of yield-reaching, collateral-shortage-ing, money-printing economalypse, the Swiss government has become the first ever to issue a 10Y sovereign bond at a negative yield. As WSJ notes, while several European countries have sold government debt at negative yields up to five years of maturity – which means investors effectively pay for the privilege of buying it – no other country has previously stretched this out as long as 10 years. Mission Accomplished Central Bankers?

As The Wall Street Journal reports,

The Alpine country sold a total of 377.9 million Swiss francs (about $391 million) of bonds maturing in 2025 and 2049. On the 10-year slice, the yield was -0.055%, compared with 0.011% on its most recent similar bond two months ago.

In the post-issuance secondary market, Swiss bonds maturing up to 11 years in the future already trade with yields under 0%. But such low yields at the initial point of sale “illustrate well the world we live in,” said Jan von Gerich, chief strategist at Nordea, referring to collapsing yields on debt amid widespread stimulus from central banks around the world.

In January, Switzerland’s central bank scrapped its upper limit on the value of the franc and cut deposit rates to -0.75%. Swiss bonds are likely to remain attractive to investors as long as yields stand above that level.

“The combination of deflationary fears and aggressive central-bank action has caused investors to accept the reality of negative-yield bonds,” said Jeffrey Sica, chief investment officer of U.S.-based Circle Squared Alternative Investments.

*  *  *



The war of words continue:


(courtesy zero hedge)


Germany Slams “Stupid” Greek Demands For “Incomprehensible” €278 Billion In Reparations

Yesterday we reported that in what may have been an attempt to stun the world, if not so much Germany, with the law of large numbers, Greece calculated that Germany owes it a whopping €278 billion in World War II reparations, or about a third of what Germany reported was its GDP in the fourth quarter. Unfortunately for Greece, Germany does not appear to be rushing to wire the funds. As Reuters reported earlier today, Germany’s economy minister had one word for the Greek demand:“stupid.”

From Reuters:

Sigmar Gabriel, who is economy minister and German vice chancellor, called the demand “stupid”, saying Greece ultimately had an interest in squeezing a bit of leeway out of its euro zone partners to help Athens overcome its debt crisis.

“And this leeway has absolutely nothing to do with World War Two or reparation payments,” said Gabriel, who leads the Social Democrats (SPD), junior partner in the ruling coalition with Chancellor Angela Merkel’s conservatives.

Berlin is keen to draw a line under the reparations issue and officials have previously argued that Germany has honored its obligations, including a 115-million deutsche mark payment made to Greece in 1960. A spokeswoman for the finance ministry said on Tuesday that the government’s position was unchanged.

Other Germans were likewise unimpressed:

Eckhardt Rehberg, a budget expert for the conservatives, accused Athens of deliberately mixing the debt crisis and reform requirements imposed by Greece’s international creditors with the issue of reparations and compensation.

“For me the figure of 278.7 billion euros of supposed war debts is neither comprehensible nor sound,” he told Reuters. “The issue of reparations has, for us, been dealt with both from a political and a legal perspective.”

It may not be sound but from the standpoint of the Greeks it is completely comprehensible: with their back against the wall, and with sovereign and financial bankruptcy breathing down the Greeks’ neck, the country may as well go for the Hail Mary pass: who knows it just may find enough supportive voices in Germany to reach the endzone.

And, to our surprise, not one but two political parties in Germany are willing to help Greece out with this particular desperation “pass” because members of both the Greens and the far-left Linke party have said that Berlin should cough up some of the €10.3 billion in wartime loan repayment.

Both Manuel Sarrazin, a European policy expert for the Greens, and Annette Groth, a member of the leftist Linke party and chairman of a German-Greek parliamentary group, told Reuters that Berlin should repay a so-called occupation loan that Nazi Germany forced the Bank of Greece to make in 1942.

Berlin and Athens should “jointly and amicably” take any other claims to the International Court of Justice, Sarrazin said.

Groth went further, saying: “If you look at Greece’s debt and the European Central Bank’s bond purchases every month, it puts the figure of 278.7 billion euros into perspective.”

She said the German government should, at the very least, talk to Athens about how it came up with that figure.

“The German government’s categorical ‘Nein‘ certainly cannot be allowed to stand. That’s disgraceful 70 years after the end of the war,” Groth said.

It can’t but it will, because with Frau Merkel it is all about keeping stern appearances. However, just in case Greece needed encouragement to continue the pursuit of this ultimately futile line of attack, the two German opposition parties have certainly provided it. Then again, the final outcome, one that depends entirely on Angela Merkel’s decision, is clear. And sadly it now looks like Greece will spend even more time pursuing this lost cause with a final outcome that – at least for Greece – does not look good, than focusing what little energy and focus it has left on what it shoudl have been doing over the past 5 years – reforming.

Finally, let’s not forget that this is Europe, where a little under a century ago, it was again the issue of German reparations thrust upon a far weaker Germany, that led to not only the rise of German hyperinflation and the rise of Adolf Hilter, but maybe even more importantly, led to the creation of that all important entity, the one which is the true committee that runs the world, the Bank of International Settlements, in whose Tower of Basel, every two months, unelected academics sit down and decided the fate of the world.

One can’t possibly imagine what outcomes the question of German war reparations will lead to on this particular occasion.




A terrific article from Wolf Richter on what would no doubt sink the banks inside Greece, Portugal, Spain and Italy.  Wolf comments that the world is unaware that sovereigns have guaranteed much of tier 1 assets even though they are dubious in character.

Find out what these banks did!!

(courtesy Wolf Richter/WolfStreet)


This Could Sink Banks in Greece, Portugal, Spain, and Italy



Not that much has changed in Spain since the climax of the debt crisis during which its collapsing banks were bailed out. Some of them were recombined into a bank with a new name – Bankia – and sold to the public via an IPO that immediately sank into red ink and scandal. Spanish government debt sported yields that reflected the risks of owning it. At this time in 2012, six-month T-bills yielded over 3.2%.

But that part has changed. In this absurd era when risks no longer exist in a quantifiable manner, the Spanish government today joined a growing club: it issued its first debt – 6-month T-bills – with a negative yield. Spain!

But the European Commission is now contemplating pulling the rug out from under the banking miracles in Spain, Portugal, Greece, and Italy.

Turns out, these four countries have been smart in how they propped up their rickety banks. They and their banks have declared something a “high quality” asset even though it has a dubious value, no market price, and can’t be sold. And they have included this totally illiquid asset of dubious value in the “core capital” of the banks. This asset significantly increases the “capital buffers” and makes the bank more resistant to shock and collapse, on paper. That’s how they solved their banking crisis.

Under the rules of Basel III, these kinds of assets need to be phased out from core capital. And the banking union’s top regulator, the ECB, is trying to crack down on national exceptions to European capital rules. To get around these issues, the governments in those countries have made some legislative changes to where each government effectively guarantees those dubious assets in their banks’ core capital.

In theory, if a bank with this sort of core capital gets in trouble, the government would have to pay up for those dubious assets, which would be a taxpayer bailout through the back door. But even the guarantee itself is a bailout, because it creates core capital out of a dubious asset. And because banks in other countries supposedly don’t have access to the same state guarantees, it might be illegal “state aid” in violation of European fair competition rules.

And now, according to information obtained by the Financial Times, the European Commission is gathering up evidence to determine if these guarantees by Spain, Greece, Portugal, and Italy are illegal state aid. A full probe of this issue could rattle the banks. And if the Commission declared these guarantees illegal, the banks would lose a big part of their core capital.

A cascading wave of toppling banks, from small ones in Greece to the megabanks in Italy, would be just the sort of thing Europe’s new banking union needs.

These assets of dubious value are “deferred tax assets.” Banks (as other companies) can carry forward their bountiful losses of prior years to offset their tax liabilities, if any, in the future. Deferred tax assets are the theoretical value of potential future tax savings, should the banks ever have enough taxable profits, and therefore enough tax liabilities, to use them.

In total, there are €40 billion in deferred tax assets dressed up as core capital in the banks of these four countries. That’s how precarious these banks are. At one unnamed bank in Greece, these deferred tax assets account for 30% to 40% of its core capital. Without Greece’s special state guarantee, these deferred tax assets could not be part of the core capital, and without this additional “capital,” the bank would be toast.

But on paper, these crummy sorts of assets do a nice job of propping up these banks. And that’s why these four countries have bent over backwards to make it happen. Why bail out rotten banks with real money when fake assets can accomplish the same?

But it’s these state guarantees that are now in the cross hairs of the European Commission’s competition authorities as illegal state aid to banks that are supposed to compete fairly on level ground with banks in other countries.

Interestingly, it is not the EU’s top bank regulator, the ECB, that is trying to put a stop to it, or the European Banking Authority – the previous top but toothless bank regulator – that should have stopped this practice a long time ago. They might shake their head in despair, but they’re not really going to crack down on their own banks and make them clean up their own mess with recapitalizations that might wipe out stockholders and some bondholders under the new banking rules.

But no. It’s the competition folks at the Commission that have gotten wind of this insidious deal between government and bank for which, in the end, taxpayers are always held accountable. It’s these competition folks that are raising a stink. And they have teeth. Let’s see how long it will be before the ECB puts the kibosh on it.

As you would expect, when the Financial Times reached out to the governments of Greece, Spain, Portugal, and Italy, they wisely declined to comment.

Greece needs to make some smallish payments in April. But it might not be able to. That’s how broke it is. So it’s using its own methods to negotiate with its creditors. But it just backfired. Read… Greece Brandishes Drachma, Threatens Euro Exit





The meeting between Putin and Tsipras: the courtship begins!


(courtesy zero hedge)

Putin And Tsipras Are Meeting: Here Are The Main Highlights

While Germany has pre-emptively, and somewhat defensively, come out proclaiming Russian aid to Greece as ‘no big deal’ – a “routine event”

As Bloomberg reports, the German government suggests Russia-Greece loan would be a “routine Event.”


One country borrowing from another “is nothing special at all,” German Finance Ministry spokeswoman Friederike von Tiesenhausen says when asked whether Greece accepting loans from Russia would be in line with European policy. “That’s the international financial system.”


Declines to comment specifically on possibility of Russian loans to Greece, says that’s “hypothetical” and “as far as I know not on the agenda” of Tsipras visit to Moscow

We suspect the signal that it would send would not be entirely great for the EU (and Obama’s) ‘Russia is evil’ meme.

Nonetheless, as Greek Prime Minister Alexis Tsipras meets Russian President Vladimir Putin today, topics for discussion vary from lifting sanctions (bilaterally) or bankrolling a bailout to gas discount from Gazprom.Here’s a summary… (via RT),

The new 40-year-old leader of one of the world’s most indebted countries with meet with Putin on Wednesday, just one day before the country is due to repay €463.1 million to the International Monetary Fund. The Greek Prime Minister arrives in Moscow on Tuesday.

Is Russia going to bail out Greece?

Rumors have been abuzz that Athens and Moscow are plotting a secret bailout ever since the idea was first floated by Russian Finance Minister Anton Siluanov days after the Syriza party won the elections in January. Russian daily Kommersant reported that Moscow is ready to offer indirect financial help, citing an unnamed government source.

“We are ready to consider the issue of allowing Greece a gas discount: under the contract, the gas price is linked to the oil price that has gone significantly lower in recent months,”Kommersant cited a Russian government source as saying.


“We are also ready to discuss the possibility of allowing Greece new loans. But in turn we are interested here in reciprocal moves, in particular in terms of Russia getting certain assets from Greece,” the source added, without specifying the sort of assets he was talking about.

Greek Finance Minister Yanis Varoufakis has said that his country “will never ask for financial assistance from Moscow,” in an interview with Zeit online in early February.

Wait, does Russia have the money for this?

Yes and No.


Government officials have hinted that Russia’s help, if provided, would be indirect.


Most economists around the world are more positive about the Russian economy, but everybody agrees it will contract this year between 4 and 3 percent. Most recently S&P improved its economic outlook for Russia, saying it’ll return to growth in 2016 and add 1.9 percent.


In the first quarter of 2015, the economy expanded 0.4 percent, and the Russian ruble, which lost nearly 50 percent in 2014, is now the best performing currency of the year.


Though Russia‘s economy isn’t as strong as it was two years ago, and growth is near zero, it still has $356 billion saved up in currency reserves as of April 1 and over $150 billion split between the country’s oil reserve funds, the National Reserve Fund and National Welfare Fund.If the Russian economy goes nose first into a recession, these funds are expected to keep the financial situation stable for 2-3 years.


Russia provides financial aid and loans to most former Soviet countries. In March, the Kremlin prolonged a $2 billion loan to Belarus, and in February agreed on a $270 million loan to Armenia. In 2013, just before Ukraine began its pivot towards Europe, Russia gave Kiev a $3 billion Eurobond loan.


The question isn’t if Moscow has the money but if it wants to get a ‘political dividend’ by getting another ally and sink money into Greece, which has already sucked up €240 billion in EU debt and hasn’t posted GDP growth in six years.

What about a gas discount for Greece?

Gas has become an important issue in economic relations between Russia and Greece, after President Putin announced the new Turkish Stream pipeline that will travel to the Turkish-Greek border. Both Russia and Greece are interested in the project but Athens’ stance largely depends on the gas price Russia will offer.


On March 30, Greek Energy Minister Panagiotis Lafazanis met with Russian counterpart Aleksandr Novak as well as Gazprom head Aleksey Miller in Moscow to discuss a gas discount for Greece as well as the ‘take-or-pay’ clause, which requires Athens to buy gas it doesn’t use.


Under the current contract, Greece’s state gas company DEPA buys gas at $300 per 1,000 cubic meters. In 2014, DEPA was able to secure a 15 percent discount from Gazprom. Greece may be able to secure a further discount or renegotiate the ‘take-or-pay’ part of the contract if Athens offers Russian companies oil assets or rights to explore oil and gas deposits in the Ionian Sea.


In 2013, Gazprom made a €900 million bid to buy a controlling stake in DEPA, but backed out of negotiations at the last minute, citing concerns over the company’s financial stability. Gazprom currently controls almost 70 percent of the Greek gas market.


During the talks, Lafazanis also discussed the prospect of Greece joining the Turkish Stream pipeline project, which will have the potential to deliver 47 billion cubic meters of gas to Europe via Turkey. Gazprom said the onshore route will pass through the Black Sea and reach the Turkish port of Kiyikoy, and then travel to the Turkish-Greek border near the town of Ipsila.

Can Moscow lift sanctions on Greece?

Russia’s agriculture counter-sanctions against the EU do not expire until August 2015, a year after they were enacted as a counter measure to protect Russia’s economy.


Greece has been hit especially hard by Moscow’s food ban, as more than 40 percent of Greek exports to Russia are agricultural products. In 2013, more than €178 million in fruits and conserves were exported to Russia, according to Greece’ fruit exports association, Incofruit-Hellas.


Russian Minister of Agriculture Nikolai Fyodorov has said food sanctions against Greece would be lifted in the event that Athens leaves the EU. While Greece is a part of the EU, it cannot sign any trade agreements with Russia.


As an EU member, Greece has the power to veto further sanctions against Russia. Alexis Tsipras has openly said that sanctions against Russia are a “road to nowhere”. Other Moscow-friendly states include countries with very close economic ties to Russia- such as Hungary, Slovakia, Italy, and the Czech Republic.


Russia is Greece’s biggest trading partner, with net trade in 2013 nearly $12.5 billion (€9.3 billion), more than Greece and Germany in the same year. Russia is the biggest source of imports for Greece, accounting for 11 percent in 2013.


Once Russia’s food market is again open, Greece, along with Turkey and Cyprus, will be the first to re-enter, according to Sergey Dankvert, head of Russia’s food inspector, Rosselkhoznadzor,

After the trip, what’s next for Greece?

While Tsipras is still in Moscow, Greece is expected to make a €463.1 million payment on IMF loans. By the end of May, another €768 million is due.

If Varoufakis goes back on his statement and Greece does default on its loans from EU creditors, leave the eurozone and shared currency, and then ask Moscow for a few billion to get by – the situation would shock almost everyone and spark chaos across financial markets since Greece has repeatedly said it intends to pay off its massive €324 billion debt.

The reason the EU came to Athens’ rescue with two bailouts totaling €240 billion was to protect the euro currency, which is shared by 18 countries including Greece.

So far, Athens has signaled it wants to keep borrowing from the EU, but just under different terms. If for some reason Greece decides to default on its IMF debt, it would be the first developed country to ever do so.

The Greek economy hasn’t expanded since 2008 and has rapidly come to a grinding halt under stringent EU conditions.

Greece was given a four month extension on its bailout plan from its lenders, and the next step will be decided after Athens can convince EU ministers they are serious about economic reform. However, ministers from Greece have said they do not intend to default on any financial obligations to their lenders.


*  *  *

Late in the afternoon, Greece has decided that much of the bailout money received in 2012 is odious and thus does not count as total debt
They are to write off this illegal debt and place the burden on the previous administration
Popcorn anyone?
(courtesy zero hedge)

“Odious Debt” Has Finally Arrived: Greece To Write Off “Illegal” Debt

It was back in June 2011 when we first hinted that the time of Odious Debt is rapidly approaching.

As a reminder, this is what Odious Debt is: In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

Today, nearly four years later, Odious Debt is now a reality in Greece, where Zoi Konstantopoulou, the head of the Greek parliament and a SYRIZA member, released two videos which have promptly gone viral, designed to promote the investigative parliamentary committee to look into the circumstances surrounding the signing of the country’s two bailout agreements that led Greece to implement its austerity measures.

The short video spots, shown below, end with the message “Check it, Erase it” referring to the country’s 320 billion-euro debt.


That this concept emerges now is perhaps confusing: it was just a few days ago when the Greek FinMin promised to the IMF that Greece would honor all of its debt commitments. Should Greece decide that some (or all) of its debt was illegal and unenforceable, this will clearly not happen. Then again, this is the same political party that made pre-election promises whose execution would require about €30 billion according to German calculation, so the relentless flipflopping is not very surprising.

On the other hand, while perhaps Greece was hoping for a more favorable outcome from Tsipras’ meeting with Putin today, the resultant outcome which led to virtually nothing (that was revealed at least) may embolden the Greek nation to push on with this track which is certain to infuriate the Troika.

According to Greek Reporter, Konstantopoulou has said that the newly established “Debt Truth Committee,” will investigate how much of the debt is “illegal” with a view to writing it off.

Proving that this is more than just a populist stunt, during a vote that took place early yesterday, out of the 300 Greek MPs, 156 voted in favor of establishing the public debt auditing committee.

“The committee will examine how Greece entered into the bailout agreements with its international lenders, as well as any other matter related to the memoranda’ implementation,” SYRIZA Parliamentary Secretary Christos Mantas had explained earlier.

“We are fulfilling our commitment and the social demand to explore the causes and responsibilities of an unprecedented crisis that devastated the vast majority of society,” Mantas added.

If the Greek “Debt Truth Committee” indeed persists with determining how much of its debt is legal and enforceable, and ultimately decides to rescind some (or all) of it, the only question is how long until other countries around the world, all of which are burdened with massive, untenable debt loads across the government, financial and household sectors, decide it is time to do the same and declare a fresh start.

Because as the end of the day, the winners will be 99% of the population – or all those who have been trampled upon by the central banking regime and their crony capitalist, private bank and oligarch backers. The only losers will be that 0.01% of the population which benefited during the past 8 years of what is now obvious to all has been nothing more than a farcical global “recovery.”



And for our other hotspot:


Iran Enters Hornets Nest: Parks Two Warships Off Yemen Coast Immediately Next To Two US Aircraft Carriers

The probability of a major escalation over the latest proxy Middle Eastern civil war just escalated substantially.

While it has been widely reported that the United States has been accelerating its weapons supply to the Saudi-led coalition striking rebels in Yemen as a sign of how foreign powers are deepening their involvement in the conflict, the biggest regional backer of the Houthi rebels, the state of Iran, had been mostly inert. Until this morning, when as AP reports, Iran dispatched a naval destroyer and another vessel Wednesday to waters near Yemen.

According to Iran’s English-language state broadcaster Press TV, the official reason for the mini flotilla is a peacekeeping mission meant to deter piracy. It quoted Rear Adm. Habibollah Sayyari as saying the ships would be part of an anti-piracy campaign “safeguarding naval routes for vessels in the region.” The real reason has nothing to do with pirates and everything to do with showing that there is another interest party in a conflict that until now has seen unilateral involvement mainly by the Saudi-led and US supported Gulf Arab air campaign targeting the Yemeni rebels, known as Houthis.

As for the topic of US support, speaking a day earlier in the Saudi capital, Riyadh, U.S. Deputy Secretary of State Antony Blinken blamed the violence in Yemen on the Houthis, and forces loyal to former President Ali Abdullah Saleh, saying that the U.S. is committed to defending Saudi Arabia.

“We have expedited weapons deliveries, we have increased our intelligence sharing, and we have established a joint coordination and planning cell in the Saudi operations center,” he said in a statement to reporters after meeting with Saudi royals and Yemen’s President Abed Rabbo Mansour Hadi, who fled his country amid rebel advances.

Ironically, the U.S. said that the chaos has allowed the local al-Qaida branch, which it considers the world’s most dangerous wing of the group, to make “great gains” on the ground, causing Washington to rethink how it prevents it from launching attacks in the West.

Ironic“, because as reported previously, it was the US’ own hasty departure from the Houthi overrun country that provided $500 millions of dollars in “misplaced” modern weaponry and supplies to these same rebels.

That was the US side of things. Here is Iran’s via Press TV:

The 34th fleet of the Iranian Navy has left for the Gulf of Aden and Bab al-Mandab Strait in line with the country’s policy of safeguarding naval routes for vessels in the region.

The flotilla, which comprises the Bushehr logistic vessel and Alborz destroyer, left Iran’s southern port city of Bandar Abbas on Wednesday, Navy Commander Rear Admiral Habibollah Sayyari said on the sidelines of a ceremony to deploy the fleet. 

The Alborz destroyer shown here in a Feb. 21, 2010 file photo.

More from Press TV:

The commander said that the 34th Fleet is sent on a mission “to provide [safety for] Iran’s shipping lines and protect the Islamic Republic of Iran’s interests in the high seas.” Sayyari said that the flotilla also seeks to ensure safety for the vessels against pirates.

The Navy observes international law while conducting its mission in the north of the Indian Sea with full power, the commander stressed.

In recent years, Iran’s Navy has increased its presence in international waters to protect naval routes and provide security for merchant vessels and tankers.

In line with international efforts against piracy, the Iranian Navy has also been conducting patrols in the Gulf of Aden since November 2008 in order to safeguard merchant containers and oil tankers owned or leased by Iran or other countries.

Iran’s Navy has managed to foil several attacks on both Iranian and foreign tankers during its missions in international waters.

As Al-Arabia adds, “Iran has condemned the campaign and called for dialogue. Saudi Arabia accuses Iran of providing military support to the Houthis, a charge the Islamic Republic denies. The Iranian ships will patrol the Gulf of Aden, south of Yemen, and the Red Sea, Sayyari said. The area is one of the world’s most important shipping routes and a gateway between Europe and the Middle East.”

* * * * *

And now the punchline: as the following Naval update map shows, the two Iran warships will now be located in the immediate vicinity of not only two US aircraft carriers, CVN-71 Teddy Roosevelt and CVN-70 Vinson, but well as the big-deck amphibious warship Iwo Jima which as reported before is providing marine support should the situation demand it.

All of this means the odds of a naval “accident” involving one or more warships in the Red Sea just went up substantially.




The uSA is becoming more isolated by the day.  Today it is Viet Nam joining the Russian led Economic Union.

(courtesy zero hedge)

Vietnam Shuns US, Joins Russia-Led Economic Union

With many of the world’s nations drawing closer to the China-led AIIB, and The Greeks in Moscow today, the news that Vietnam has agreed all of the principle aspects in creating a free trade zone between the countries of the Russia-led Eurasian Economic Union, will likely come as yet another blow to Washington.

As Sputnik News reports,

During the first day of Dmitry Medvedev’s visit to Vietnam, the Russian and Vietnamese sides have signed several agreements on energy cooperation.


“Almost all of the parameters have been agreed, and the preparation of documents have reached the final stage,” Medvedev said after negotiations in Vietnam’s capital of Hanoi.


Medvedev stated that a contract will soon be signed between Moscow and Hanoi.


“I hope that we will soon move on to signing the agreement,” Medvedev added.


Hanoi plans to sign an agreement with the Eurasian Economic Union on a free trade zone by the middle of this year, Vietnamese Prime Minister Nguy?n T?n D?ng said.


“Our goods turnover has dropped a bit lately and in order to improve the situation, we decided to instruct our ministers, businessmen, and organs from both sides totake measures on signing an agreement soon on a free trade zone between Vietnam and the Eurasian Economic Union in the first half of 2015,” D?ng said in a joint statement with Russian Prime Minister Dmitry Medvedev.


D?ng added that Vietnam is striving to increase its goods turnover with Russiato $10 billion by 2020.



“We are continuing our cooperation in nuclear energy and have discussed the current situation of business,” Medvedev said after negotiations in Vietnam’s capital of Hanoi.


Medvedev added that an overall framework agreement would soon be signed.

*  *  *



Oil related stories:


The big major oil deal announced this morning from Europe:

(courtesy zerohedge)


The Shell-BG Megadeal: All You Need To Know, And Why The Initial Response Is Not Enthusiastic

As previously reported, overnight oil giant Royal Dutch Shell agreed to buy BG Group for £47 billion ($69.6 billion) in cash and shares, the 14th largest ever corporate takeover, the largest energy transaction in the past decade, and as the WSJ put it, “the latest sign of how tumbling energy prices are shaking up the global oil-and-gas industry.”

The catalyst for the rushed, and unsolicited, deal: the sharp drop in oil and gas prices since last summer, with the hope being that thousands of layoffs and operations synergies would enable the two European energy giants to eliminate overlapping costs to lower the breakeven oil production cost.

As the WSJ, which broke news of the deal first, adds, the combination “furthers Buying BG will add 25% to Shell’s proved oil and gas reserves and 20% to production and give it access to BG’s highly prized offshore oil fields in Brazil’s Santos Basin, significant undeveloped natural gas resources in East Africa and a huge liquefied natural gas project in Australian that is ramping up this year.”

Here are the key deal terms and conditions:

  • 0.4454 Shell B shares and 383p in cash per BG share
    • Represents a value per BG ordinary share of 1350p, a premium of 52%
    • Values BG equity at £47.0 billion3
    • BG shareholders to own 19% of Shell
  • Equity increase:
    • 1,532 million new B shares
    • Election option for A shares
  • ‘Mix and match’ election between cash and shares
  • Purchase price allocation (IFRS 3 + 13)
    • ~ – $2 billion post-tax P&L annual impact
  • To be implemented by Scheme of Arrangement
  • Key conditions: shareholder + regulatory approvals

Here is Shell’s pitch to its shareholders why they should endorse the deal:

  • Mildly accretive to earnings per share in 2017 and strongly accretive from 2018
  • Accretive to cash flow from operations per share from 2016
  • Accelerates deep water + LNG strategy
  • Accretive to earnings and cash flow per share
  • Complementary portfolios: synergy opportunity
  • Enhanced portfolio: springboard to high-grade Shell + BG
  • Improved cash flow enhances future dividends + buyback potential

Some, see below, disagree with the proposed corporate assessment.

The combination as summarized by Shell:

  • Enhanced position in our growth priorities: LNG + deep water
  • Complementary fit in 15 countries
  • ~$2.5 billion/year synergies* identified + further potential

Why pay a massive premium for BG Group? Here is the politically correct slide explainer:





OH OH!! Cushing Oklahoma storage facilities is now up to 90% full as inventories surge the most in 14 years as today we get the D.O.E. report after yesterday’s ATI.


(courtesy zero hedge)


Cushing Storage Around 90% Full As Inventories Surge Most In 14 Years, Crude Plunges


Following last night’s huge 12.2 mm barrel inventory rise estimate from API, DOE has just confirmed last week saw an almost all-time high 10.95 million barrel inventory build. This is the higest since March 2001. With today’s 1.232 million barrel addition at Cushing, Goldman estimates only about 10% of storage capacity is left. And to complete the trifecta, crude oil production ticked back up again after last week’s hope-strewn reduction.


Biggest weekly build in 14 years… 13th week in a row of builds – a record


Hitting another all-time record high inventory…


With Cushing rising notably – pushing storage levels to around 90%


Weighing on crude…


Retracing most of yesterday’s idiocy…



Charts: Bloomberg



Your more important currency crosses early Wednesday morning:





Euro/USA 1.0870 up .0048

USA/JAPAN YEN 119.67 down .612

GBP/USA 1.4941 up .0122

USA/CAN 1.2414 down .0087

This morning in Europe, the Euro rose by 48 basis points, trading now just below the 1.09  level at 1.0870; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine and today falling bourses.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled  up again in Japan by 61 basis points and trading just below the 120 level to 119.67 yen to the dollar.

The pound was well up this morning as it now trades just above the 1.49 level at 1.4941  (very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation).

The Canadian dollar is up by 87 basis points at 1.2414 to the dollar despite the lower oil price.

We are seeing that the 3 major global carry trades are being unwound.  The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc.  This has partly blown up (see  Hypo bank failure)

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral.  Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>




The NIKKEI: Wednesday morning : up 149.27  points or 0.76%

Trading from Europe and Asia:
1. Europe stocks mostly in the red

2/ Asian bourses all in the green … Chinese bourses: Hang Sang in the green ,Shanghai in the green,  Australia  in the green: /Nikkei (Japan) green/India’s Sensex in the green/

Gold very early morning trading: $1211.00




Early Wednesday morning USA 10 year bond yield: 1.87% !!!  down 1  in basis points from Tuesday night/

USA dollar index early Wednesday morning: 97.35 down 48 cents from Tuesday’s close. (Resistance will be at a DXY of 100)




This ends the early morning numbers, Wednesday morning




And now for your closing numbers for Monday:



Closing Portuguese 10 year bond yield: 1.62% down 1 in basis points from Tuesday


Closing Japanese 10 year bond yield: .36% !!! par in basis points from Tuesday


Your closing Spanish 10 year government bond,  Wednesday, up 2 in basis points in yield from Tuesday night.


Spanish 10 year bond yield: 1.20% !!!!!!


Your Wednesday closing Italian 10 year bond yield: 1.25% up 1 in basis points from Tuesday:


trading 5 basis points higher than  Spain.






Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 4 pm

Euro/USA: 1.0785 down .0037  ( Euro down 37 basis points)

USA/Japan: 120.13 down .152  ( yen up 15 basis points)

Great Britain/USA: 1.4867 up .0048   (Pound up 48 basis points)

USA/Canada: 1.2543 up .0040 (Can dollar down 40 basis points)


The euro collapsed again during the afternoon, and adding further losses from yesterday. It settled down 37 basis points to 1.0785. The yen was up 15 basis points points and closing just above the 120 cross at 120.13. The British pound gained some more ground, 48 basis points, closing at 1.4867. The Canadian dollar was on a roller coaster ride again today against the dollar. It closed at 1.2540 to the USA dollar, down 40 basis points as oil was slaughtered today.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are  causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.






Your closing 10 yr USA bond yield: 1.90% up 1 in basis points from Tuesday


Your closing USA dollar index:

98.07 up 24 cents on the day.



European and Dow Jones stock index closes:




England FTSE down 24.36 or 0.35%

Paris CAC  down 14.33 or 0.28%

German Dax down 87.66 or 0.72%

Spain’s Ibex down 75.00 or .64%

Italian FTSE-MIB down 127.64 or 0.54%



The Dow:up 27.09 or 0.15%

Nasdaq; up 40.59 or 0.83%



OIL: WTI 50.88 !!!!!!!

Brent: 56.00!!!!



Closing USA/Russian rouble cross: 53.66 up  1 1/2 rouble per dollar despite the lower oil price.








And now your important USA stories:



First New York trading today:


Stocks Gyrate Wildly Following Two Consecutive Stop Hunts, Close With A Whimper Despite More Fed Dovishness


If there is one word to describe today’s market, as well as the market of the past week, past month, and perhaps all of 2015, it is “stop hunts.” Well, technically it’s two words.

The first stop hunt took place, as is now a daily routine, right after the US market open, when the entire Dow Jones increasingly, looking like the infamous, illiquid and massively overvalued (until such time as it was halted) CYNK stock, ramped, then tumbled the moment reality was glimpsed courtesy of the abysmal EIA crude report which sent crude crashing on its biggest one day drop in two months, also sending stocks into the red…


… only to be followed by another stop hunt, this time with the dump first then the ramp after the FOMC minutes were released.


Even the traditional last minute ramp was feeble by normal Fed standard, and barely managed to push the S&P or the DJIA solidly into the green. The only outlier were transports which were buoyed by the plunge in oil to close at the day’s high.


Commodities were broadly lower pressued by a horrible day for crude longs who after the dramatic short squeeze ramp in the past 4 days had declared (once again) that bottom for oil is in, only to find, shockingly, find that it isn’t.


They will be even more shocked once the realize that Cushing now has about 10% storage capacity left.


If and when it does fill up, it will not be blood on the streets, it will be oil. Literally.

Rates had a mixed day with pronounced curve flattening, following another strong 10 Year auction. Come to think of it, it has been a while since any pundit mentioned Net Interest margin as a bullish catalyst for bank earnings.


And with the last trading day ahead of the start of earnings season behind us, bring on Q1 earnings: remember the more horrible, and the greater the EPS drops (offset by gargantuan pro-forma and non-GAAP adjustments), the better it is for stocks, because it means that the Dow Data Dependent and utterly terrified Fed will have no choice but to keep waiting, and waiting, and waiting…

At 2 pm we get the beige book report on the last FOMC meeting:

First:  official release of the minutes of the last FOMC meeting:

(courtesy zero hedge)


FOMC Minutes Expose World Weary, Un-Patient, Dow-Data-Dependent Fed

Following the surprise dovish FOMC dot-downgrade to counter hawkish ‘patience removal’, and this morning’s admission by Dudley that The Fed is Dow-Data-Dependent; expectations for the FOMC Minutes offering any insights were low


So “worried” about the world, “downside” risk to growth but reasons to be cheerful, unpatient and data-dependent liftoff… something for everyone.

Pre-FOMC Minutes: S&P 2079, 10Y 1.89%, EURUSD 1.0815, Gold $1206


*  *  *

Some of the key sections.

On the great debate of a “liftoff” in June versus a delay to 2016:

Participants expressed a range of views about how they would assess the outlook for inflation and when they might deem it appropriate to begin removing policy accommodation. It was noted that there were no simple criteria for such a judgment, and, in particular, that, in a context of progress toward maximum employment and reasonable confidence that inflation will move back to 2 percent over the medium term, the  normalization process could be initiated prior to seeing increases in core price inflation or wage inflation. Further improvement in the labor market, a stabilization of energy prices, and a leveling out of the foreign exchange value of the dollar were all seen as helpful in establishing confidence that inflation would turn up. Several participants judged that the economic data and outlook werelikely to warrant beginning normalization at the June meeting. However, others anticipated that the effects of energy price declines and the dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016.

On “exports”, and the USD strength:

In their discussion of language for the postmeeting statement, the Committee agreed that the data received over the intermeeting period suggested that economic growth had moderated somewhat. One factor behind that moderation was a slowdown in the growth of exports, and members decided that the statement should explicitly note that factor.

On the strength of the dollar:

A number of participants cited the further appreciation of the dollar and recent weakness in spending and production data as reasons for their revision.

On the pace of normalization:

Some participants emphasized that the stance of policy would remain highly accommodative even after the first increase in the target range for the federal funds rate, and several noted that they expected economic developments would call for a fairly gradual pace of normalization or that a  data-dependent approach would not necessarily dictate increases in the target range at every meeting.

On “international” developments, and even Greece makes an appearance:

Participants pointed to a number of risks to the international economic outlook, including the slowdown in growth in China, fiscal and financial problems in Greece, and geopolitical tensions.

And the most important topic: why the Fed will never reduce its balance sheet:

Many participants mentioned that selling assets that will mature in a relatively short time could be considered at some stage, if necessary to reduce ON RRP usage. However,a number of participants noted that it could be difficult to communicate the reason for such sales to the public, and, in  particular, that the announcement of such sales would risk an outsized market reaction, as the public could view the sales as a signal of a tighter overall stance of monetary policy than they had anticipated or as an indication that the Committee might be more willing than had been thought to sell longer-term assets.

Finally, it seems, the Minutes failed to include the real Fed Dot Plot once again…



The the net reaction:  total confusion!

(courtesy zero hedge)


The “Markets” React To FOMC-Minutes-Implied Fed Confusion

No new news whatsoever, aside from perhaps greater emphasis on the fact that now The Fed is ‘protector of global wealth creation’ given the smorgasbord of risks discussed… left market participants and machines as confused as The Fed appears to be…

What that looks like…

Stocks… dump’n’pump

Commodoties Cluelesss…

And Crude is now puking it back to a $50 handle…

Dollar and Bond (yields) roundtripping too

Charts: Bloomberg




Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: