June 29/GREECE!!!!

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1178.50 up $5.60  (comex closing time)

Silver $15.66  down 7 cents

In the access market 5:15 pm

Gold $1180.00

Silver: $15.76


First, here is an outline of what will be discussed tonight:

At the gold comex today, we had a good delivery day, registering 39 notices serviced for 3900 oz.  Silver comex filed with 2 notices for 10,000 oz. Remember we are entering options expiry tomorrow with respect to gold/silver LBMA contracts and the OTC contracts.  So gold and silver will be subdued in price until tomorrow night.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.52 tonnes for a loss of 57 tonnes over that period.

In silver, the open interest fell by 1167 contracts as Friday’s price was down 11 cents. The total silver OI continues to remain extremely high, with today’s reading at 196,164 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .980 billion oz or 140% of annual global silver production (ex Russia ex China). 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 as they continue to raid as basically they have no other alternative. There can only be one answer as to how the OI of comex silver is now just under 1 billion oz coupled with a low price under 16.00 dollars:  sovereign China through proxies are the long and they have extremely deep pockets.

In silver we had 2 notices served upon for 10,000 oz.

In gold, the total comex gold OI rests tonight at 442,007 for a gain 415 contracts as gold was down $0.10 on Friday. We had 39 notices filed for 3900 oz.

we had no change in tonnage at the gold inventory at the GLD; thus the inventory rests tonight at 711.44 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. I am sure that 700 tonnes is the rock bottom inventory in gold.  Anything below this level is just paper and the bankers know that they cannot retrieve “paper gold” to send it onwards to China .In silver, again, we had a huge withdrawal in inventory at the SLV to the tune of 4,777,000 oz/ Inventory now rests at 324.339 million oz. Somebody was in need of silver badly.

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

1. Today, we had the open interest in silver fall by 1247 contracts to 196,164 as silver was down 11 cents on Friday. The OI for gold rose by another 415 contracts up to 442,007 contracts as the price of gold was down $0.10 on Friday.

(report Harvey)

2. Today, 30 important commentaries on Greece

Due to the importance of the impending default on Greece, I have provided a chronological order of events from Saturday morning until tonight.

(zero hedge, Reuters/Bloomberg/)

3.the impending default for Puerto Rico

(2 stories)

(zero hedge)

4. China crashes

(2 stories/zero hedge)

5. Gold trading overnight

(Goldcore/Mark O’Byrne)

6. Trading from Asia and Europe overnight

(zero hedge)

7. Trading of equities/ New York

(zero hedge)

8. Dave Kranzler/IRD on Blackrock telling investors to get out of all mutual funds

(Dave Kranzler IRD)

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 appreciably by 415 contracts from  441,592 up to 442,007 as gold was down 10 cents in price on Friday (at the comex close).  We are off  the big active delivery contract month of June.  The next contract month is July and here the OI fell by 110 contracts to 445.  The next big delivery month after June will be August and here the OI rose by only 40 contracts up to 286,230. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was fair at 147,049. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 114,515 contracts. Today we had 39 notices filed for 3900 oz.

And now for the wild silver comex results. Silver OI fell by a small 1247 contracts from 197,411, down to 196,164 as the price of silver was down 11 cents in price with respect to Friday’s trading. We continue to have our bankers pulling their hair out with respect to the continued high silver OI.  The front non active delivery month of June is now off the board.  The next delivery month is July and here the OI  fell by a considerable 18,655 contracts down to 12,724. We have just 1 trading days left before first day notice tomorrow.  The next major active delivery month is September and here the OI rose by a huge 17,161 contracts to 128,411. So far, for the first time we did not witness the collapse of OI in an active delivery month.  However all of the longs rolled into September.. The estimated volume today was excellent at 70,751 contracts (just comex sales during regular business hours. The confirmed volume on yesterday (regular plus access market) came in at 106,943 contracts which is excellent  in volume.  We had 2 notices filed for 10,000 oz today.


June initial standing

June 29.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 2,925.65 oz (SCOTIA)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 37,986.327 oz (Scotia)
No of oz served (contracts) today 39 contracts (3900 oz)
No of oz to be served (notices) off the board
Total monthly oz gold served (contracts) so far this month 2958 contracts(295,800 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month 99.93 oz
Total accumulative withdrawal of gold from the Customer inventory this month  567,930.4  oz

Today, we had 0 dealer transactions


we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

we had 0 dealer deposits


total dealer deposit: zero
we had 1 customer withdrawal

i) Out of Scotia: 2925.65  (91 kilobars???)


total customer withdrawal:2,925.65 oz

We had 1 customer deposit:

i) Into Scotia: 37,986.327 oz

Total customer deposit: 37,986.327 oz

We had 0 adjustments:



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 39 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 39 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the June contract month, we take the total number of notices filed so far for the month (2958) x 100 oz  or 295,800 oz , to which we add the difference between the open interest for the front month of June (39) and the number of notices served upon today (39) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2958) x 100 oz  or ounces + {OI for the front month (39) – the number of  notices served upon today (39) x 100 oz which equals 295,800 oz standing so far in this month of June (9.198 tonnes of gold).  Thus we have 9.20 tonnes of gold standing and only 16.07 tonnes of registered or for sale gold is available.

Total dealer inventory 517,216.902 or 16.08 tonnes

Total gold inventory (dealer and customer) = 7,893,642.14 oz  or 245.52 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.52 tonnes for a loss of 57 tonnes over that period.


And now for silver

June silver initial standings

June 29 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 460,199.430  oz (Delaware,CNT,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 3,073.584 oz (Delaware)
No of oz served (contracts) 2 contracts  (10,000 oz)
No of oz to be served (notices) off the board
Total monthly oz silver served (contracts) 298 contracts (1,490,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 526,732.4  oz
Total accumulative withdrawal  of silver from the Customer inventory this month 6,056,121.4 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz


We had 1 customer deposit:

i) Into Delaware

total customer deposit: 3073.584  oz


We had 3 customer withdrawal:

i) Out of Delaware:  19,898.73 oz

ii) Out of CNT: 190,159.100 oz

iii) Out of Scotia: 250,141.6 oz


total withdrawals from customer; 460,199.43   oz


we had 0 adjustments


Total dealer inventory: 57.866 million oz

Total of all silver inventory (dealer and customer) 182.412 million oz

The total number of notices filed today is represented by 2 contracts for 10,000 oz. To calculate the number of silver ounces that will stand for delivery in June, we take the total number of notices filed for the month so far at (298) x 5,000 oz  = 1,490,000 oz to which we add the difference between the open interest for the front month of June (2) and the number of notices served upon today (2) x 5000 oz equals the number of ounces standing.

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

298 (notices served so far) + { OI for front month of June (2) -number of notices served upon today (2} x 5000 oz ,= 1,490,000 oz of silver standing for the June contract month.

this should be the final standings.  We must wait until tonight to see if anybody else serves notices.

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



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:

June 29/no change in inventory/rests tonight at 711.44 tonnes

June 26./it did not take our bankers long to raid the GLD. Yesterday they added 6.86 tonnes and today, 1.75 tonnes of that was withdrawn/Inventory tonight rests at 711.44 tonnes.

June 25/a huge addition of 6.86 tones of  inventory at the GLD/Inventory rests tonight at 713..23 tonnes

June 24/ a good addition of.900 tonnes of gold into the GLD/Inventory rests at 706.37 tonnes

June 23/no change in gold inventory/rests tonight at 705.47 tonnes

June 22/ a huge increase of 3.27 tonnes of gold into GLD/Inventory tonight: 705.47 tonnes

June 19.2015: no change in gold inventory/rests tonight at 701.90 tonnes.

June 18/no change in gold inventory/rests tonight at 701.90 tonnes

June 17/no change in gold inventory/rests tonight at 701.90 tonnes

June 16./no change in gold inventory/Rests tonight at 701.90 tonnes.

June 15/we lost a huge 2.08 tonnes of gold from the GLD/Inventor rests tonight at 701.90 tonnes

June 12/we had a small withdrawal of .24 tonnes of gold from the GLD/Inventory rests this weekend at 703.98 tonnes.

June 11/we had another huge withdrawal of 1.5 tonnes of gold from the GLD/Inventory rests tonight at 704.22 tonnes

June 10/ we had a huge withdrawal of 2.98 tonnes of gold from the GLD/inventory rests at 705.72

June 9/ no change in gold inventory at the GLD/Inventory rests at 708.70 tonnes

June 8/ a big withdrawal of 1.19 tonnes of gold from the GLD/Inventory rests at 708.70 tonnes

June 29 GLD : 711.44 tonnes


And now for silver (SLV)

June 29/ a monstrous loss of 4.777 million oz of silver from the SLV/Inventory rests tonight at 324.339 million oz

June 26/today we had another addition of 198,000 of silver/Inventory rests at 329.116 million oz

June 25/ a huge increase of 1.242 million oz of silver into the SLV inventory/Inventory rests at 128.918 million oz

June 24/no change in inventory/rests tonight at 326.918 million oz

June 23/we had a small withdrawal of 956,000 oz/Inventory tonight rests at 326.918 million oz

June 22/ no change in silver inventory/327.874 million oz

June 19/no change in silver inventory/327.874 million oz

June 18 no change in silver inventory/327.874 million oz

June 17/no change in silver inventory/327.874 million oz

June 16./no change in silver inventory/327.874 million oz

June 15/we had no change in silver inventory/327.874 million oz

June 12/we had another addition to the tune of 956,000 oz/Inventory rests this weekend at 327.874.  Please note that there has been an addition on each of the past 5 days.

June 11.2015: we had another monster of an addition to the tune of 2.791 million oz/Inventory rests at 326.918

June 10/another monster of an addition to the tune of 1.126 million oz/Inventory rests at 324.127

June 9/ a monster of an addition to the tune of 3.393 million oz/inventory rests at 323.001 million oz.

June 8/no change in inventory/SLV inventory rests at 319.608 milion oz.

June 5 a huge addition of 1.433 million oz of silver added to the SLV/Inventory at 319.608 million oz

June 29/2015: we had a huge withdrawal of 4.777 million oz of  silver inventory/SLV inventory rests tonight at 324.339 million oz


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

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 7.8 percent to NAV usa funds and Negative 7.7% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.8%

Percentage of fund in silver:37.8%

cash .4%

( June 29/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 0.78%!!!! NAV (June 29/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .58% toNAV(June29/2015

Note: Sprott silver trust back  into positive territory at +0.78%

Sprott physical gold trust is back into negative territory at -.58%

Central fund of Canada’s is still in jail.


Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *






And now overnight trading in gold/silver from  Europe and Asia/plus physical stories that might interest you:


First:  Goldcore’s Mark O’Byrne


(courtesy Goldcore/Mark O’Byrne)

Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy

– Persistent low rates leave central banks with no ammunition to fight next crisis
– BIS says short-sighted central banks and governments contributed to current weaknesses
– Lack of policy options have forced some central banks to stretch “boundaries of the unthinkable”
– Bust in developed economies the main risk facing global economy
– Greece prepares to default
– China markets routed overnight
– Gold will be last man standing when currencies collapse

Greeks line up to an ATM in a run on Greek banks

Greece embarked on capital controls as talks over the weekend between Tsipras’ leftist government and foreign lenders fell apart.

All banks and the Greek stock exchange are closed today. Greek citizens cued in long lines at ATMs or cash machines over the weekend and a run on the banks left most ATMs empty. There is a €60 limit on withdrawals from cash machines under strict capital controls. The ATMs will reopen tomorrow. Citizens are also lining up for petrol and food.

Central banks have run out of options to deal with the next global financial crisis the Bank of International Settlements (BIS) has warned in its annual report. Failure to make difficult policy decisions and raise rates throughout the “recovery” have left central banks with no stimulus options with which to juice the economy when the next downturn arrives.

The BIS, which is central bank of the central banks based in Basel, Switzerland, points to the short-sighted policies of governments and national central banks over the past few years who preferred to try keep their economies afloat using excessive debt rather than take unpopular steps to reform their economies.

Dangerously low interest rates for too long by Central Banks

The Telegraph puts it thus:

“The BIS claimed that central banks have backed themselves into a corner after repeatedly cutting interest rates to shore up their economies. These low interest rates have in turn fuelled economic booms, encouraging excessive risk taking. Booms have then turned to busts, which policymakers have responded to with even lower rates.”

“Rather than just reflecting the current weakness, they may in part have contributed to it by fuelling costly financial booms and busts and delaying adjustment. The result is too much debt, too little growth and too low interest rates…In short, low rates beget lower rates,” according to Claudio Borio, who heads the monetary and economic department at the BIS.

The BIS is critical of the low interest rate environment and is, apparently, appalled by the actions of some central banks – namely, those of Switzerland, Sweden and Denmark – who have introduced negative interest rates which it describes as “stretching the boundaries of the unthinkable”.

The organisation rejects the argument that the current status quo of very low rates is some kind of “equilibrium”. Jaime Caruana, General manager of the BIS says:

“True, there may be secular forces that put downward pressure on equilibrium interest rates … [but] we argue that the current configuration of very low rates is neither inevitable, nor does it represent a new equilibrium”.

Low rates are gradually whittling away the balance sheet of banks as low rates are a disincentive to savers, particularly when the cost of many necessities is rising.

The greatest threat facing the global economy today is another bust in developed economies according to the bank. Persistent low rates may “inflict serious damage on the financial system”.

Economies driven by excessive debt, rather than productivity, has caused labour to migrate into less productive sectors of the economy which would not have survived the bust had authorities not intervened. Productivity in the west is therefore weaker than it should be in a recovery.

The report cites Greece as an example of this type of mismanagement where a “toxic mix” of “private and public debt being used as a solution to economic problems, rather than making the proper commitment ‘to badly needed’ structural reforms” as the Telegraph puts it.

The release of the report coincides with Greece preparing to default and a major stock market correction in China. Indeed the crisis to which the BIS says the central banks have no solutions may already be upon us.

An acknowledged default of Greece will trigger credit default swaps in the opaque derivatives market. If a major bank – such as Deutsche Bank, with its enormous derivatives exposure that dwarfs the GDP of Germany – were caught on the wrong side of a trade, we would be immediately in the midst of a truly unprecedented global crisis.

At the same time China is experiencing major difficulties as its stock markets have doubled in the past year and now has shed over 21% of its value in recent days.

It seems certain that a new crisis is imminent. When the public finally lose faith in central banks and the money they print, currencies will rapidly devalue. Holding an allocation of physical gold outside the financial system will prove to be valuable insurance.

Please Review: Gold Is a Safe Haven Asset


Today’s AM LBMA Gold Price was USD 1,176.50 , EUR 1,060.82 and GBP 749.10 per ounce.
Friday’s AM LBMA Gold Price was USD 1,174.40, EUR 1 ,048.38 and GBP 745.89 per ounce.

Gold rose $1.00 or 0.09% percent Friday to $1,174.10 an ounce. Silver slipped $0.07 or 0.44 percent to $15.80 an ounce. Gold and silver both fell last week at 2.22% and 1.92 percent respectively.

Gold in U.S. Dollars - 5 Day

Gold in Singapore for immediate delivery climbed 0.7 percent to $1,183.18 an ounce near the end of the day.

The yellow metal rose today as investors piled into safe haven assets as the Greek debt crisis took a turn for the worse over the weekend and a Grexit appear imminent.

U.S. gold futures also climbed 1 percent to a session high of $1,187 before capping gains. Silver rose nearly 1 percent along with gold.

Riskier assets fell such as U.S. equity futures, Asian stock markets and the euro fell as investors made a beeline into safe-haven assets like gold and silver.

Friday’s U.S.CFTC data showed speculators upped bullish bets in COMEX gold futures and options and switched to a net short position in silver for the week ending June 23.

In Asia, the People’s Bank of China slashed its one-year lending rate by 25 basis points to 4.85 percent,  and lowered the amount of reserves certain banks are required to hold by 50 basis points. This has been its fourth cusince November. The central bank also decreased its one-year deposit rate rate by 25 basis points to 2.0 percent.

In late morning European trading gold is up 0.09% or $1,176.38 an ounce. Silver is up 0.05 percent at $15.80 an ounce, while platinum is off 0.94 percent at $1,067.88 an ounce.


Huge withdrawals from SGE equal to 54.2 tonnes.

this should equate to gold demand from China

(courtesy Jessie/Amercan cafe)


Shanghai Gold Exchange 54.2 Tonnes of Bullion Withdrawn – Total More Than All Official Gold of US

During the latest week there were 54.2 tonnes of gold withdrawn from the Shanghai Gold Exchange.

Since the beginning of 2009 there have been 9,030 tonnes of gold taken out of the Shanghai Exchange into China.

That is more than 290,320,000 troy ounces of fine gold in bars.

Just for the sake of comparison, as shown in the last chart below, the total official holdings of the United States are about 261,498,926 ounces of gold.

So it does seem that since 2009 more gold has been withdrawn from the Shanghai Exchange than is in all the official holdings, vaults, forts, mints and Federal Reserve Banks of the United States.

Related: Why Shanghai Gold Withdrawals Equal Chinese Gold Demand




(courtesy GATA)

China Challenges Gold Price-Setting Regime; Confirms Launch Of Yuan-Denominated Fix

“They want to be on the top table in all areas of international trade and this is no different,” Sharps Pixley CEO told Bloomberg earlier this month, tying China’s move to participate in the twice-daily auction that determines London gold prices to Beijing’s efforts to embed the yuan more deeply in international investment and trade.

As a reminder, the auction has its roots in efforts to deter manipulation. Here’s what we said last month:

A long time ago, in a financial galaxy far, far away, a “fringe” blog raised the topic of gold market manipulation during the London AM fix. Several years later (which, incidentally, is about average in terms of the lag time between when something is actually going on and when the mainstream financial media finally figures it out and reports on it), it was revealed that in fact, shenanigans were likely afoot and indeed, regulators are still trying to sort out what happened. The ‘fix’ for the ‘fixed’ gold fix (only in the world of corrupt high finance is such a hilariously absurd passage possible) is supposedly a new system whereby the fixings are derived electronically. 

On June 16, the LBMA announced that Bank of China would become the first Chinese bank to participate. Earlier this week, ICBC said it may also join the electronic auction process. From the press release introducing Bank of China’s participation:

“We are proud to become the first Chinese and Asian bank to participate in the gold auction.” said Yu SUN, General Manager, Bank of China London Branch & CEO, Bank of China (UK) Limited. “Bank of China joined LBMA as an initial member in 1987, and has been actively participating in the gold trading business in London for over forty years. Although being the world’s largest gold producer and consumer, China has never played a major role in the global gold fixing. Bank of China’s direct participation in the IBA gold auction will reinforce the connection between the Chinese domestic market and overseas markets, make the international gold price better reflect the supply and demand in China, and help to promote the internationalization of the Chinese gold market.”


“We are delighted to welcome Bank of China to the gold auction,” said Finbarr Hutcheson, President, ICE Benchmark Administration. “The growth in daily volumes coupled with the increase in participation from around the globe, demonstrates strong market support for the independent governance and oversight we have implemented to bring transparency and trust to the gold auction.”

“Participation in the gold auction will increase the link between China and international markets, and make the gold price better reflect the nation’s supply and demand,” Bank of China said, while on Thursday, ICBC’s general manager of precious metals Zhou Ming told an audience in Shanghai that “Chinese banks want to expand [their] reputation and brand influence in the Western market.”

Indeed, China isn’t stopping with the LBMA when it comes to increasing its influence on gold pricing. As tipped herelast month, the country is set to launch a yuan-denominated gold fix later this year. Now, we have the first public confirmation from the Shanghai Gold Exchange that the fix will be introduced by the end of 2015. Reuters has the story:

“We will be introducing a renminbi-denominated fix at the right moment, we are hoping to introduce by the end of the year,” Shen Gang, SGE’s vice president, said at the LBMA Bullion Market Forum in Shanghai on Thursday.


“We have policy support for development (of the gold market),” she added.


While Shen did not give more details, sources familiar with the matter have said that China is expected to receive central bank approval for the fix soon.


Pan Gongsheng, a deputy governor of the People’s Bank of China (PBOC), said the central bank would continue to support “speedy and healthy growth of the China gold market” and its internationalization.


Given its leading role in gold, China feels it is entitled to be a price-setter for bullion and is asserting itself at a time when the global benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation.


If the yuan fix takes off, China could compel local buyers and foreign suppliers to pay the domestic yuan price, making the dollar-denominated London fix less relevant in the world’s biggest bullion market.


While details of the fix are yet to be revealed, sources say it would be derived from a contract traded on the bourse for a few minutes, with the SGE acting as the central counterparty. That could make the process transparent – addressing one of the big concerns about the London fix.


The yuan fix is the most recent effort by SGE to boost China’s position in the global gold market. The exchange opened an international bourse in September 2014, allowing foreigners to trade yuan-denominated contracts for the first time.

Between Chinese banks’ participation in the London auction and the advent of the yuan fix, China is now in a position not only to exert its influence on the dollar-denominated benchmark, but to establish its own price setting mechanism that may well serve to challenge and ultimately supplant the Western fix which the market will likely always view as subject to manipulation.




(courtesy Brien Lundin/GATA)

Brien Lundin: Proof of gold market manipulation


By Brien Lundin, Editor
Gold Newsletter, Metairie, Louisiana
Thursday, June 25, 2015


As long-time readers know, I’ve been skeptical that the anyone in the U.S. government is manipulating the gold market on a daily basis. That skepticism is rooted in my confidence that the government would screw up any attempts at active, high-tech manipulation. Just look at their inability to prevent the Chinese from obtaining confidential personnel files on tens of millions of Americans — after having already seen them hack into the system once without downloading the files.

To quote the great 20th-century philosopher Ringo Starr, “Everything the government touches turns to crap.”

No, a minute-by-minute manipulation of the gold market isn’t within the capabilities of the Washington bureaucracy. But somebody is doing it — of that there is no longer any doubt — and they’re doing it by the millisecond.

That’s the conclusion of a number of comprehensive analyses by Nanex (www.nanex.net), a company that offers software and data that tracks quotes and trades on the major U.S. equity exchanges sequentially. In other words, quote by quote, trade by trade, by the millisecond. That alone is a great service. But under the direction of CEO Eric Hunsader, Nanex has also conducted investigations of many anomalous trading events in the markets and has tracked the rise and impact of high-frequency trading. Their research site —


— deserves browsing by anyone interested in shenanigans now being perpetrated on a daily basis by HFTs and their algo trading software.

Of particular interest to us, Nanex has identified and examined some “flash crashes” that occurred last year and this year in gold. This Zero Hedge post —


— describes Nanex’s study of the most recent such event, on Tuesday, June 25, when “15 minutes after GDP data was released — showing Q1 was indeed as weak as expected and inventories suggesting Q2 will be just as weak — someone decided it was an appropriate time to dump over half a billion dollars of notional gold on the futures market. …” (Emphasis by Zero Hedge.)

The Nanex studies can get a bit technical but they are fascinating. For instance, their examination of a flash crash that occurred on January 6, 2014, showed how gold was forced down over $30 in less than 100 milliseconds. By breaking the groups of trades into jumps in the exchange sequence numbers, they were able to identify nine groups where the sum of the trade sizes was precisely 338 contracts.

At the time of this flash crash, blame was placed on someone’s “fat finger” trade. As Nanex concluded, “This was not the result of a fat finger, but rather the work of a high-frequency trading algorithm that paused and (probably) tested the market before continuing. A fat finger would not have such distinguishing features. What is disturbing about this algorithm is that it carefully waited so as not to trip the CME’s stop logic and halt the stock. The halt was from the more lenient volatility circuit breaker after the price declined $30 in less than a second. This algo appears to have been more concerned about preventing an immediate halt rather than getting the best prices. Since the value of the trades was close to $500 million, there aren’t a lot of suspects.”

To me this is ironclad evidence that someone is manipulating the market in a very sophisticated way, and not necessarily for profit-driven reasons. And as
Nanex observed, the list of actors who can employ $500 million in what was essentially a single trade is short.

In this case, the evidence was even convincing enough to prompt the CME into action, whereupon it recently fined Mirus Futures LLC $200,000 for failing “to adequately monitor the operation of its trading platform (Zenfire) and the connectivity of its trading system (Zenfire) with Globex. This failure resulted in unusually large and atypical trading activity by several of the firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 gold futures market and prompted a Velocity Logic event.”

As Zero Hedge notes, Mirus was sold to Ninja Trader about a year ago and all the people behind the scheme have probably now scattered to different HFT enclaves.

So, yes, the manipulation of gold and silver is ongoing. But don’t count on any sweeping regulatory action to rein in HFTs or their backers until they trip up the more important markets that Wall Street is involved in.



(courtesy GATA)

BIS scolds its own central bank members: You’ve made a mess of everything

 Claudio Borio, head of the organisation’s monetary and economic department, said: “Persistent exceptionally low rates reflect the central banks’ and market participants’ response to the unusually weak post-crisis recovery as they fumble in the dark in search of new certainties.””Rather than just reflecting the current weakness, they may in part have contributed to it by fuelling costly financial booms and busts and delaying adjustment. The result is too much debt, too little growth and too low interest rates.”In short, low rates beget lower rates.”The BIS warned that interest rates have now been so low for so long that central banks are unequipped to fight the next crises.”In some jurisdictions, monetary policy is already testing its outer limits, to the point of stretching the boundaries of the unthinkable,” the BIS said.Policymakers in the eurozone, Denmark, Sweden and Switzerland have taken their interest rates below zero in an attempt to support their economies, contributing to a decline in bond yields.Extraordinarily low interest rates are not a “new equilibrium” said Jaime Caruana, general manager of the BIS, rejecting the theory of so-called “secular stagnation” which some economists blame for the continued decline in global lending rates.”True, there may be secular forces that put downward pressure on equilibrium interest rates … [but] we argue that the current configuration of very low rates is neither inevitable, nor does it represent a new equilibrium,” he said.Mr Caruana said that interest rate hikes “should be welcomed,” as global economies have started to grow at close to their historical averages, and a slump in oil prices has provided the global economy with a boost.The BIS report described the threat of a new bust in advanced economies as a “main risk,” with many reaching the top of the economic cycle.The economies worst hit by the last crisis are now suffering the costs of persistent ultra-low rates, the organisation said, which could “inflict serious damage on the financial system”, sapping banks and weakening their balance sheets and their ability to lend.And the continued misallocation of resources during busts prompted by central banks’s rock-bottom interest rates has also hammered productivity growth, the BIS said, as a prolonged reliance on debt had been used in its place.This problem is compounded as the world’s populations continue to age, the organisation warned, making debt burdens harder to bear. Yet politicians have relied too much on temporary growth boosts by using debt, rather than making painful choices, said the BIS.Mr Caruana said that during booms, workers and capital are shifted to slow-growing sectors, with a “long-lasting negative” impact on productivity growth. “Misallocated labour needs to move from these sectors to other parts of the economy,” he said.The BIS said that the current turmoil in Greece typified the kind of “toxic mix” of private and public debt being used as a solution to economic problems, rather than making the proper commitment “to badly needed” structural reforms.Mr Caruana said that policymakers must now focus on the supply side of the economy, introducing the right reforms, rather than continue to lean on debt which will inevitably undermine growth.

* * *

World Is Defenseless Against Next Financial Crisis, BIS Warns

By Peter Spence
The Telegraph, London
Sunday, June 28, 2015


The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises, the Bank of International Settlements has warned.

The so-called central bank of central banks launched a scatching critique of global monetary policy in its annual report:


The BIS claimed that central banks have backed themselves into a corner after repeatedly cutting interest rates to shore up their economies.

These low interest rates have in turn fuelled economic booms, encouraging excessive risk taking. Booms have then turned to busts, which policymakers have responded to with even lower rates.



(courtesy Craig Hemke/TFMetals/GATA)


TF Metals Report: The criminality of the Comex


7p ET Sunday, June 28, 2015

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson tonight powerfully echoes a point long made by silver market rigging whistleblower Ted Butler: that the monetary metals futures markets have been captured by naked short-selling speculators and completely perverted to destroy price discovery in the markets they are supposed to be serving.

Ferguson asks why this is allowed to continue. GATA answers that question with extensive documentation here:


But back in 2001 the British economist Peter Warburton figured it all out in principle long before anybody else did:


Where does it all end?

In his novel “1984,” written in 1949, George Orwell wrote that it wouldn’t end. “If you want a picture of the future,” Orwell wrote, “imagine a boot stamping on a human face — forever.”

But somehow much of the world has held on for three decades longer than Orwell thought possible. Dissent survives, and Ferguson’s — headlined “The Criminality of the Comex” — is posted at the TF Metals Report here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




Europeans rush to buy gold sovereigns.  They are now sold out!!

(courtesy zero hedge)

Gold Tumbles Despite UK Mint Seeing Europeans Rush To Buy Bullion

European investors are increasing purchases of gold as Bloomberg reports, Greece’s turmoil boosts the appeal for an alternative to the euro. Demand from Greek customers for Sovereign gold coins was double the five-month average in June, the U.K. Royal Mint said in an e-mailed statement.As one Frankfurt-based bullion dealer noted, “most of our common gold coins are sold out, when people learned that the Greek banks will be closed, they started to think that itmay not be such a bad idea to have some money in gold.”

Emailed statement from UK Mint…

“During June, we experienced twice the expected demand for Sovereign bullion coins from our customers based in Greece,” accord. to e-mailed statment from U.K. Royal Mint.

*  *  *

As Bloomberg reports,

CoinInvest.com, an online retailer, said sales on Saturday and Sunday were the highest since Cyprus limited cash withdrawals in 2013, driven by a jump in German, French and Greek buyers.


Investors are searching for a safe haven after Greece imposed capital controls, closed banks and stopped selling gold coins to the public until at least July 6. German Chancellor Angela Merkel and French President Francois Hollande have signaled they’ve reached the limits of their ability to safeguard Greece, offering the government no further concessions to step back from the brink.


“Most of our common gold coins are sold out,” Daniel Marburger, a director of Frankfurt-based CoinInvest.com, said by phone. “When people learned that the Greek banks will be closed, they started to think that it may not be such a bad idea to have some money in gold.”


GoldCore, which buys and sells bullion, reported coin and bar demand increased “significantly” on Monday.Sales to U.K. and Ireland today are about three times the average level for the past three Mondays, according to an e-mailed statement from the Dublin-based firm.


BullionVault, which operates the largest online physical gold trading platform, reported a jump in sales during the first half of this year, a sign of a broader increase.


Customers globally added 1.4 metric tons of gold to their account, the biggest increase since 2012, the London-based company wrote in a press release. More clients want their gold stored in Switzerland, a country that isn’t in the European Union, Adrian Ash, head of research at BullionVault, said by telephone.

But despite this demand, gold “prices” are gettiung hammered after an initial spike…


How is this possible? Simple – Thank Benoit!


And now for a very important message to us all from Bill Holter


(courtesy Bill Holter/Holter-Sinclair collaberation)


The Beginning of “the Ending Sequence”!

This coming week could be very telling.  China just ended a disastrous week and finished just whiskers away from entering bear market (-20%) territory  http://www.zerohedge.com/news/2015-06-27/chinas-370-billion-margin-call   .  Credit markets all over the world are weakening and yields are rising.  Greece will not make theirJune 30 payment(s) and probably go through a referendum to decide whether or not to flip their creditors the bird in a meaningless vote.  In fact, Greece will probably “go boom” this week.  Their banks and stock markets may not open Monday morning http://www.zerohedge.com/news/2015-06-27/greek-stock-market-may-not-open-monday-greek-officials-warn .  Two days later, some sort of plan will need to be concocted to classify their bankruptcy as not a “DEFAULT”, otherwise a $3 trillion fuse to a $1.4 quadrillion bomb will be lit!  These and more will be very important “mid-term exams”, any failure will bleed over into derivatives and become “final and terminal exams” with zero chance of a passing grade!
   We have all heard about the Greenspan, Bernanke and now the Yellen “put”.
It has been believed (and for good reason), the Fed would step in and save the stock market should it begin to buckle.  Magically, and time after time as the stock market would hit critical levels, panic buying would appear.  This has been written about many times by many authors.  Would the Fed really buy stocks or even indices?  I would ask, “why wouldn’t they, it is actually even legal” after the plunge protection team was created in 1988.  This is not conspiracy theory, it is FACT!   All one needs to do is look at the Bank of Japan, they openly buy stocks and even seem proud of it!  As for equities, please ask yourself these questions.  How “sound” is a stock market that makes continual new highs on lesser and lesser volume?  http://www.zerohedge.com/news/2015-06-27/bad-breadth-milestone-warning-stocks  If you are a large holder, are you bigger than the available exit?  What if everyone at once took Ms. Yellen up on her “put offer”?
  Another area where Fed buying looks to be very important is in our credit markets.  Unless they step up with some serious buying, and soon, our 10 year Treasury yield will take out 2.5% to the upside.  U.S. Treasuries and their “value” are what act as collateral or foundation for everything the world “believes in”.  Before going further, I do want to mention another aspect of the ultra low rates we live with.  When rates are 10%, a 100 basis point move is only 10%, when rates are 2%, a 100 basis move is 50%!  In other words, movements in interest rates when rates are low have a hugely magnified impact.  When rates rise, collateral “shrinks” very rapidly from a low interest rate base which means margin calls are more rapid and bigger in amounts.  Higher rates will make insolvencies that much more likely and will then occur “systemically”.
  This topic was suggested to me by Jim, as he put it,  I believe this chapter will be described as “The Phantom of the Fed Put revealed.”  Please understand what is meant here.  There is a “confidence” all over the world in not just the Fed but in ALL central banks.  This is a misplaced confidence because the markets themselves are far larger than any single central bank or even ALL of them collectively.  Yes, The Fed can push, pull, support and suppress …for a time.  They cannot stop a broad tide from going out or prevent a tsunami from coming in over a long time frame.  The current timeframe is six years, A LONG time for us Westerners, might as well be six days for those from the East.  Does a Fed (central bank) put really exist?  Or is it only the “belief” a put exists?
  My point is this, the only thing holding markets together is confidence …and the only thing keeping confidence from being shattered is the belief central banks are and will provide a “free put” to all markets.  Take the three examples I started with up top.  If the Chinese market continues to implode, what will that say about the abilities of the PBOC?  Or when Greece defaults and triggers others, what will that say about the ECB or IMF?   Were Treasury yields to rise through 2.5% amongst the other turmoil, what will that say about the “safe haven” status of Treasuries and thus the dollar?  It will be a reflection of Fed impotence.  The skeptics who say “they will do this forever” …can say what they say at their own peril!
  Let me finish this with the BIG BAZOOKA.  I am sure you remember Hank Paulson talking about $700 billion TARP as a bazooka?  The reality is this amount will not even be a spitball this next time around.  There are over $1.4 quadrillion worth of notional value derivatives outstanding. The apologists say “notional” value has no meaning, it is only the “margin” that counts.  They are correct during “normal times”.  Normal times being defined as being “trusted enough” and being able to breathe.  Seriously, if you can breathe today you can borrow money.  What comes next is a change of thought and a massive phase of global distrust.  When trust and confidence break, “margin call” will become a familiar term to nearly all.
  This you MUST understand, when trust evaporates, credit will cease entirely.  Without credit, the world will stop spinning.  Everything finance and many things real will be gone.  The financial house cannot stand with a worthless foundation and distribution of real products will cease as the supply chain breaks.  Over $1.4 quadrillion in derivatives is a larger number than “everything is worth” …not to mention far larger than the money supplies to settle the trades or put up the margin.  You see, “putting up the margin” will equate to 100% of all these contracts because in default …notional and real value are one and the same!  Settlement is not an option!  It is this $1.4 quadrillion margin call that hangs over the entire system each and every day.  Margin calls are almost never issued into calm.  They are almost always issued into panics and by definition ALWAYS at the wrong time!  The only way to shed all margin is to get G.O.T.S.!
  I have said all along and stand by my statement “when this thing gets lit, it will only take 48 hours to engulf everything”.  If this is truly the “beginning of the ending sequence”, many markets will go no bid while a couple will go no offer!  Meaning you will have what you and that’s all you will have… I leave you with this horrible thought for the weekend.  How better might $100 be spent?  A nice dinner with your spouse or on 200 lbs. of parboiled rice?
Regards,  Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

and now overnight trading in stocks and bonds from Asia and Europe:


1 Chinese yuan vs USA dollar/yuan weakens to 6.2085/Shanghai bourse red and Hang Sang: red

2 Nikkei closed down by 596.20  points or 2.88%

3. Europe stocks all in the red /USA dollar index down to 95.62/Euro falls to 1.1115

3b Japan 10 year bond yield:  falls to  .45% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.43/ominous to

3c Nikkei still just above 20,000

3d USA/Yen rate now well below the 123 barrier this morning

3e WTI 58.17 and Brent:  61.53

3f Gold up/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. German 10 yr bund falls to .74 per cent. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate rise  to 33.87%/Greek stocks this morning stock exchange closed/ still expect continual bank runs on Greek banks /Greek default inevitable for tomorrow/

3j Greek 10 year bond yield rise to: 14.53%

3k Gold at 1178.70 dollars/silver $15.84

3l USA vs Russian rouble; (Russian rouble down 1/2 in  roubles/dollar in value) 55.54,

3m oil into the 58 dollar handle for WTI and 61 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can 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. It is not working: USA/SF this morning .9337 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0378 well below the floor set by the Swiss Finance Minister.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 3 year German bund remains in negative territory with the 10 year moving further away from negativity at +.74%

3s Three weeks ago, another 1.8 billion ELA was raised to a maximum of 85.9 billion euros.  Two weeks ago, saw another 1.9 euros added to the ELA as massive bank runs were the object of the day and thus the ELA stood at a maximum 87.8 billion euros.Then last Tuesday and Wednesday, the ELA was raised twice to 89 billion euros (finally announced on Friday). The ELA is used to replace depositors fleeing the Greek banking system. The bank runs are increasing exponentially.This week the ECB is contemplating cutting off the ELA which would be a death sentence to Greece and they are as well considering a 50% haircut to all Greek sovereign collateral which will totally wipe out the entire Gr. banking and financial sector. ON the weekend the ECB freezes ELA setting the entire globe financially on fire!!!

3t Greece  paid the 700 million plus payment to the IMF but with IMF reserve funds.  The funds are deferred to June 30. It will not be repaid


4. USA 10 year treasury bond at 2.34% early this morning. Thirty year rate well above 3% at 3.11% / yield curve flatten/foreshadowing recession.

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

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)


Central Banks Scramble To Stabilize Crashing Markets: China Fails, Switzerland Succeeds (For Now)

Following a week in which the Chinese stock bubble popped and a weekend in which the Eurozone bubble followed, it was all up to central banks to stabilize the devstation that would follow should the Plunge Protection Team, now global, not show up.

And while US equities futures were looking grim overnight, China at least started off on the right foot, rising a little over 2% in early trading following China’s scramble to stabilize markets as it knows the alternative could very well be (deadly) civil unrest.  And then something unexpected happened: the market did not follow the Chinese central bank script. In fact, as noted earlier, stocks plunged tumbling as much as limit down for CSI-300 futs, and the SHCOMP crashing the most since 1996.


This was not supposed to happen: in fact, with China unleashing the bazooka of the double rate cuts, it was virtually assured that at least China’s stock would rise as the rest of the world tumbled on Greek worries. That it did not was the biggest red flag, far more so than what the Greek referendum reveals this weekend, as it means that after Sweden last week, now China has lost control!

According to Paul Chan, chief investment officer for Asia ex-Japan at Invesco in Hong Kong, “China’s fourth interest-rate cut since November failed to stabilize the stock market as it was seen as a stopgap measure to stem a slide in share prices rather than an effort to revive the economy.” He added that “It seems like policy makers are more worried about the stock market than about the real economy. The economy is slowing down and they are so much behind the curve in terms of easing. But as the stock market corrected, they jumped in, putting in all the policies. It gives people a sense of panic.

That’s about right: and now with rate cuts no longer stabilizing the market which as revealed was the PBOC’s only real motive, the next and final option for the Chinese central bank is QE, just as we predicted.

But until we get then, there is a question: what happens in the interim. Because at the open, Europe looked in the abyss, and with no help coming from China, it did not like what it saw:


And then the answer came from the Swiss National Bank, which stepped in to prevent the collapse just as Europe was opening. Because seemingly out of nowhere, a tremendous bid came in to life the EURCHF, buying Euros (against the CHF and the USD) and selling Europe’s last left safety currency.

We now know that it was the SNB, the same central bank which is the proud owner of well over $1 billion in Apple stock.


End result:

As the SNB president admitted: “There was an increased demand for francs” over night, Thomas Jordan says at conference in Bern. “The SNB intervened in the market to stabilize it.”

In other words, without the SNB, the situation would have been truly dire.

And this is only on Sunday night: we now have 5 more days of agonizing wait until we get to the Greek referendum, which may not even happen because as German FAZ reports Greece may not even have the funds to hold the Greferendum!

To be sure before the week is done every single other central bank will have a go at stabilizing the “market” although if everyone else decides to sell, the Chinese contagion will spread as central bank after central bank loses market intervention credibility. At that point, it will be time to really get the hell out of Dodge.

A deeper look at markets, starting in Asia: PBoC cut interest rates for a 4th time in 7 months by 25bps with the lending rate lowered to 4.85% and the deposit rate lowered to 2.00%, while it also cut the RRR rate by 50bps for banks which lend to agricultural and small and medium sized businesses and by 300bps for Non-banking financial companies. (China Economic Net)

Asian equities plunged as participants react to the latest developments in the Greek crisis, while losses in the Nikkei 225 (-2.9%), ASX 200 (-2.2%) and Hang Seng (-2.6%) were exacerbated by weakness in financials. Shanghai Comp (-3.4%) yet again traded in erratic fashion, as the index entered bear market territory having fallen 20% from its June 12th highs, with the PBoC’s decision over the weekend to cut interest rates by 25bps months failing to provide a sustained rally in the index. Finally, JGB prices jumped by 39 ticks with USTs rising by over a point as safe havens benefited from a widespread risk-off tone.

Weekend developments in Greece have dominated headlines and market moves this morning, with Greek PM Tsipras announcing a referendum on 5th July and imposing a bank holiday for the week. For a full roundup of developments in Greece please click here. This saw European equities (Euro Stoxx: -3.1 %) open the session in negative territory, with FTSE (-1.4%) and SMI (-1.0%) outperforming as the UK and Switzerland are not members of the Eurozone. On a sector specific basis, financials are lagging with some Italian banks failing to post as opening price.

While fixed income markets have seen Bunds trade around 175 ticks higher, fears of contagion have not been realised despite analysts at Goldman Sachs forecasting that Italian and Spanish spreads would widen by 150-175 bps against the German benchmark, but have instead widened by around 30bps and have come off their worst levels throughout the morning.

EUR initially weakened substantially as a result of the collapse in Greek talks, with many concerned not only with the possibility of a Grexit, but also the risk of contagion to other European periphery nations. This saw EUR/JPY fall as much as 460 pips as the impact on the cross was intensified due to safe haven flows into JPY. However the European open saw a less severe impact on European periphery bonds, with the Spanish and Italian 10Ys both widening against the German benchmark by around 30 bps, substantially less than the 150-175 forecast by Goldman Sachs, leading to EUR paring back much of its losses, bolstered by the limited contagion. As a result EUR/JPY traded lower by 180 pips and EUR/USD lower by around 60 pips heading into the US open.

Away from Greece, EUR/CHF saw an uptick this morning after SNB’s Jordan stated that the central bank has active in the FX market overnight emphasising the potential for the SNB to step in to weaken the CHF. Also of note, supporting EUR this morning is the regular month-end related buying of EUR/GBP by Buba.

The USD opened higher today but has fallen throughout the European session to trade lower by around 0.8% amid JPY strength stemming from safe haven flows. Elsewhere, Fed’s Dudley (Voter, Dove) has stated that a September rate-lift off is ‘very much in play’ amid stronger US data.

Looking ahead, today US Pending Home Sales as well as German CPI, with regional CPIs so far printing lower than expected.  Participants will also be looking out for comments from EU’S Juncker at 1145BST/0545BST although a European Commission spokeswoman has already stated that no new proposals will be presented.

Gold (+ USD 3.10) strengthened overnight as a consequence of safe haven flows, however the yellow metal has come off its best levels throughout the European morning to trade back below USD 1180. The energy complex has seen weakness so far this morning with an Iran nuclear deal appearing close ahead of the deadline tomorrow, combined with concerns regarding China after the aforementioned weakness. Also of note CFTC oil speculators lowered their WTI net long positions by 5,314 contracts to 238,274 in the week to 23rd June.

In summary: European shares fall, though are off intraday lows, with the autos and banks sectors underperforming and basic resources, health care outperforming. Stoxx 600 falls as much as 3.2%, most since Oct. 15 Greece imposes capital controls, Athens stock exchange trading suspended until bank holiday over.  Germany’s bonds surge most since 2011, Greek yields rise. China’s stocks fall 22% from this year’s June peak, entering bear market. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is weaker against the dollar. Commodities decline, with nickel, Brent crude underperforming and copper outperforming. U.S. Dallas Fed index, pending home sales due later.

Market Wrap:

  • S&P 500 futures down 1% to 2075
  • Stoxx 600 down 2.1% to 388.5
  • US 10Yr yield down 13bps to 2.34%
  • German 10Yr yield down 13bps to 0.79%
  • MSCI Asia Pacific down 2% to 144.9
  • Gold spot up 0.2% to $1177.4/oz
  • All 19 Stoxx 600 sectors drop; basic resources, oil & gas outperform, autos, banks underperform
  • Asian stocks fall with the Kospi outperforming and the Shanghai Composite underperforming; MSCI Asia Pacific down 2% to 144.9
  • Nikkei 225 down 2.9%, Hang Seng down 2.6%, Kospi down 1.4%, Shanghai Composite down 3.3%, ASX down 2.2%, Sensex  0.6%
  • Euro down 0.6% to $1.11
  • Dollar Index up 0.24% to 95.7
  • Italian 10Yr yield up 14bps to 2.29%
  • Spanish 10Yr yield up 14bps to 2.25%
  • French 10Yr yield down 9bps to 1.21%
  • Greek 10Yr yield up 377bps to 14.62%
  • S&P GSCI Index down 1.3% to 429.9
  • Brent Futures down 2.3% to $61.8/bbl, WTI Futures down 2.1% to $58.4/bbl
  • LME 3m Copper up 0.3% to $5773/MT
  • LME 3m Nickel down 4.7% to $11870/MT
  • Wheat futures down 0.1% to 567.3 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • Markets react to latest Greek developments with PM Tsipras calling for a referendum & week long bank holiday seeing weakness in EUR & equities, while PBoC cut rates for the 4th time in 7 months
  • Greek referendum announcement sees European equities trade firmly in the red with EUR also weaker, while periphery bonds have not suffered as much as expected due to limited contagion
  • PBoC cut interest rates for a 4th time in 7 months by 25bps with the lending rate lowered to 4.85% and the deposit rate lowered to 2.00%, while it also cut the RRR rate by 50bps for banks which lend to agricultural and small and medium sized businesses and by 300bps
  • Today US Pending Home Sales and German CPI, with comments also expected from EU’S Juncker at 1145BST/0545BST.
  • Treasuries surge, led by 7Y and 10Y, as Greece shut its banks and imposed capital controls in an announcement designed to avert the collapse of its financial system, heightening the risk it will be forced out of the euro.
  • History suggests capital controls hardly ever work; while dozens of countries have imposed such measures since World War I, the IMF found that only those few with sound economies and strong institutions succeeded in slowing capital flight
  • The Greek government plans to ask voters on July 5 whether they accept the latest proposal by creditors on implementing budget cuts in return for more financial aid, and advocates a “no” vote
  • Markit iTraxx Europe CDS index surged by as much as 20%, the most since Lehman in Sept. 2008, to 80bps
  • Morgan Stanley sees Greek EUR exit now as base case, with odds at 60%; RBS sees 40% odds of Greece leaving EUR
  • Chinese stocks tumbled, sending the benchmark index into a bear market, as signs of an exodus by leveraged investors overshadowed the central bank’s effort to revive confidence with an interest-rate cut
  • Chinese regulators are considering suspending IPOs to stabilize the country’s tumbling stock markets, people familiar with the matter said
  • With two days left in Puerto Rico’s fiscal year, the cash- strapped commonwealth is struggling to pass a budget that would allow  it to make payments on a $72b debt load that the island’s governor said is unsustainable
  • Sovereign 10Y bond yields lower with the exception of peripheral EU; Greece 10Y +379bps, Italy, Spain and Portugal yields also higher. Asian, European stocks plunge, U.S. equity-index futures decline. Crude oil lower, copper and gold slightly higher


DB’s Jim Reid concludes the overnight recap

Well, well. What a week we have ahead. If the drama around the upcoming Greek referendum and the weekend Chinese rate cut are not enough then we have the confusion of an extra second being added to world time at midnight GMT tomorrow – the first time this has been done during international trading hours. The variability of the earth’s rotation will play second fiddle to the ongoing Greece saga though.

Before we dig into all the details, a snapshot of markets this morning shows the expected sell off. However there is no panic yet and bourses are generally trading better than where they opened the Asian session. The Nikkei (-2.18%), Hang Seng (-2.68%), Kospi (-1.35%) and ASX (-2.18%) have all fallen though, while S&P 500 futures are around -1.49% as we go to print. The Shanghai Comp is -3.75% although markets in China have been particularly volatile once again with the PBOC rate cut muddying the waters. In bond markets, 10y Treasury yields are 17.0bps tighter at 2.303% and at the lows for the session. 10y yields in Australia (-13.9bps), Japan (-2.4bps), South Korea (-3.4bps) and New Zealand (-7.1bps) have also taken a leg lower, while credit indices in Asia, Australia and Japan are +7bps, +8bps and +6bps respectively, although all traded as much as +10bps wider on the open. In FX markets the Euro is 1.48% lower versus the Dollar at $1.1002 (touching $1.0955 briefly), while the single currency is also down against the Yen (-2.45%), Aussie Dollar (-1.42%), Swiss Franc (-1.39%) and Sterling (-1.21%).

So let’s quickly recap the news and then delve into some of the issues. Tsipras has called for a referendum on the ‘final’ EU bailout offer (which was never actually formally finalised) to be held next Sunday (5th July). Ironically any agreement that might have been available expires tomorrow night so it will become largely hypothetical by then. It is also a pretty vague question being asked and one that leaves it open to interpretation what citizens are in effect voting for. A yes vote will actually probably only start a new round of negotiations with what would be seen as a discredited government – assuming they survive.
Tsipras is campaigning for a no vote. In response to the weekend news the ECB has capped the ELA at Friday’s levels. After the current program expires tomorrow night all eyes will be on whether the ECB actually suspends the ELA, effectively deeming the Greek banks insolvent. There will be little going back if they do so we would expect them to just keep the cap for now until the vote is made.

Meanwhile, shortly after 3am local time in Greece, the Greek government as expected issued a decree closing banks and imposing capital controls on the back of the ELA decision. Banks are set to be closed until July 6th with cash withdrawals at ATM’s limited to €60 per day. At the same time, any bank transfers or payments abroad are set to be banned. The move confirms earlier comments from Piraeus Bank CEO Thomopoulos following a crisis meeting of Greek government and finance officials earlier on Sunday and also comes following various reports of long queues at ATM’s and petrol stations as well as suggestions that 500 of the country’s more than 7000 ATM’s had run out of cash by Saturday morning.

There are going to be lots of technical questions as a result of this move to referendum and what seems certain to be a non-payment to the IMF tomorrow. Will it immediately be termed a default? Will it lead to a cross-default on EFSF loans, GGB and Greek CDS? It might not immediately (the EU for starters might wait until after the referendum) but the debate will start. However I think it’s important not to get too bogged down in the technical details at this stage as surely the likely result of the referendum is going to be the most important event this week and ahead of this the perception as to the result.

On this, it’s likely that we start to see a number of polls pop up this week which will get the market debating. There was plenty of attention on two polls in particular in the Greek press on Sunday morning which showed support for making a deal with Greece’s Creditors at 57% in the Alco Poll for Proto Thema and 47% (with No’s at 33%) in the Kapa Poll for To Vima, although the latter with a carefully worded question based on making a ‘new painful agreement’. It’s worth noting however that these polls were run prior to the announcement of the referendum and so are somewhat outdated. It’ll also be important to caution against the questioning in any upcoming polls with the government likely to campaign emphasizing the negative aspects of an ‘austerity package’, while the opposition will likely stress the equivalence of a euro exit and so as a result it’s likely that we see different segments perceiving the question differently. Whoever is more effective as getting their interpretation across may help swing the vote.

In the meantime, the IMF and EU will surely tread a careful path and whilst they will want to make it painful this week for Greece they won’t want to cut them off completely. Indeed Merkel has been strangely quiet so far which may reflect a desire not to antagonise a delicate situation. Overall the EU are likely to try to show the voters that things have taken a turn for the worse (without making any irreversible decisions) and give them a glimpse of the chaos that might arise at the end of the week if they don’t vote yes?

DB’s resident expert George Saravelos notes however that even the consequences of a yes vote are far from certain. Finance ministers on Saturday highlighted the important credibility issues that would arise from Greek government implementation of an agreement it campaigned against. A change in government therefore and a cabinet of national unity – possibly under the pressure of a continuously strained banking system – may well be the most the likely outcome, however any agreement would have to happen fast given the accelerating impact of the crisis on the economy.

In terms of markets could this be a big test of the poor liquidity that there is at the moment. I’m sure most clients in Europe would like to lighten up on risk this morning and buy the safe havens but there are some markets (like European credit) where this will likely to be very difficult to do efficiently. I wouldn’t expect panic at the moment but this could be a test of the new regime of awful secondary market liquidity.

One important factor to consider will be the ECB’s reaction function this morning. We’ve already got verbal evidence of support following the ELA decision with the associated statement including such rhetoric as ‘determined to use all instruments available within its mandate’ and the bank is ‘closely monitoring’ market conditions. Given the tools available, specifically QE, it’ll be interesting to see if we get an aggressive response from the ECB in the market this morning. It would certainly be a statement of intent from Draghi should he feel the need to accelerate asset purchases.

A personal view is that this story won’t get too out of hand unless we start to see any evidence that the Greek’s are likely to vote No on Sunday. At this point the sell-off could get messy. If this doesn’t happen the negativity may well be contained even if the story will be far from over.

Of course, the other news story over the weekend came out of China where we got the news that the People’s Bank of China has cut the one-year benchmark lending rate and deposit rate by 25bps to 4.85% and 2% respectively. At the same time, there was also an RRR cut of 50bps for some banks who’s lending to rural borrowers and small and medium-sized enterprises is over a certain threshold, while there was a 300bps RRR cut for financing companies. DB’s Zhiwei Zhang, noted that the cuts were more than he expected and believes that the recent equity market sell-off triggered the action. Zhiwei notes that his baseline forecasts remain the same, that being another interest rate cut and a broad-based RRR cut in Q3 of this year. He does however note his concerns around the downside risks to the economy, particularly in 2016. Zhiwei believes that the government is following a strategy of leveraging the equity market to boost economic growth, which although helped in Q1 (through a boost from the financial service sector), is showing signs of volatility now which may pose risks to growth in the future. He notes that if the equity market drops significantly, the contribution from the financial service sector to GDP growth may return to its historical average or even lower.

Backtracking to markets on Friday, there wasn’t a whole to report as markets largely traded to the tune of what are now mostly redundant headlines concerning Greece. In Europe the Stoxx 600 (+0.12%), DAX (+0.17%) and CAC (+0.35%) all finished modestly firmer on the day, while Greek equities closed +2.03% higher in what is expected to now be the last trading day for the ATHEX before the referendum on Sunday. Equity markets were slightly more mixed in the US as the S&P 500 finished (-0.03%) more or less unchanged while the Dow (+0.31%) was a tad higher. In bond markets meanwhile, yields had drifted steadily wider with 10y Treasuries and Bunds +6.4bps and +6.1bps respectively. It was a similar story in peripherals meanwhile as Italy, Spain and Portugal ended +6.0bps, +4.5bps and +3.4bps respectively. There was little to report on the data front other than an upwardly revised June University of Michigan consumer sentiment reading, with the final print revised up 1.5pts to 96.1bps.

Headlines dominating Greece are set to be front and centre this week, however elsewhere we’ve also got a busy week for the data docket and we start this morning in the UK with consumer credit and money supply data before we get a range of confidence indicators out of the Euro area shortly after. German CPI is due this afternoon before we pass over to the US where pending home sales for May will be the highlight, shortly followed by the Dallas Fed manufacturing activity index. Tuesday starts in Japan where we’re expecting housing starts and cash earnings data. It’s a busy day in the European timezone with French PPI and consumer spending, German unemployment, the final Q1 UK GDP print and Euro area CPI and unemployment readings all due. In the US on Tuesday we’ve got more house price data with the S&P/Case Shiller house price index, while the ISM Milwaukee, Chicago PMI and June consumer confidence reading are all due. It’s a busy start in Asia on Wednesday where we see the Q2 Tankan survey out of Japan, shortly followed by the manufacturing and non-manufacturing PMI’s for China. The final June manufacturing PMI’s are also scheduled to be released in the Euro area, Germany and France on Wednesday while we’ll also get the latest revision for the UK. It’s a busy session in the US on Wednesday when we get ADP employment change data for June, Challenger job cuts, manufacturing PMI, ISM manufacturing and prices paid, construction spending and finally vehicle sales. Euro area PPI kicks off Thursday morning shortly followed by the latest ECB minutes from the June 3rd meeting. In the afternoon however we get the week’s main data event with US payrolls for June, as well as jobless claims, average hourly earnings, ISM NY and factory orders. We end the week on Friday in the Asia timezone with services and composite PMI readings for China and Japan. We’ll also get these for the Euro area shortly after as well as for Germany and France. The latest revision for the UK will also be due. Euro area retail sales rounds off the releases with the US closed for Independence Day. Fedspeak wise Bullard is scheduled to speak.

Stand by for a hectic week.

Let us begin as we recap a tumultuous weekend.
First we will discuss China

On Sunday morning, in a desperate move,prior to markets opening, China cuts both its key lending rate and its banking RRR requirements:

(courtesy zero hedge)


A Desperate China Cuts Key Policy Rates After Stock Market Crash; “It’s Just Like 1987”

On May 10, China cut its benchmark lending rate for the third time since November. The move came just a few days after several brokerages tightened margin requirements, which triggered a 4% decline in Chinese stocks.

At the time, we noted that the PBoC had done something similar not even a month prior, when in April, the central bank slashed the RRR rate for the second time in 2015 after a decision by the CSRC to crackdown on brokerages’ use of umbrella trusts to skirt margin limits caused futures to crash.

Here’s what we said after each of those policy rate cuts: “We wonder then, if Beijing is taking its cues from stocks or from the economy.”

If there were still any doubts about what really matters to Beijing when it comes to setting policy rates, they were answered on Saturday when the PBoC cut both the benchmark rate (for the fourth time in eight months)and the RRR rate (for the third time this year) on the heels of the steep declines suffered by Chinese stocks last week.

Effective tomorrow, the one-year lending rate drops 25bps to 4.85% and some lenders will see RRR fall 50bps. As WSJ notes, this is the first time the PBoC has cute both the benchmark lending rate and the RRR rate on the same day since October of 2008, which should certainly tell you something about how dangerous Beijing thinks the current situation truly is. Here’s WSJ with more:

Analysts saw the PBOC’s moves as a reaction to the massive stock market decline. The near-20% decline in equity values in a matter of days—despite efforts to clamp down on margin lending—threatens to undermine recent progress on restoring growth momentum, said ING economist Tim Condon. “It’s difficult when you have a tiger by the tail. The stock market is clearly fueled by speculative excess,” he said.


It isn’t surprising that China cut interest rates, said HSBC economist Ma Xiaoping, but what was unexpected was that Beijing would put through both a cut in benchmark interest rates and a reduction in certain bank reserves at the same time. This reflects the central bank’s desire to stimulate the economy, fight deflationary pressure and respond to last week’s sharp market decline, she said.


Some analysts went so far as to liken the action by PBOC to that taken by the U.S. Federal Reserve following the infamous “Black Monday”—or Oct. 19, 1987, when stock markets around the world crashed.The Fed at the time encouraged banks to continue to lend to one another on their usual terms, which boosted investor confidence in the central bank’s ability to calm severe market downturns.


“It’s just like what the Fed did in 1987,” said Larry Hu, China economist at Macquarie Group Ltd., a Sydney-based investment bank. “The PBOC is trying to stabilize the market with the unprecedented easing moves.”

“The fact that this is announced now may have something to do with the plunge of the stock market on Friday. This may give the impression that monetary policy easing is somehow aimed at supporting the stock market, which is a pity,” Wang Tao, chief China economist at UBS Group AG told Bloomberg on Saturday.

So although Morgan Stanley — whose “don’t buy this dip” call didn’t do Chinese investors any favors on Friday — thinks Beijing can’t “exert direct control over the stock market”, it won’t be for lack of trying because given that the Street is calling for several more policy rate cuts before the end of the year, this is likely only the beggining of what may end up being the most transparent attempt to use monetary policy to sustain an unsustainable equity bubble since… well, since the Fed-managed five-year S&P rally.



Sunday evening:  Chinese markets after initially stabilizing collapsed:

(courtesy zero hedge)

Chinese Stocks Are Collapsing, Despite PBOC Hail Mary


  • *CHINA’S CSI 300 INDEX FALLS 3.4% TO 4,190.3 AT BREAK

After The People’s Daily proclaimed… “investors were moved to tears” thanks to the PBOC’s actions…



The bounce is dead. CHINEXT – China’s tech-heavy high beta ‘Nasdaq’ – is down 5-6% today, 19% in 3 days, and 33% from highs in early June…!


In 3 weeks, it has given up half its gain of the year…

*  *  *

All that pent-up demand to be ignited among the farmers and housewives of China thanks to a double rate cut (RRR and benchmark) enabled a mere 2.5% bounce in Chinese stocks at the open which has now completely been erased as Shanghai enters a bear market. As The South China Morning Post’s George Chen notes, the most dangerous idea gaining traction in the Chinese stock market is the naïve consensus among ordinary investors that no matter how bad the market gets, the Communist Party will eventually rescue everyone. If not them then, as Chen concludes, “It’s time to wake up.”


Spot the double-rate cut ‘bounce’…



Decidely not what the doctor ordered… and as The South China Morning exclaims, many Chinese investors who have a planned economy mindset, believing government should help them, may well have a surprise coming…

The most dangerous idea gaining traction in the Chinese stock market is the naïve consensus among ordinary investors that no matter how bad the market gets, the Communist Party will eventually rescue everyone.


The central bank surprised everyone with its announcement on Saturday that it will cut its benchmark deposit and lending rates by 25 basis points – the fourth reduction since November.


Meanwhile, it also decided to reduce the reserve requirement ratio at selected banks to further ease liquidity in the banking system.

The unusual “double cut” move came just 24 hours after more than US$760 billion was wiped off the value of mainland stocks – equivalent to the market capitalisation of US technology giant Apple. The reasons for the market crash are complicated, including margin calls, tight liquidity at the end of the month, and panic. Afterwards, the most frequently heard question was, what will the government do to rescue the market. Rescue? Is this really government’s responsibility?


China has been through the planned economy model for decades. This is especially ingrained in the generation of my parents, who make up the bulk of individual investors. Just as everything once belonged to the government, many of these people believe the stock market should also belong to the government. So it’s the job of the government – in other words, the Communist Party – to rescue the market.


Unfortunately, many Chinese experts and professors are also promoting this naïve view of the relationship between domestic investors and the government.


After the central bank’s moves on Saturday, many experts told state media that they believed the central bank acted mainly to rescue the stock market, given the timing of the decision.


Suddenly, investors who felt that Friday was the end of the world – with more than 2,000 stocks sinking – began to talk about what stocks they should buy on Monday morning.


“You still don’t get it? It’s now like the government policy that the stock market must go up. Otherwise, why bother asking the central bank to rescue the market?” said one investor in a post on Weibo. Many others echoed his views on the social media network.


Beijing has been talking about how to do a better job with so-called investor education for years. Unless the government corrects an impression that it is a last-resort market rescuer, risks will grow in the market and sooner or later the bubble will burst.


It’s time to wake up. Beijing has faced more serious challenges than a stock market that is becoming more risky. If you want to rely on President Xi Jinping for everything, then your thinking may just be too simple and too naïve.

*  *  *

With Central Bank bazookas seemingly un-omnipotent, the fate of the world is in the hands of illiterate Chinese farmers and Greek grannies.

And now onto Greece/chronological sequence of events.

Very early Saturday morning:

Europe responding to the decision for Greece to hold a referendum:


“This Is A Sad Decision”: Europe Responds To The Greek Referendum, Which Has One Massive Problem


In the aftermath of yesterday’s “nuclear option” announcement by Greece, when in a dramatic after-midnight speech Greek PM Tsipras announced that Greece would hold a referendum next Sunday, the day after the US independence day, the same Greek government made it very clear how it wants the Greeks to vote.

First, it was the Greek Energy Minister Panagiotis Lafazanis, head of the Left Platform movement of Syriza, who said in comments broadcast on state-run ERT TV that a no vote by the Greek people in July 5 referendum “will open the road for a new future for the country” adding that “the dilemma facing Greeks is “whether to live better or not. Greek people are aware of difficulties of a new starting point, they’re ready to support new national effort.”

Then the alternate health and social security minister Dimitris Stratoulis doubled down telling ERT-TV that Greeks are being given the opportunity to decide the way forward and “I’m optimistic” that they will give a “resounding” no to the “provocative” demands of the country’s creditors. The only issue is the question being put to the people in the referendum.” It got better when he said that “Greeks are being asked to vote whether the country should be a colony, or not, of creditors.”

Well, if that’s how the referendum question is indeed phrased then yes, it is clear how the Greeks will vote.

As was to be expected, the Greek opposition parties, except for the Nazi-inspired Golden Dawn, expressed horror at the referendum. Conservative main opposition leader Antonis Samaras accused Tsipras’ radical left government of advocating an exit from the eurozone and the European Union. “Mr Tsipras has led the country to an absolute impasse,” he said. “Between an unacceptable agreement and leaving Europe.”

Why? Because they know that despite the referendum move, which is clearly just a last ditch attempt by Tsipras to save his political career by punting the decision straight to the people, if there is a “Yes” vote to the proposed bailout, then Syriza is out and new elections have to follow.

As for the reason why Tsipras had to punt, it is a simple one: at the core of the ongoing Greek negotiation debacle is the inability of the local people to decide what they want: according to various recent polls 80% of Greeks want to stay in the Eurozone and keep the Euro currency, the problem is that 80% also want an end to austerity. Two conditions which are mutually exclusive. It is no surprise then that Tsipras had no clue how to proceed based on his mandate.

So with all that in place, the question was how would Europe respond to this shocking after-midnight (both literally and metaphorically as July 5 comes after the June 30th deadline by which Greece needs to have a deal in place) announcement. Conveniently we had just the soundbite venue today when the European finance minister met once more in Brussels to finalize the Greek deal, which is now clearly moot, and instead were asked for their reactions to the referendum proposal.

Here are some of the key responses:

First, the take of Finnish finance minister Alexander Stubb who said “we’re basically closing the door for any further negotiations,” Stubb says to reporters in Brussels before a meeting of euro-area finance ministers adding that most of the Eurogroup opposes a program extension adding the ominous: “Plan B is fast unraveling and becoming plan A. We cannot extend the program as it stands. There is nothing else on the table. We will have to see what the next step entails for Greece.”

When asked if Europe will impose capital controls on Greece after last night’s dramatic footage of long ATM lines following Tsipras’ announcement he said that “We are in no position to announce bank holidays in Greece nor are we in any position to announce capital controls in Greece”

Then it was the turn of Varoufakis’ old nemesis, Dijsselbloem, who said that the Greeks “seem to have taken a negative stand on the last proposal by the three institutions, and basically reject those proposals.”

That is a very sad decision, because the door in our mind was still open to finalize talks,” Dijsselbloem also said to reporters in Brussels before a meeting of euro-area finance ministers. “And now, given their decision, they are now proposing to hold a referendum, again with the negative advice to the Greek people, and that is a very sad situation.

“We will hear from the Greek minister today whether all of this is correct, whether we understand that correct, and then we will talk about the consequences that will have.”

Of course, no response would be possible without the German finmin Schauble pouring the usual glass of cold water on the face of Greece and he did so promptly when he said that “we no longer have a basis for negotiation.

“We actually came today to try to negotiate a unified position with Greece, but the Greek government, if I understand it correctly, has unilaterally ended the negotiations. We have to look at what the situation is. The program ends on June 30. We know the situation with the Greek banks. That’s an issue of talks between Greece and the ECB. But we’ll also discuss that. But right now we have to discuss everything, that’s why we’ve agreed to meet this afternoon.”

On the question of Plan B: “What does Plan B mean? The negotiations have been abandonded by Greece, the negotiating table. So we’re in a situation in which the program ends Tuesday, because there’s no other negotiations on anything else.

There was a brief comic interlude when the Slovenian finmin Peter Kazimir responded to what he expects from Yanis Varoufakis saying “more lecturing” before making it also clear that if the Greek government rejects the proposal, which it effectively has done with the referendum, then the “programme is over.”

But the biggest problem for Greece was phrased as follows by an unnamed EU official cited by Bloomberg who said that Euro-area finance ministers are unlikely to extend Greece’s aid program while Prime Minister Alexis Tsipras considers a referendum adding that “some nations won’t accept such an extension.

Belgian finmin Van Overtveldt confirmed as much saying that “we don’t have three weeks, but three days. So that is something that everybody and the Greek government should be aware of. They have wasted so much time in the last weeks and now we have come to the point that we have just three days left. We can no longer prolong whatever action we want to take, because June 30 is there, it is very much there. June 30 is the end of the program. We will have to decide on issues today.” Alas, that is now impossible as per the events Greece has set in motion.

When asked about a possible extension of the Greek program beyond June 30, Van Overtveldt says: “I don’t think so.”

And so we reach the massive problem facing the Greek people and the way the referendum is proposed:because it takes place 5 days after the June 30 expiration of the extended bailout program, there won’t be an actual program to “refer” on, especially once Europe makes it clear today that unless a deal is reached today, which now appears impossible, then there won’t even be the offer of a program on July 5.

As a reminder, this is what the Greeks would be voting for: according to the cabinet proposal, posted on the parliament’s website, voters will be asked to respond to the following question:

Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on June 25 and which consists of two documents:

The first document is called ‘‘Reforms for the Completion of the Current Program and Beyond’’ and the second document is called ‘‘Preliminary Debt Sustainability Analysis.’’

– Those citizens who reject the institutions’ proposal vote Not Approved / NO

– Those citizens who accept the institutions’ proposal vote Approved / YES.


Sure enough moments ago Varoufakis was quoted as saying he would ask the Eurogroup for a bailout extension of a few weeks to accommodate the referendum.

And the punchline: if the Eurogroup says “Oxi”, then the entire Greek gambit, which has been a bet that to Europe the opportunity cost of a Grexit is higher than folding to Greek demands, collapses.

If the Eurogroup declines Varoufakis’ request, there simply can not be a referendum, as the “institutions proposal” will no longer be on the table. As such, the only question is whether the ECB will also end the ELA at midnight on June 30, adding insult to injury, and causing the collapse of the Greek banking system days ahead of a referendum whose purpose would now be moot.

But that would be suicide to the European project, as it sets the Grexit in play and with that the “European Union” becomes nothing more than Disunion and moving the crisis away from Greece to Italy, Spain and Portugal, the Greek game theorists would say, claiming that to the ECB this is the worst possible outcome?

After all even the former Greek prime minister, George Papandreou, who lost his job threatening to do just the referendum which Tsipras announced yesterday, came to twitter to blast the decision and saying it is irreversible.

Well, not really.

Recall what we said last week in “Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants” which we urge everyone to reread, especially those who think that the ECB and thus Troika, will cave to any last minute Greek demands. Because a Grexit, at least according to Goldman, may be just what Mario Draghi wanted all along, and the only question is who ends up getting the blame for Grexident. Conveniently, with the referendum announcement, Greece blinked in the game of blame, and now Europe can legitimately say it was the Greek’s fault and they kicked themselves out of the Eurozone, which will then be a green light for the ECB to expand its QE, crush the Euro, and – supposedly – lead to even more growth for Europe as Greece is left to fend for itself outside of the monetary union.

All this, of course, assuming the Greeks do vote No on the referendum. And even if they vote Yes, which is a distinct possibility based on recent polls, it may already be too late, as it will unleash a political crisis even more delays and gridlock, new elections, and even more misery from inside the Eurozone. Assuming, of course, that the Troika will agree to have Greece back, without Syriza in power of course.

In any event, going forward the Greeks will only have themselves to blame for whatever the final outcome is. That, and the Greek tragicomedy which has now lasted for over 5 years, may finally be over.

Early Saturday morning, we have 3 possible options being discussed by the EU:
(courtesy zero hedge)

Here Are The Three Options Being Discussed In Brussels

With the ATMs literally running out of cash in Greece after PM Alexis Tsipras announced a referendum in a dramatic, early morning televised address to the nation, EU finance ministers are meeting in Brussels today to determine what the next steps are now that Athens has effectively given creditors an ultimatum. 

According to MNI, three options are being discussed at the Eurogroup emergency session. 

The first involves effectively hitting the “reset” button, withdrawing all existing proposals, and extending the deadline for the end of the second program although without providing for more liquidity.

Alternatively, the EU may decide to stick to a proposal tabled on June 1, which represented a compromise on fiscal targets but preserved creditors’ “red lines” on pensions and the VAT.

Finally, the EU may decide to present Yanis Varoufakis with a take-it-or-leave-it proposal that contains VAT compromises and special considerations for Greek islands which are critical to the country’s tourism industry. Varoufakis would then need to call Alexis Tsipras and attempt to secure a hasty agreement.

(Finnish Finance Minister Alexander Stubb talks to Yanis Varoufakis on Saturday)

We’ll get more color later today once the emergency meeting breaks up. For now, we’ll leave you with the following from MNI (citing sources close to the negotiations):

Another Eurogroup source said that the Ministers are preparing for all possible scenarios but the “spin” of the situation is to put the blame to the Greek government for backing down while knowing that a new compromise proposal was about to be presented during the Eurogroup meeting.


One half hour later, it did not take the Eurozone folks to come the following decision: they reject the Greek bailout extension!

(courtesy zero hedge)

Eurozone Rejects Greek Bailout Extension

First thing this morning, when summarizing the flurry of overnight events, we focused on today’s final gambit by Greece:

“… moments ago Varoufakis was quoted as saying he would ask the Eurogroup for a bailout extension of a few weeks to accommodate the referendum.


And the punchline: if the Eurogroup says “Oxi”, then the entire Greek gambit, which has been a bet that to Europe the opportunity cost of a Grexit is higher than folding to Greek demands, collapses.


If the Eurogroup declines Varoufakis’ request, there simply can not be a referendum, as the “institutions proposal” will no longer be on the table. As such, the only question is whether the ECB will also end the ELA at midnight on June 30, adding insult to injury, and causing the collapse of the Greek banking system days ahead of a referendum whose purpose would now be moot.”

And, as expected, with the Eurozone meeting on Greece having just ended after a brief hour of deliberations, AFP reports that the answer, was indeed, no.

And then this:


In effect, and very symbolically, Greece is already out of the Eurogroup.

What happens next: Eurogroup makes it official that the Greek proposal ends on June 30 making the referendum moot as the institutions proposal will no longer be on the table, the ECB pulls a “Cyprus” on Greek ELA, and a Greek bank system which is put on indefinite hiatus, leading to a “soft” Greek default if not outright Grexit, paving the way for even more ECB QE.



Saturday afternoon:  Greek officials warn that some banks may not open Monday morning.  (In reality Sunday night, it was announced that all would not open!)

Greek Officials Warn “Some Banks May Not Open Monday”


Following Tsipras’ surprise referendum decision (and subsequent pulling of proposals by Troika the institutions), Greece’s bank jog has turned into a full sprint. ATM lines began to form at 2am, minutes after the announcement and now many ATMs are out of money and, as Bloomberg reports, some Greek banks are drastically limiting cash transactions. Despite all the reassurances that “banks will open Monday,” two senior bank executives have warned that some lenders will not be able to open Monday (unless more emergency liquidity is released).

Many ATMs have been drained…


As Bloomberg reports,

Some Greek banks limiting cash transactions as hundreds of people lined up outside branches and drained cash machines after Prime Minister Alexis Tsipras called vote for July 5 that could decide whether Greece remains in euro.


2 senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and thatsome lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece.


Central bank spokesman said bank is making efforts to supply money to the system


Some banks were placing limits in daily bank note and ATM transactions. Yiota Kardogianni, manager at a Piraeus Bank branch said cash withdrawals were limited at EU3000 ($3,350) daily and ATM withdrawals at EU600. Alpha Bank had set a daily limit of EU5000 for most of its branches since last week.

As Barclays previously noted, during the same period over which Greek banks lost nearly €30 billion in deposits, banknotes in circulation jumped by some €13 billion. In short, because Greeks are increasingly prone to stuffing their euros in mattresses, a large proportion of the deposit flight has come in the form of hard currency withdrawals, meaning the Bank of Greece is forced to (literally) print billions in physical banknotes:

A large part of the deposit outflows is in the form of banknotes, whose usage has increased significantly since the end of last year (+44%). Indeed, out of a deposit outflow of €29bn (from the end of November 2014 to the end of April 2015), banknotes in circulation in Greece have increased by €13bn.



Crucially, this is not just about banks being in trouble – drained of deposits electronically – this is running out of physical banknotes, there is literally no more physical cash left in Greek banks.


Saturday afternoon:

Next up to the plate Mr Disselboom!! stating that the Greek program expires on Tuesday night and will not exist when and “if” the Greeks vote on referendum day July 5


(courtesy zero hedge)


Dijsselbloem Says Greek “Program” Will Expire On Tuesday Night, Offer Won’t Exist At Referendum Time

And just like that, “game theory” has become “over theory”:


The punchline, which as we hinted earlier, is the biggest problem with the Greek referendum – there will be no deal to vote on since the program will expire on Tuesday night, which means the offer will be pulled.


So just what will the Greeks vote on next Sunday if the proposal is no longer on the table? Some reporters asked precisely this, i.e., what can the Greek people do to stay in the Eurozone, to which Dijsselbloem had no clear answer, saying that he speaks “with regret” but the risks “will be there” adding that one should ask the Greek Government what the point of holding a referendum is.

Varoufakis responds: extend the program and we may come back!!
(courtesy zero hedge)


Varoufakis: Creditor Proposal Offers “No Hope,” Greece At “Historic Moment”


As Jerome Dijsselbloem fearmongers all the worst parts of the bible that are about to befall Greece, Yanis Varoufakis is explainiing the Greek decision:


Adding that the decision by the Eurogroup (ex-Greece) to veto the program extension damages Europe overall, Varoufakis defiantly concluded, the Greek government has no mandate to accept a “recessionary” aid offer.


He added:


But offered a final branch for negotiations…


In other words – extend the program and we may come closer to a deal.


Saturday afternoon:

Greek officials warn that the stock market may not open.  (It did not open for trading today)


Greek Stock Market May Not Open Monday, Greek Officials Warn



Despite all the talk of “containment” and “Greece doesn’t matter,” not only are we told by anonymous EU officials that some banks may not open Monday but now, a Greek SEC Official has warned…


Greeks just got CYNK’d (or Hanergy’d).

As a reminder, here is the exuberance in Greek stocks from last week…


and remember what we said Friday

  • Greek Stocks best week since post-Lehman dead-cat bounce (fell 37% after that)

*  *  *

On a side note, for those looking for market reaction,Bitcoin is up 4% since Tsipras announced the referendum as the exodus from fiat currency begins to gather pace.


This is what Bill Holter and I have been warning you about:

(courtesy zero hedge)

Greek IMF Default May Trigger €131 Billion Payment On EFSF Loans

Back on May 11, we took a close look at what a Greek default to the IMF would mean in terms of the country’s obligations to its other creditors.

At the time, it appeared as though Greece was set to default on a €750 million payment to the Fund, so naturally, we were curious to know what the ramifications of a default might be. A day later, we discovered that Varoufakis had in fact orchestrated a deal whereby Greece was allowed to use its SDR reserves to make the payment, a move which amounted to the IMF literally paying itself.

That bought Greece around three weeks and the decision to bundle June’s payments bought three more, but now, with PM Alexis Tsipras having called for a referendum, with EU officials and finance ministers having finallythrown in the towel, and with Greek depositors draining the ATMs at a frantic pace, default is now all but certain on Tuesday and so the focus has suddenly shifted back towards what happens if Tsipras doesn’t cut Christine Lagarde a check by 11:59 on June 30.

As we’ve discussed at length, Lagarde can, if she chooses, delay a technical default by 30 days by not sending a formal notice of default to the IMF board. Regular readers have been well aware of this for some time now as we discussed it exactly one month ago today. Unfortunately for the Greeks, Lagarde recently indicated she isn’t likely to go that route and will “notify the board promptly” if payment isn’t made. Here’s Bloomberg on the consequences: 

A possible Greek default on debt due to the International Monetary Fund next week would trigger cross- default clauses on 130.9 billion euros that Greece owes the euro area’s temporary rescue facility, a European Union official says.


Should IMF Managing Director Christine Lagarde tell her board that Greece defaulted on a 1.5 billion-euro payment due on June 30, the European Financial Stability Facility would have to decide among three options: to claim the funds that Greece owes the EFSF; to waive the EFSF’s right to the money; or to invoke a “reservation of rights” that would avoid an immediate claim while maintaining the EFSF’s option to take such a step, the official tells reporters in Brussels on the condition of anonymity


EFSF Chief Executive Officer Klaus Regling would have to make a recommendation to the rescue fund’s board of directors, who are deputy finance ministers from the euro area: official

And here, as a reminder, is how Deutsche Bank explained the situation last month:

IMF loans do not include any formally defined grace period, with fund staff required to send an urgent cable demanding payment to the Greek authorities immediately. This is then followed by a formal notification by the IMF Managing Director to the Executive Board of the failure to pay. It is this notification that is defined as an event of default in Greece’s EFSF and other official-sector loans, triggering cross-default. If this materializes, European creditors then have the right (but not the obligation), to accelerate EFSF loans, causing them to be immediately payable. In turn such an acceleration event would trigger cross-default and potential acceleration in the post-PSI Greek government bonds. The timing of the IMF notification letter is itself a political decision, however, as is the decision to accelerate EFSF loans. IMF guidelines suggest the notification to the board happens in a month. Our understanding is that the notification period may be flexible, with some reports last week suggesting that the Executive Board has requested that this notification happens sooner in the event of a failure to pay from Greece.

For those who demand still more granular details about which defaults trigger accelerated payment rights for whom and when, here is the complete visual breakdown courtesy of Barclays:

So as you can see, not only would a publicly acknowledged default to the IMF trigger accelerated payment rights on EFSF loans, but would “very likely” tip over the EU loan domino and after that, it’s on to the ECB’s SMP holdings (note that the profits from these bonds were included in Friday’s memorandum outlining possible sources of funding for Greece) and then to what would likely be a very messy discussion about whether a CDS-triggering ‘credit event’ has occurred.

*  *  *

Bonus: Deutsche Bank from early this morning (prior to Eurogroup) on the “big uncertainty”:

We would consider the recent turn of events as a particularly negative market outcome.

First, the Greek Prime Minister took a significantly critical tone of the proposed creditor agreement, signaling he would campaign for a “no” vote. Tsipras said that the aim of some of Greece’s partners is to “humiliate” the Greek people, and rejected the creditor’s proposal as an “ultimatum” that is against European principles and will “undermine social and economic cohesion.” The subsequent message was confirmed by numerous government ministers who all said the government would openly campaign for a “no” and were highly critical of the European position.

Second, the referendum will take place after program expiry and the IMF 1.6bn EUR payment on June 30th. Given that Greece likely does not have the funds to repay the IMF on Tuesday, the decision is likely to lead to a non-payment event on the day. Assuming the loan program is not extended, this materially increases the probability that the ECB does not approve an increase in Greek bank’s ELA provision as soon as Monday, in turn leading to effective capital controls.

There will be three things to watch over the next forty-eight hours.

First, the European political response. A Euro leaders’ summit may be called at short notice. Similar to the Papandreou referendum proposal in 2012, we expect that Europeans will make it clear that the government’s referendum will be equivalent to a question on euro membership. The Europeans will also need to decide on whether to grant a short-term legal extension to the loan agreement. Though we are still waiting for the European reaction, we consider a more likely outcome that the program is allowed to expire: extension requires multiple parliamentary approval processes, and given the tone of the Greek PM’s speech it is unlikely that the political appetite exists to grant such an extension. The IMF response will also be important: when and if Lagarde notifies the IMF board of a non-payment event, this will trigger cross-default on Greece’s EFSF loans and the EFSF board of directors (the finance ministers) will have the option, but not the obligation, to call these loans immediately due and payable.

Second, the ECB response. The central bank has been holding daily reviews of Greek bank ELA provision this week, and officials have in multiple statements last week made it clear that ongoing liquidity provision is based on a “credible perspective” of an agreement being reached. Decisions are likely to be taken in conjunction with the European political response and program extension this weekend. The situation remains very fluid, but as things stand we consider the most likely outcome being an ECB decision not to raise ELA funding beyond existing levels as of this past Friday, or alternatively an aggressive adjustment in collateral haircuts resulting in an implicit cap at some point next week. The Greek deputy PM has said he will seek a meeting with ECB’s Draghi on Saturday.

The third factor to watch will be public opinion polls on the referendum question. So far, these have shown that support for euro membership when an “unconditional” (“simple”) question is asked stands at around 70%. However, when this question is made conditional on more austerity, support drops to 55- -65% depending on how the question is phrased. We expect the Greek PM’s position and the phrasing of the question itself to likely lead to additional swing towards a “no” vote. This is particularly so as Greek government officials have stated that the referendum will not be on euro membership, but rather the agreement. The extent to which European pressure and the situation of the banking system next week swings the vote the other way remains an open question.

Overall, we expect the outcome to be very close and uncertain. The closer opinion polls are to a “no” vote, the greater probability is the market likely to price to a Greek Eurozone exit.

In terms of timelines, parliament is expected to be called tomorrow where the exact question will be made public. A simple MP majority is needed. It is likely that a referendum is posed as a “matter of national importance” under the relevant legislation, which requires a 40% participation by voters and a 50% +1 majority for a “yes”. The PM has stated that the referendum will be on the creditor’s proposal, but this has not been made public and does not exist in an official manner. It is likely that this is done so in the context of tomorrow’s scheduled Eurogroup, or it may be that the Greek PM publishes an outline. This notwithstanding, pressure from the European side is likely to be intense so that the referendum will be effectively on Euro membership.

In the meantime, the ECB is likely to hold an emergency meeting this weekend to decide on ELA policy. In the event of an effective cap being set, Greek banks’ access to liquidity would be restricted and cash withdrawals or deposit transfers above would not be able to continue. Greek legislation allows either the Bank of Greece governor or the finance ministry to impose capital restrictions. The extent to which this materializes will depend on the ECB decision over the next forty-eight hours as well as depositor behaviour. Outflows had slowed down towards the latter part of the week but are reported to have accelerated again on Friday. Deposit behaviour and usage of ATMs this weekend will provide an indication of likely depositor behaviour into Monday.

In sum, a very significant period of uncertainty has now been initiated. The question of Greece’s Eurozone membership has been officially opened.




Saturday night:  They are worried!!

Two commentaries from zero hedge



EU FinMins Admit Real Concern, Will Do ‘Whatever It Takes’ To Avoid Market Unease


It is clear from the EU Finance Ministers’ template-like comments to the press what the real worry is in Europe (and the world). It’s not The Greeks (Schaeuble: No other decision was possible, no problem with Greek referendum… need to see what happens next”), it’s something else:


And then there’s this utter rubbish:  


But then they spew this…


What a farce!

*  *  *

Save The Markets, screw The Greeks; save The Bankers, screw Democracy.

*  * *

Over to you Draghi…


Unleash the bond-buying… let’s just hope that Buba plays along.

and then this!!
Second commentary:  Saturday evening
(courtesy zero hedge)

EU Officials Unleash The Fearmongery: “The Crisis Has Commenced”


Presented with little comment aside to ask if someone is off-script?


“Financial arrangement with Greece, without immediate prospects of a follow-up arrangement, will require measures by the Greek authorities, with the technical assistance of the institutions, to safeguard the stability of the Greek financial system,” ministers from 18 euro area member-states say today.


“The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member” ministers say in statement after informal meeting in Brussels

Translation: you are on your own f##kers

*  *  *

But always remember, “Greece doesn’t matter,” which asMohamed El-Erian explains, is somewhat true, since European leaders have two other existential issues to contend with also… 

Via Project Syndicate,

Dark clouds are lowering over Europe’s economic future, as three distinct tempests gather: the Greek crisis, Russia’s incursion in Ukraine, and the rise of populist political parties. Though each poses a considerable threat, Europe, aided by the recent cyclical pickup, is in a position to address them individually, without risking more than a temporary set of disruptions. Should they converge into a kind of “perfect storm,” however, a return to sunny days will become extremely difficult to foresee any time soon.

As it stands, the three storms are at different stages of formation.

The Greek crisis, having been building for years, is blowing the hardest. Beyond the potential for the first eurozone exit, Greece could be at risk of becoming a failed state – an outcome that would pose a multi-dimensional threat to the rest of Europe. Mitigating the adverse humanitarian consequences (associated with cross-border migration), and geopolitical impact of this storm would be no easy feat.

The second storm, rolling in from the EU’s east, is the costly military conflict in Ukraine’s Donbas region. The crisis in eastern Ukraine has been contained only partly by the Minsk II ceasefire agreement, and reflects the deepest rupture in the West’s relationship with Russia since the Soviet Union’s collapse.

Further Russian interference in Ukraine – directly and/or through separatist proxies in Donbas – would present the West with a stark choice. It would either have to tighten sanctions on Russia, potentially tipping Western Europe into recession as Russia responds with counter-sanctions, or accommodate the Kremlin’s expansionist ambitions and jeopardize other countries with Russian-speaking minorities (including the EU’s Baltic members).

The third storm – political tumult brought about by the rise of populist political movements – poses yet another serious threat. Energized by broad voter dissatisfaction, particularly in struggling economies, these political movements tend to focus on a small handful of issues, opposing, say, immigrants, austerity, or the European Union – essentially whomever they can scapegoat for their countries’ troubles.

Already, Greek voters handed the far-left anti-austerity Syriza party a sweeping victory in January. France’s far-right National Front is currently second in opinion polls. The anti-immigration Danish People’s Party finished second in the country’s just-concluded general election, with 22% of the vote. And, in Spain, the leftist anti-austerity Podemos commands double-digit support.

These parties’ extremist tendencies and narrow platforms are limiting governments’ policy flexibility by driving relatively moderate parties and politicians to adopt more radical positions. It was concern about the United Kingdom Independence Party’s capacity to erode the Conservatives’ political base that pushed Prime Minister David Cameron to commit to a referendum on the country’s continued EU membership.

With three storms looming, Europe’s leaders must act fast to ensure that they can dissipate each before it merges with the others, and cope effectively with whatever disruptions they cause.The good news is that regional crisis-management tools have lately been strengthened considerably, especially since the summer of 2012, when the euro came very close to collapsing.

Indeed, not only are new institutional circuit breakers, such as the European Financial Stability Facility, in place; existing bodies have also been made more flexible and thus more effective. Moreover, the European Central Bank is engaged in a large-scale asset-purchasing initiative that could be easily and rapidly expanded. And countries like Ireland, Portugal, and Spain have, through hard and painful work, reduced their vulnerability to contagion from nearby crises.

But these buffers would be severely strained if the gathering storms converged into a single devastating gale. Given the EU’s fundamental interconnectedness – in economic, financial, geopolitical, and social terms – the disruptive impact of each shock would amplify the others, overwhelming the region’s circuit breakers, leading to recession, reviving financial instability, and creating pockets of social tension. This would increase already-high unemployment, expose excessive financial risk-taking, embolden Russia, and strengthen populist movements further, thereby impeding comprehensive policy responses.

Fortunately, the possibility of such a perfect storm is more a risk than a baseline at this point. Nonetheless, given the extent of its destructive potential, it warrants serious attention by policymakers.

Securing Europe’s economic future in this context will require, first and foremost, a renewed commitment to regional integration efforts – completing the banking union, advancing fiscal union, and moving forward on political union – that have been crowded out by a never-ending series of meetings and summits on Greece. Likewise, on the national level, pro-growth economic-reform initiatives – which seem to have lost some urgency in the face of overly complacent and excessively accommodating financial markets – need to be revitalized. This would ease the policy burden on the ECB, which is currently being forced to pursue multiple ambitious objectives that far exceed its capacity to deliver sustainably good outcomes regarding growth, employment, inflation, and financial stability.

The current focus on the downpour in Greece is understandable. But policymakers should not be so distracted by it that they fail to prepare for the other two possible storms – and, much more worrisome, the possibility that they merge into a single more devastating one. Europe’s leaders must act now to minimize the risks, lest they find their shelters inadequate to the extreme weather that could lie ahead.

* * *

It seems Goldman’s “conspiracy theory” was right all along as the ‘excuse’ for Draghi to unleash the biggest bazooka the world has ever seen is looming… whether or not the ‘market’ can withstand it…

and remember, what Goldman wants, its former employeeat the ECB tends to deliver.


(courtesy zero hedge)

IMF Confirms Greek Referendum “Irrelevant” After Program Expires On Tuesday


If there was any confusion if, as we warned first thing today was the biggest problem with the Greek referendum namely that next weekend there will no longer be a proposal to vote on, the IMF’s Christine Lagarde just put it to rest. As she told the BBC moments ago, the Greek government’s planned referendum on the terms of any new bailout plan will be invalid after Tuesday, when the current programme expires. As a result, the Greek people would be voting on proposals that were no longer in place.

But she said that if there was a resounding vote in favour of staying in the euro and restoring the economy then Greece’s creditors would be willing to try.


Speaking to the BBC’s Gavin Lee, she said there was still time for the Greek government to change its mind and accept the eurozone proposals.

Incidentally, in another interview with CNBC, Lagarde confirmed that hope is still an investment thesis: ” I certainly hope that the bundled payment due to the IMF on Tuesday night, at the latest, will be paid.”

Good luck, really. But assuming Greece, which hasn’t had any cash in over a month and has zero intention of paying the IMF its €1.5 billion, whe then?

” If they were not paid on Tuesday night, then there is a series of procedures and notifications that I have to initiate. But technically, any country that does not pay on due date is in payment arrears vis-à-vis the Fund. And the consequences are that the Fund cannot disburse vis-à-vis that country until the arrears has been paid. Greece remains a member of the IMF. Greece benefits and alternate seat on the Board… and has access to technical assistance, receives surveyance and services but it cannot receive any payment until arrears has been paid.'”

So it’s time to rephrase the referendum question which as was presented on the website of the Greek parliament is currently as follows:

Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on June 25 and which consists of two documents:


The first document is called ‘‘Reforms for the Completion of the Current Program and Beyond’’ and the second document is called ‘‘Preliminary Debt Sustainability Analysis.’’

  • Those citizens who reject the institutions’ proposal vote Not Approved / NO
  • Those citizens who accept the institutions’ proposal vote Approved / YES.

We have no idea what a new referendum formulation may look like – most likely one on remaining in the Eurozone – but at that point the phrasing will likely be moot: by next Sunday, all else equal, the social situation in Greece is almost certain to devolve to the point where the government will hardly have much control left over key public works, especially if it has no money to pay wages and pensions, and the banking system implodes earlier in the week.

Ironically, the Greek PM, who clearly did not read theGoldman “conspiracy theory” article, which explained that Greece was set up as a fall guy, and a catalyst for the ECB to unleash even more “forceful” QE and thus to pad banker bonuses for 2015 with taxpayer moneyh, still is convinced that in the game theory between Greece and the Troika, rational minds are making the decisions:

Late Saturday night/early Sunday morning, the Greek Parliament votes in favour of the referendum and poses the two questions:
(courtesy zero hedge)

Greek Parliament Votes In Favor Of Referendum

Update: Parliament has voted in favor of Alexis Tsipras’ call for a referendum.

*  *  *

Greece’s referendum question will would have read as follows (before the offer was rescinded):

“Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on on June 25 and which consists of two documents:


“The first document is called Reforms for the Completion of the Current Program and Beyond and the second document is called Preliminary Debt Sustainability Analysis.


“- Those citizens who reject the institutions’ proposal vote Not Approved / NO.”


“- Those citizens who accept the institutions’ proposal vote Approved / YES.”

The two documents reflect the complexity of Greece’s financial predicament.

  • The first includes sections on “parametric budgetary measures” and “unified wage grid reform.”
  • The second has a discussion of the methodological advantages of using ‘‘gross annual financing needs’’ to assess Greece’s debt burden, rather than the more traditional debt-to-GDP ratio.

*  *  *

We noted earlier:

The Greek parliament is in session on Saturday evening as lawmakers debate the country’s EMU fate and vote on the referendum called by PM Alexis Tsipras just after midnight this morning.


Parliament Speaker Zoe Konstantopoulou announces 10-min recess after opposition New Democracy lawmakers walk out of chamber in the middle of debate.



 Sunday morning:  Draghi freezes ELA at around 89 billion euros.  The Greeks  are looking at imposing capital controls and closing banks giving them a bank holiday


(courtesy zero hedge)

Draghi Freezes Greek ELA, Varoufakis Tells BBC “Looking At Imposing Capital Controls, Closing Banks”

With Greece having gone past the point of no return, things are now escalating very rapidly, and moments ago the BBC’s Nikc Sutton tweeted that the BBC’s Mark Mardell was told the Greek government will be “looking overnight at imposing capital controls and closing banks on Monday.”

The context, of course, is bluffing until the very end, with Varoufakis claiming that if the ECB were to stop support for Greek banks, then Europe as we know it (or not) “has failed.”

The problem is that Greece would be, in the eyes of the ECB, no longer part of the monetary union and certainly won’t be after June 30 if there is no “deal” so as Dijsellbloem said yesterday, it is the Greek government’s problem – in other words, Europe thinks it has won the “blame game”, and the loser is Greece while Greece is still desperate to make Europe seem the villain.

The whole BBC interview can be heard here:

And of course, in keeping with the diplomatic strategy of Greece, which has been to promptly deny everything it has just said, Varoufakis did just htat.

But admit or deny, it no longer matters: moments ago the ECB announced it has frozen the Greek ELA at its Friday level even as the Greek bank run has claimed at least another €1 billion in deposits according to Skai TV reports (ahead of its formal pulling just after midnight on Tuesday when Greece is no longer in an official bailout program), and as such it is only a matter of time before the entire ELA bailout is unwound a la Cyprus in March 2013. From the ECB:

ELA to Greek banks maintained at its current level

  •     ECB takes note of decision on Greek referendum and the non-prolongation of the EU adjustment programme
  •     ECB will work closely with Bank of Greece to maintain financial stability
  •     Emergency liquidity assistance maintained at Friday’s (26 June 2015) level
  •     Governing Council stands ready to review decision
  •     Governing Council closely monitoring situation and potential implications for monetary policy stance

The Governing Council of the European Central Bank today welcomed the commitment by ministers from euro area Member States to take all necessary measures to further improve the resilience of euro area economies and to stand ready to take decisive steps to strengthen Economic and Monetary Union.


Following the decision by the Greek authorities to hold a referendum and the non-prolongation of the EU adjustment programme for Greece, the Governing Council declared it will work closely with the Bank of Greece to maintain financial stability.


Given the current circumstances, the Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on Friday (26 June 2015).


The Governing Council stands ready to reconsider its decision.


Mario Draghi, ECB President, said: “We continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro area economies.”


Yannis Stournaras, Governor of the Bank of Greece, said: “The Bank of Greece, as a member of the Eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances.”


The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

End result (h/t @NectarAxais):




Later Sunday morning:


ECB Says “Greek Bank Holiday Now Necessary”



Earlier this morning we noted that the ECB has now frozen the ELA cap for Greek banks in the wake of PM Alexis Tsipras’ move to call for a euro referendum and the Greek parliament’s vote to allow the poll to go ahead.

With €1 billion or more having already been withdrawn this weekend, the Greek banking sector faces an acute liquidity crisis and without access to more ELA, the game is over and capital controls are likely a foregone conclusion despite Varoufakis’ contention that such an outcome is “a contradition of terms” in a monetary union.

The ECB knew this of course when the board of governors decided against raising the cap and indeed, the central bank has now confirmed that without further access to emergency liquidity, Greek banks likely cannot operate going forward and a bank “holiday” may now be necessary.

Via Bloomberg:



Sunday morning:

The G7, as well EU banking officials are holding emergency meeting ahead of “Black Monday”.  Germany is very concerned especially because of its high Target 2 balance credit of at least 80 billion euros.(Greece itself has a 99 billion euro Target 2 deficit owing to Germany, Austria, Finland and Holland: the Target 2 credit club)
(courtesy zero hedge)

G-7, EU Banking Officials Hold Emergency Calls Ahead Of Black Monday

Now that the Greek parliament has given PM Alexis Tsipras’ euro referendum the go ahead (the vote will effectively be a poll on euro membership or, on the choice between sovereignty and servitude if you will, because as the IMF flatly noted on Saturday, the proposal that was supposed to form the basis for the referendum will be null and void by the time Greeks go to the polls) and now that Greeks have pulled another €1 billion plus from the ATMs, capital controls are all but certain early next week, especially now that the ECB has frozen the ELA cap. This means the crisis, to use Irish FinMin MIchael Noonan’s words, “has now commenced” and a “Lehman weekend” is indeed underway.

Against this backdrop, multiple “emergency” meetings have been scheduled for Sunday as EU officials scramble to figure out how best to deal with what is likely to be a turbulent week and to consider the financial impact a potential Grexit will have on the currency bloc, its member nations and institutions, and on the global financial system as a whole.

Here’s Bloomberg with more:

G-7 deputies to hold conference call Sunday to discuss development of Greek crisis, Handelsblatt reports, citing unidentified euro region official.


Purpose is to inform non-European govts


European banking supervision officials also will hold conference call on situation of Greek banks and possible impact of Greek developments on European financial system


Euro Working Group to hold evening conference call


European Systemic Risk Board to conveneimmediately after ECB Governing Council meeting: Skai TV

And more from Handelsblatt (via Google translate):

Because of the impending bankruptcy of Greece are on Sunday a series of crisis talks planned. The most industrialized countries (G7) wanted throughout the day to advise on a conference call, said a representative of the Euro zone the Handelsblatt.



The conversation should at Deputy level, ie between the state secretaries, take place. It serves mainly to inform the non-European governments on the developments in the Greek crisis. 


In addition, was also a Sunday teleconference of European Banking Supervisors (SSM) planning, told the Handelsblatt. There are representatives of the European Central Bank (ECB) and the national supervisory authorities. In the Phone Unlock should be advised on the situation of Greek banks and the possible impact on the European financial system, it said.

Meanwhile, German Chancellor Angela Merkel is set to confront lawmakers in Berlin on Monday and apprise them of the latest developments in the Greek drama. Over the course of the last two months, political support for continued aid to Athens has worn thin among German MPs, while influential Finance Minister Wolfgang Schaeuble has at every turn expressed reservations about the lengths Europe has gone to in order to keep Greece afloat. Here’s Bloomberg again:

German Chancellor Angela Merkel will brief leaders of German parties and parliamentary groups on Monday at 1:30 p.m., her spokesman Steffen Seibert says in e-mailed 

Expect some lawmakers to ask how exposed Germany is to a Greek default. After all, given Berlin’s role as the EU paymaster and the country’s massive TARGET2 credit with the ECB, Germany stands to lose the most (financially anyway) from a potential Grexit, considering EFSF contributions and the country’s share of committed ECB credit lines. Once more, via Bloomberg:

German public coffers face loss of at least EU80b from a Greek default, lawmaker Gunter Krichbaum, chairmanof European Affairs Committee in lower house of parliament, tells Leipziger Volkszeitung newspaper. Amount includes exposure to bailout mechanisms, ECB measures.

And indeed, Germany’s financial ‘obligation’ to assist its ailing EU ‘partner’ may persist long after Grexit, because as we’ve warned repeatedly, the economic malaise that will almost certainly accompany default and redenomination will create a political and social crisis, the magnitude of which will likely necessitate outside intervention. With that, we’ll leave you with the following, again from Bloomberg, citing Gunter Krichbaum:

Lower house of parliament may have to meet during summer recess to vote on measures related to Greece. German lawmakers may need to approve “humanitarian aid” because a Greek default may ignite unrest.

As we have explained to you on countless occasions:  why the ECB has a massive headache on its hands:  ECB banks just do not have the necessary buffer reserves to withstand a default:
(courtesy zero hedge)

Why The ECB Suddenly Has A Huge Headache On Its Hands, In One Chart


Last week we reported that as a result of the relentless surge in the Greek deposit flight, which may finally end tonight if, as now appears almost certain, the Greek government imposes capital controls, the ECB’s claims on the Greek banking system have now surpassed the total amount of Greek deposits…


… when one factors in some €38 billion in collateralized EFSF bonds and other collateral usage.


We previously explained that on the surface, this is terrible news for Greece as it implies that the moment the last linkage between the ECB and Greece is severed, Greek deposits will have to undergo a massive haircut as without ECB liquidity backstop funding the banks at ridiculously small haircuts on what is essentially worthless collateral, the Cyprus “Plan B” will be immediately imposed.

However, a quick glance at a different balance sheet reveals that a full-blown Grexit with all bridges burned between Greece and its former “irreversible monetary union” implies someone else may have an even greater headache on their hands. The balance sheet in question:that of the Eurosystem in general, and the ECB – which is the anchor behind the Eurosystem and the Eurozone’s official monetary authority – in particular.

The chart below compares total ECB claims to Greek banks (excluding SMP purchases of Greek bonds) side by side with the latest total Capital and Reserves of the Eurosystem as of June 19.


Incidentally the chart above is why earlier today Varoufakis said that “if ECB were to stop support for the Greek banking system would mean that Europe has failed.” Because if indeed the ECB were to pull the carpet from under Greece as it hinted it would do on Tuesday when the Greek program runs out, when it froze the Greek ELA despite the ongoing Greek bank run, it would promptly set off a chain of events that would not only crush the Greek banking system but destroy any credibility Greek sovereign collateral had as a state, impairing all Greek national and corporatecollateral, including bonds and loans currently held by the ECB, to zero.

It would also mean that as that €126 billion or so of total ECB/Eurosystem claims on Greek banks were “charged off” in case of a terminal Greek “event” then the entire ECB capital buffer would also be wiped out, leaving the ECB with negative equity. Translated: dear Eurosystem members: we need more cash.

And yes, while in theory the ECB can always print more money (and it will, in fact as we first showed Goldman’s entire play has been that the ECB wants a Greek default precisely so it can boost its QE, and print stocks to new highs), an event such as this may well crush what little confidence the ECB has left: if not so much with Germany, whose commercial banks are well capitalized, but with the rest of the periphery, leading to a slow at first, then quite dramatic bank run across Italy, Spain, Portugal, Ireland and so on, in other words all those countries who have yet to address their €2 trillion bad debt problem, which the ECB eagerly brushes under the rug with every single stress test.

Finally, keep an eye on that old favorite, Europe’sTARGET2 balances: if indeed Greece is kicked out, watch as the imbalance promptly blows through all time high levels, and Germany is suddenly left on the hook for perpetuating an “irreversible” monetary system which just became very much reversible.

Target2 Balances figure1

Sunday afternoon
Controls begin as banks will not re open until after July 6 and the Greek stock exchange will not open:
(courtesy zero hedge)

Greek Capital Controls Begin: Greek Banks, Stock Market Will Not Open On Monday

Update 2: Greece’s Skai reports that if/when banks reopen (supposedly on Tuesday), a 60€ withdrawal limit will be imposed.

Update 3: Bloomberg, citing Kathimerini, reports that Greek banks will remain closed until July 6.


Despite the reassurances from any and all elected (and unelected) officials, given the run on bank ATMs in Greece has turned into a stampede, it is not surprising that:


The announcement was made when Piraeus Bank CEO Anthimos Thomopoulos told reporters after a meeting of the government’s financial-stability panel on Sunday.

At the same time, Finance Minister Yanis Varoufakis said an announcement would be made after a Cabinet meeting due to start imminently in Athens. Which is ironic considering just earlier today Varoufakis said he is opposed to the “very concept” of capital controls:

Banks will remain shut until at least after a July 5 referendum called by Prime Minister Alexis Tsipras on whether to accept austerity in exchange for a European bailout, Kathemerini newspaper reported, citing unnamed sources.

Reuters is also reporting that the Greek stock market will not open on Monday (leaving us wondering just what that will do to the Greek ETFs liquidity in US markets) as hedgers scramble to protect un-closable losses wherever they can.

More from Reuters, which reports that “Greece’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a 1.6 billion euros payment due to the International Monetary Fund on Tuesday.”

The ECB had made it difficult for the banks to open on Monday because it decided to freeze the level of funding support it gives the banking system, rather than increasing it to cover a rise in withdrawals from worried depositors.


Amid drama in Greece, where a clear majority of people want to remain inside the euro, the next few days present a major challenge to the integrity of the 16-year-old euro zone currency bloc. The consequences for markets and the wider financial system are unclear.


The head of Piraeus Bank, one of Greece’s top four banks, speaking after a meeting of the country’s financial stability council, said banks would be shut on Monday while a financial industry source told Reuters the Athens stock exchange would not open.


“It is a dark hour for Europe….nevertheless from where we’re sitting we have a clear conscience,” Greek Finance Minister Yanis Varoufakis said earlier in an interview with the BBC.


Greece’s left-wing Syriza government had for months been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Tspiras asked for extra time to enable Greeks to vote in a referendum on the terms of the deal.


Creditors turned down this request, leaving little option for Greece but to default, piling further pressure on the country’s banking system.


The creditors want Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.


Pro-European Greek opposition parties have united in condemning the decision to call the referendum on the bailout terms, but people on the streets of Athens backed the decision.


“I want him (Tsipras) to knock his fist on the table and to say ‘enough!’,” said resident Evgenoula.


Many leading economists have voiced sympathy with the Greek government’s argument that further cuts in spending risk choking off the growth which would give Greece some prospect of servicing debts worth nearly twice its annual national income.


The IMF has pressed European governments to ease Athens’ debt burden, something most say they will only do when Greece first shows it is trimming its budget.


Long lines formed outside many ATMs on Sunday, including some of 40 to 50 people outside some in central Athens.


The Bank of Greece said it was making “huge efforts” to ensure the machines remained stocked.

The German foreign ministry said tourists heading to Greece should take plenty of cash to avoid possible problems with local banks and some tourists said they were joining the ATM queues.

“I am trying to go over to the bigger banks,” said Cassandra Preston, a Canadian tourist. “I am here for another month and I would like to make sure I have some cash on me.”

* * *

In other words, Greek speculators (and of course, those depositors who were dumb enough to still have money in local banks) just got CYNK’d – you can buy stocks all you want, but if the market is about to fall out of the bottom, you simply are not allowed to sell.

Which, incidentally, is coming to every centrally-planned, banana “market” near you…

And now the night before “Black Monday”.  Tsipras pleas for calm. It does not work as Greeks storm ATM’s, stores and gas stations:
(courtesy zero hedge)

Ignoring Tsipras Plea For Calm, Greeks Storm ATMs, Stores, Gas Stations


Just a few hours ago Greek PM Tsipras addressed his nation imploring then to “remain calm” and reassuring them that their “deposits were safe.”It appears the Greeks did not believe him. Many were wondering where the Greek bank lines were for the past several months. Turns out the local depositors were merely waiting until just after the last minute to withdraw their funds… horde gas… and stack food.Greece, it appears is Venezuela – the new socialist paradise.

Tsipras implored: “Keep Calm….”


They did not listen…

Call that an ATM line…


Now THIS is an ATM line…








Even at the airports…



And gas stations are overwhelmed…




As grocery stores and general appliance stores come under seige…


We have seen this before – in Russia recently as the Ruble collapsed and citizens spent any and every piece of currency they had on ‘assets’.

The great news for Greece is that GDP for Q2 will be sent soaring.

Simply put – it’s all about inflation expectations. And unlike The Fed or The BoJ, who keep trying to jawbone higher expectations into their citizens’ minds, the Greek government may have achieved it implicitly through devaluation expectations and with it – a spending spree before things get more expensive and implicitly a surge in GDP. Of course, however, the spending surge can only be short-term and will stop as soon as there are no more euros to spend.

Monday morning:  the carnage spreads to Italian banks as they now fail to open in trading:

Greek Contagion Spreads As Several Italian Bank Failed To Open

While things have normalized since the open thanks entirely to the SNB’s aggressive EUR-buying, CHF-selling intervention (good to see that central banks have read the BIS’ report and have learned from their prior intervention mistakes), earlier this morning we got a snapshot of what happens if and when the SNB, and then the ECB itself, finally lose control when as a result of the Greek crisis the contagion promptly spread a few hundred kilometers west to Italy where as the WSJ reported, “several Italian banks failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most.

As the paper reported sales orders on Italian stocks, in particular financial stocks, piled up before the market opening. At the start, the sales orders were so numerous that the system couldn’t manage to process them, something that often happens when specific news causes a sell-off on a stock.

Theoretical prices for Italian banks–the prices at which they would have started trading–hovered around losses of 8% to 10% at the beginning of the trading session.

UniCredit SpA and Intesa Sanpaolo managed to start trading some time after the market opened, but were suspended immediately, accumulating losses of around 6% compared with Friday’s closing prices.

Ironically, in an attempt to avoid just this kind of selling panic, on Sunday, Italy’s banking lobby head Antonio Patuelli dismissed fears of contagion on Italian lenders, saying the country’s banks’ direct exposure to Greece was less than EUR1 billion.

For now the SNB has stabilized things but how much longer will this artificial “stability” continue especially if the just concluded speech by Jean-Claude Juncker managed to antagonize Greeks even further and pushed all those who were on the fence about this Sunday’s coming Greferendum, solidly into the “No” camp.



The sell side reacts to our “Lehman weekend”

(courtesy zero hedge)

The Sell Side Reacts To Europe’s “Lehman Weekend”

Over the weekend, the situation in Greece escalated quickly after PM Alexis Tsipras took the dramatic step ofcalling for a referendum in a televised speech to the nation shortly after midnight on Saturday. Shortly thereafter, Greeks were lined up at ATMs. The outlook deteriorated further at a meeting of EU finance ministers on Saturday and by Sunday evening, the ATM lines had grown and Greeks began to stock up on food and fuel ahead of a week-long bank holiday, the closure of the Greek stock market, and the imposition of capital controls.

Global equities plunged on Monday as both carbon-based traders and HFTs tried in vain to keep their composurewhich watching in horror as Greece, the birthplace of Western civilization, quickly became Venezuela. With Europe’s “Lehman weekend” now in the books and as the currency union stares into an uncertain future, the sellside tries to make sense of it all. Here’s a sampling of reactions and predictions.

From Morgan Stanley:

We don’t see any good outcome from the referendum: Even if it’s a ‘yes’, the current government could be in jeopardy and a period of political limbo might follow, while its credibility with the creditor institutions remains at rock-bottom. 


[Capital controls] make what happens over the medium term more binary: either capital controls are lifted, or Greece slides towards euro exit. We think that there’s a 60% probability of Grexit taking a 12-18-month view (up from 45% previously). There’s also a high probability of missing the IMF payment on June 30, which is also when the current bailout expires. And the chances are that Greece will struggle to make further payments too.We estimate a cash shortfall of €22 billion from now to year-end.


The ‘impossible trinity’ – which leg has to give? Staying in the currency union, being in power and not doing what it takes to keep euro membership (e.g., undoing the bailout) is an ‘impossible trinity’ for Syriza, in our view. That’s inconsistent, so one of these three has to give. Mounting economic and financial pressure in theory would suggest that Syriza compromises (in practice, this is not the case) as it would prefer that Greece stays in the EMU and, given the choice, would prefer not to default on the official creditors. But Syriza’s platform has to do with undoing the bailout programme, which is how it came into power in the first place. 


And here’s Citi’s take:

We expect the referendum to result in a comfortable majority for the ‘Yes’ camp, and expect no Grexit this year and a lower risk of Grexit in subsequent years. Either a belated extension of the European programme (expiring on 30 June) or a new interim programme, to take us close to the end of the year, would be negotiated in our view. If the Greek authorities comply with the terms of this extension or interim programme, this could set the scene for a new one-year or even multi-year programme after the end of 2015. Given the track record of the Greek authorities on the structural reform front, however, it is likely that disagreements and tensions between the institutions and the Greek government could flare up again soon. A rerun of the scenario since the beginning of 2015 is therefore possible.


With a ‘No’ vote or an unconvincing ‘Yes’ vote, it is hard to see how a government willing and able to implement anything like the latest proposals of the institutions could be in place for the rest of this year. Unless there is a change of government in Greece (or a major change of views among the institutions), the slide into Grexit would be very likely, even though it might take a long time.

Meanwhile, Barclays says a ‘no’ vote would trigger social unrest, a “forced currency conversion”, and, worst of all for the troika, the re-emergence of redenomination risk in the periphery:

After having likely missed the IMF payment, Greece would default on ECB bonds also. This is likely to be accompanied by significant street demonstrations, triggered by the tightening of capital controls, and a quick further worsening of the economy and may lead to the PM/party stepping down. As we discussed in Greece: the risk of capital controls, without the support of a programme, a potential exit scenario would resemble Argentina’s 2001-02 crisis, which also started with deposit controls but, in the absence of an internationally supported plan, rapidly deteriorated into tighter controls and a forced currency conversion. We believe that European institutions would need to respond to this scenario with a strong institutional reform agenda, otherwise redenomination risk could re-emerge.

Finally, RBC has more on what happens when the IMF payment is missed tomorrow:

The IMF payment will (most likely) be missed. It seems very unlikely that the Greek authorities can or want to pay the €1.6bn due to the IMF on 30 June. There have been extensive debates about what this technically means and whether that constitutes a default. On the IMF itself, this is not 100% clear. IMF managing director Lagarde said in a previous comment that the IMF would not apply any grace periods and would consider Greece to be in arrears straight away. Given the acrimonious deliberations and this weekend’s developments this seems possible. On the other hand, the IMF could also apply a four-week grace period before declaring a state of default (see Exhibit 2). If it opted to do so, this could be bridging the time until after the referendum. We actually think that this is a distinct probability.



There is some leeway on the EFSF’s side on whether or not to effectively put Greece into a default on their loans as well if the IMF has declared default. With bond redemptions not due immediately, it seems unlikely that such a call would be made. Furthermore, as we also elaborated in the aforementioned research note, we do not expect any negative fall-out on the EFSF’s ratings either – although the market reaction should clearly be negative (see below). Also important is whether any of the private sector bonds are being affected particularly the post PSI bonds that are predominantly held by Greek banks and should thus have a significant impact on the banks’ balance sheet health. According to the prospectus, the post PSI bonds rank paris passu amongst themselves and with all unsecured and unsubordinated borrowed money of the Republic. This means a default of EFSF loans and/or ECB held pre-PSI bonds should trigger a default of the post-PSI bonds. Thus, the non-IMF payment should not automatically lead to this outcome whereas a nonpayment of the ECB held bonds should. Thus the ‘real’ deadline for the Greek banking system should be the first private sector debt repayment (a JPY bond due on 14-July) and then the ECB held bond maturities (20 July) – if the banking system can be maintained for that long.

To call this a “pivotal” week would obviously be an understatement. The next few days will present EGB markets with their toughest test since the summer of 2012 when Spain and Italy were nearly priced out of the market. Central bank omnipotence and heretofore resilient Western equity markets will undergo similar trials by fire, while in Greece, the situation on the ground looks to be deteriorating quite rapidly, with the world watching incredulous as lines form at gas stations and grocery stores ahead of what is effectively a popular vote on whether the country will chance an economic collapse in order to preserve the right to govern itself.

Stay tuned, and as always, trade accordingly.

Trading so far: Mid morning

“Uncontained” – Greek Stocks Crash 17% As European Banks Plunge Most In 3 Years

Despite the Greek stock market being closed there is an option for hedging the exposure that all the smart money has been building to Greece in the past few days – GREK – the US-trade Greek ETF. In the pre-open, GREK is trading down 17% but the problems lie ahead as more and more realize how illiquid it is and redemptions are forced to be made from ‘cash’ – since there is no way to offload the underlying Greek stocks, unless OTC trades can be arranged with other entities – which could thus expose the entire false-liquidity-facade of the ETF industry.

GREK – the Greek Stock ETF – is getting hammered on negligible volume already…


While the best efforts of the SNB are underway to protectthe markets from unease, European banks are suffering the exact ‘contagion’ that we were told numerous times would be contained.

And European Banks are getting crushed


led by Italian banks…


Charts: Bloomberg


Greece Will Open 700 Bank Branches On Thursday – For Limited Pension Withdrawals Only

Good news – some Greek bank branches will re-open sooner than expected.


Bad news – only pension withdrawals are allowed in limited size.


Party’s over.



National Bank Of Greece Crashes To Record Low

While the Greek Stock Market remains closed, ADRs trade around the world and National Bank of Greece –theoretically the strongest and least ELA-exposed (although still a disaster) – is trading down 24% in US markets on extremely heavy volume

This is a new record low…


Greek 10Y Bonds Collapse – Yield Tops 15%

Greek stocks may be closed and the bond market super-illiquid but traders are willing to dump GGBs at almost any price for now. 10Y Greek government bonds are spiking over 400bps and have topped 15% for the first time since December 2012.



Charts: Bloomberg


Greece May Not Even Have The Funds To Conduct A Referendum

(courtesy zero hedge)


With Europe making it very clear that unless Greece folds in the next 48 hours, there will be no deal on which the Greeks will be conducting their “Greferendum” as Greece will be programless after June 30, there has been ample confusion about just what the wording of the ballot will be to which the Greek population will say Nai or Oxi. As the following latest snapshot confirms, even the Greek side is rather confused and is now essentially telling people to vote on a deal that was proposed once (on June 25) and may or may no longer be relevant.

This takes place even as moments ago Germany’s minister for economic affairs Sigmar Gabriel explained just what a No vote would entail:


Even though there was clearly some confusion as the push to set the narrative begins:


A clear lie as just moments prior we got this:


Of course, Greece is quite aware of this, and it doing all it can to push voters in the desired direction as the front page of Syriza’s newspaper today reveals…

… but at this point there is no alternative: since the bluffing game had to be taken beyond the point of no return and both Greece and the Troika have to last it out until the weekend.

However, the problem for Greece may not be one of wording or even maintaining the “game theory” bluff until the very end, but a far simpler one: not having the funds to actually conduct it!

According to Germany’s FAZ, the Greek Court also estimates that the referendum will cost around 110 million euros, according to a well-informed policy analyst. Money that in view of the strapped Greek Checkout simply will not be there, even if the country saves a EUR 1.6 billion full-scale default to the International Monetary Fund this Tuesday.”

So a question emerges: if indeed Greece is unable to fund a referendum will it be stuck with mailed-in responses? And how long would it take to tabulate those votes: 3 weeks, 3 months? Needless to say, the cash-based Greek economy, with its €60/day daily allowance of ATM will not survive nearly that long, something the government hopefully realizes as the next wave of anger will promptly turn away from the Troika once the nationalistic passion has died down and refocuses on the local government itself…




Oh OH!! this is not good.  The ECB upon learning that Greece will default tomorrow to the IMF, stated that not only will be freeze funding to the Greek banks but that they will review the legality of ELA with the threat that the haircut of their collateral rises exponentially.  (To tell you the truth the collateral is worth zero any).  However that would force Greece to a GREXIT immediately and forget about the referendum as it would be redundant.

(courtesy zero hedge)


ECB Strikes Back: Threatens With Greek Deposit Haircut If And When ELA Found To Be “Illegal” On Wednesday

The threats are flying fast and furious now.

Moments after the WSJ quoted a Greek official as saying that Greece will not make its IMF bond payment, the ECB struck back when Bloomberg reported that the ECB would review the legality of Greek aid should there not be a deal, i.e., on July 1 post an IMF default. According to Austrian central bank Governor and ECB member, Ewald Nowotny, on Wednesday’s governing council meeting the central bank will decide whether it can continue to provide emergency support for Greece once current bailout program expires June 30, as the Wiener Zeitung originally reported.

He added that “all legal aspects will be reviewed” and that another issue is also whether Greece support will continue beyond referendum. Perhaps somewhat needlessly he added that there are differing opinions at the ECB governing council on the issue of Greek ELA legality.

As a reminder, Nowotny is the central banker who a few weeks ago surprisingly announced that Austria would follow in the footsteps of Germany and Netherlands, and repatriate a substantial portion of its gold held abroad.

The subtext of what Nowotny just said is that absent a deal, Greek banks will have no choice but to impose a massive haircut on existing deposits, since the entire ELA will be yanked, and the Cyprus scenario would follow, one that would see existing deposits of under €120 billion, chopped off in half or probably much, more depending on the true state of Greek bank collateral.

It also goes without saying that at this point the odds of a premeditated Grexident are soaring.

More if we see it.



Massive rallies for the “No” side, if the referendum proceeds…

(courtesy zero hedge)

Massive Greek “No” Protest In Front Of Parliament – Live Feed


“To stay or not to stay,” that is the question for Greeks ahead of Tuesday’s default to the IMF and a historic referendum set for this coming weekend.

With the ATMs running dry and lines forming at gas stations and grocery stores, Greeks are understandably restless and have once again gathered en masse in Syntagma Square.

(Live feed)



Greece will default to the IMF tomorrow. Also Estonian Prime Minister is still expecting Greece to pay all of its debts even if they leave the Euro.

Good luck to them!!

(courtesy zero hedge)

Greece Will Default To IMF Tomorrow, Government Official Says

Earlier today, as the exchange between Greece and its creditors got increasingly belligerent, Estonian Prime Minister Taavi Roivas told public broadcaster Eesti Rahvusringhaaling in interview that a possible Greek decision to leave euro area wouldn’t soften stance of other EU countries and that Greece’s debt would still remain outstanding and creditors would expect this money back.”

“If Greece leaves, the value of their new national currency would decline very fast, so their solvency would still worsen further. They will either have to cut spending or improve their tax revenues. There are no other options.”

So did this latest antagonism change the Greek mind? According to a flash headline by the WSJ released moments ago, not all. In fact, Greece just made it official that it would default to the IMF in just over 24 hours.


Greece won’t make a debt repayment to the International Monetary Fund due Tuesday, a senior Greek government official said Monday.


Earlier this month, Greece had notified the IMF it plans to bundle its loan repayments falling due this month into one payment of around 1.6 billion euros ($1.7 billion), which is due Tuesday.


The IMF has said that Greece will immediately be in arrears if it fails to make the debt repayment.

So, as per game theory, the Greek plan – at least until the social mood turns very ugly – remains just one:


The problem is what happens then…

Greece supermarkets are resembling Venezuela:
(courtesy zero hedge)

Greek Supermarkets Begin To Resemble Those Of Venezuela

For years we have mocked Venezuela’s economy (if not its long-suffering population): it got so bad, we even did a visual summary of selected Venezuela headline posts we wrote over the years.

Most of these were expected, and in line with the transformation of any normal nation to a socialist utopia. None were more poignant than the images of supermarkets and grocery stores that have been ransacked empty as a result of the collapsing currency, devastated supply chains and soaring inflation (supermarkets which have since imposed fingerprint scanners in what is no longer capital but food controls).

We are sad to announce that what was once a Venezuela trademark has now transitioned to a country that until recently was among the most developed nations in the west: Greece.

As we noted yesterday, in clear rejection of Tsipras’ plea for calm, the Greek population stormed (now empty) ATMs, grocery stores and gas stations as they scrambled to obtain, or convert, paper currency into tangible products.

This morning, the NYT picked up on the realization that for Greece ATM runs were last week’s story. Now, it’s all about the “Supermarket Sweep”… and hoarding. To wit:

Beside the lines at A.T.M.s, people were also lining up at gas stations and in grocery stories. In the small town of Spata, outside Athens, residents had stripped grocery shelves bare by Saturday night. The local Shell station had run out of regular unleaded and had only premium gasoline to sell. “Doom,” the gas attendant responded, when asked to describe the mood.


The frenzy at gas stations across the country prompted Greece’s largest refiner to issue a statement assuring that there would be enough supply…

And this is how Athens is slowly starting to look like Caracas.

Maybe Goldman’s theory is correct:  The ECB wants a GREXIT so that it can increase QE!!
(courtesy zero hedge)

ECB Says “Grexit Can No Longer Be Excluded”, Hints At More QE

It seems Goldman Sachs’ conspiracy theory was right all along…


This is exactly what The ECB wanted all along (and their leaders overlords) – all they needed was an ‘excuse’.

*  *  *

As we noted previously, from Goldman:

As tensions around Greece have mounted, it is something of a puzzle that EUR/$ has shown little reaction. Our explanation, laid out in our last FX Views, is that much of this price action stems from the Bundesbank, which has reduced the maturity of its QE buying, enabling the Bund sell-off and moving longer-dated rate differentials in favor of the Euro. EUR/$ thus hasn’t traded Greece, but instead growing question marks over ECB QE.

Here is Goldman’s full take:

From an economic perspective, Greece shows that “internal devaluation” – whereby structural reforms are meant to restore competitiveness and growth –is difficult politically and a poor substitute for outright devaluation. Emerging markets that devalue during crises quickly return to growth, powered by exports, while Greek GDP continues to languish. We emphasize this because – even if a compromise involving a debt haircut is found – this will not do much to return Greece to growth. Only a managed devaluation, with the help of the creditors, can do that. With respect to EUR/$, we think the Bund sell-off increases EUR/$ downside if tensions over Greece escalate further. This is because the ECB, including via the Bundesbank, would almost surely step up QE to prevent contagion. We estimate that the immediate aftermath of a default could see EUR/$ fall three big figures. The ensuing acceleration in QE would then take EUR/$ down another seven big figures in subsequent weeks. We thus see Greece as a catalyst for EUR/$ to go near parity, via stepped up QE that moves rate differentials against the single currency.


Incidentally, “internal devaluation” is a very polite way of saying plunging wages, labor costs, and generally benefits, including pensions.

But if this is correct, Goldman essentially says that it is in the ECB’s, and Europe’s, best interest to have a Greek default – and with limited contagion at that – one which finally does impact the EUR lower, and resumes the “benign” glideslope of the EURUSD exchange rate toward parity, a rate which recall reached as low as 1.05 several months ago before rebounding to its current level of 1.14.  Needless to say, that is a “conspiracy theory” that could make even the biggest “tin foil” blogs blush.

A different way of saying what Goldman just hinted at: “Greece must be destroyed, so it (and the Eurozone) can be saved (with even more QE).

Or, in the parlance of Rahm Emanuel’s times, “Let no Greek default crisis go to QE wastel.”

Goldman continues:

Greece, like many emerging markets before it, is suffering a balance of payments crisis, whereby a “sudden stop” in foreign capital inflows caused GDP to fall sharply. In emerging markets, this comes with a large upfront currency devaluation – on average around 30 percent across nine key episodes (Exhibit 1) – that lasts for over four years.This devaluation boosts exports, so that – as unpleasant as this phase of the crisis is – activity rebounds quickly and GDP is significantly above pre-crisis levels five years on (Exhibit 2). In Greece, although unit labor costs have fallen significantly, price competitiveness has improved much less, with the real effective exchange rate down only ten percent (with much of that drop only coming recently). This shows that the process of “internal devaluation” is difficult and, unfortunately, a poor substitute for outright devaluation. The reason we emphasize this is because, even if a compromise is found that includes a debt write-down (as the Greek government is pushing for), this will do little to return Greece to growth. Only a managed devaluation can do that, one where the creditors continue to lend and help manage the transition.

Here, Goldman does something shocking – it tells the truth! “As such, the current stand-off is about something much deeper than the next disbursement. It signals that the concept of “internal devaluation” is deeply troubled.

Bingo – because what Goldman just said in a very polite way, is that a monetary union in which one of the nations is as far behind as Greece is, and recall just how far behind Greece is relative to IMF GDP estimates imposed during the prior two bailouts…

… simply does not work, and for the union to be viable, a stressor needs to emerge so that broad currency devaluation benefits not only the peak performers, i.e., the northern European states, but the weakest links such as Greece.

Incidentally, all of this was previewed long ago in, in December 2012 when we wrote “Next Up For A “Recovering” Europe: A 30-50% Collapse In Wages In Spain, Italy And… France.” To Greece’s great chagrin, all of this internal devaluation has mostly impacted the impoverished country, which continues to be a shock absorber to broader internal devaluation across the entire Eurozone.

Which brings us back to Goldman’s assessment of the current Greek state, and the suggestion that all the smoke and mirrors flooding the headline-scanning algos is nothing but noise, and that in reality the forces are alligned to “push the EUR near parity in fairly short order.”


Paradoxically, Goldman keeps pushing for a worst-case outcome, and one where the market finally reprices all the risk it has ignored for months:

Even if Greece ultimately stays in the Euro (our base case), the immediate aftermath of such a non-payment will be to push bond yields up across the periphery. This rise in the fiscal risk premium (Exhibit 3) will of course be limited, because the ECB will likely accelerate QE, including via the Bundesbank. That will push rate differentials, especially longer-dated ones (Exhibit 4), against EUR/$. We estimate that the initial fiscal risk premium effect could be three big figures, while the subsequent QE effect could be worth around seven big figures.

The conclusion:

In short, we see mounting tensions over Greece as a catalyst for EUR/$ to move near parity in fairly short order, with much of that move driven by rate differentials. If, instead, a compromise solution is found (including possible debt haircuts), we see the upside to EUR/$ as very limited, i.e. on the order of one big figure at most. The reason for this is that the market is broadly expecting an agreement to be found, even with the possibility of a default in the near term on debt repayments coming due.

And of course, going back to the start of the note, a “favorable” outcome pushing EUR higher will be one that “will do little to return Greece to growth” and as a result will force the insolvent nation back to the negotiating table until such time as the Eurozone finally realizes that it desperately needs EUR much lower, not higher, and will do everything it can to achieve that, even if it means “siloing” Greece in a state of suspended default indefinitely if only to eliminate the “risk on” euphoria in the currency pair.

Indeed, as we said last year, the entire escalation over the Ukraine conflict was merely to push Europe to the verge of a triple-dip recession, which in turn was the catalyst that finally greenlighted the ECB’s first episode of QE with Buba’s blessing (after all Germany’s economy was finally on the brink as well and it had little to lose). Well, the next such “catalyst” will come from none other than Greece as per Goldman’s punchline:

We encounter many who argue that mounting tensions over Greece could be Euro positive. The short term angle is that risk reduction will lead to a squeeze of Euro shorts, so that EUR/$ could squeeze higher. The reason we don’t believe this is because we think stepped up ECB QE will dominate any risk-off response. Or, to put this in another way, the ECB will not allow the fiscal risk premium to go all that much higher. The medium-term angle is that the Euro zone might be more cohesive without Greece. That rationale assumes that Greece is a case apart, when of course it isn’t. After all, the Spanish unemployment rate is not far behind that of Greece and populist political pressure is also building. The underlying commonality, in our minds, is that “internal devaluation” is very difficult. As a result, we think mounting tensions around Greece could just as well focus market attention on the sustainability of the adjustment program on the Euro periphery.

Whoever would have thought that none other than Goldman would serve as the source of what may be the biggest “conspiracy theory” gambit of 2015…

One final thought: what Goldman wants, its former employee at the ECB tends to deliver.

The Chemical weapons trial balloon was floated by the USA today.
Also Russia promises economic and military aid to Syria as escalation between Russia and the USA intensifies!
(courtesy zero hedge)

Russia Promises “Economic And Military” Aid To Syria As US Refloats Assad “Chemcial Weapons” Trial Balloon

It has been a while since the US State Department, with the help of the UK-funded and US-supported Syrian Observatory for Human Rights, floated doctored YouTube clips of hundreds of Syrians dead as a result of Assad’s chemical attacks. In fact, it has been almost exactly two years since the last time the US nearly launched an all out proxy war in Syria, one involving an axis of western powers and Qatar (whose natural gas this whole charade is all about) against another axis of Russia and China who were supportive of the Syrian government. Luckily, a last minute snafu by John Kerry allowed a de-escalation, which in turn resulted in the appearance of ISIS, whose entire purpose has been, as leaked Pentagon memos have revealed, to topple Assad.

And with collective memories short, and with the “diplomatic” playbook of the US State Department even shorter, the time has come to once again rekindle this particular fabulation.

Overnight the WSJ reported, in what may have been a far more pressing update than anything to do with Greece who ultimate fate has been known since 2010, that “U.S. intelligence agencies believe there is a strong possibility the Assad regime will use chemical weapons on a large scale as part of a last-ditch effort to protect key Syrian government strongholds if Islamist fighters and other rebels try to overrun them, U.S. officials said.

Note: no facts this time, not even planted ones – just beliefs.

The WSJ adds that “analysts and policy makers have been poring over all available intelligence hoping to determine what types of chemical weapons the regime might be able to deploy and what event or events might trigger their use, according to officials briefed on the matter.”

But didn’t the US supervise Assad’s disposition of his chemical weapon stockpile two years ago as part of the military de-escalation? Nevermind, one needs a narrative and when creating fictions, facts are secondary.

Last year, Syrian President Bashar al-Assad let international inspectors oversee the removal of what President Barack Obama called the regime’s most deadly chemical weapons. The deal averted U.S. airstrikes that would have come in retaliation for an Aug. 21, 2013, sarin-gas attack that killed more than 1,400 people.

Since then, the U.S. officials said, the Assad regime has developed and deployed a new type of chemical bomb filled with chlorine,which Mr. Assad could now decide to use on a larger scale in key areas. U.S. officials also suspect the regime may have squirreled away at least a small reserve of the chemical precursors needed to make nerve agents sarin or VX. Use of those chemicals would raise greater international concerns because they are more deadly than chlorine and were supposed to have been eliminated.

The punchline: “the intelligence is “being taken very seriously because he’s getting desperate” and because of doubts within the U.S. intelligence community that Mr. Assad gave up all of his deadliest chemical weapons, a senior U.S. official said.

It would appear that the only thing desperate thing here is the ongoing attempt to regurgitate a plot which makes no sense. Then again, as we reported earlier this month in “The Noose Around Syria’s Assad Tightens“, the advent of ISIS has added a new wrinkle to the Assad “war”, where as a result of a brutal, US-funded mercenary force which has taken over half of Syria’s territory, Assad’s days may indeed be numbered.

Which would provide for a useful return of the chemical weapons narrative: the “desperate dictator” is now a loose cannon, and all it takes is another false flag chemical attack to rerun the staged events of 2013, this time hopefully achieve the outcome the US is hoping for – planting a US-friendly regime, and one which would be agreeable to a Qatar pipeline crossing the land.

And then there are all the “positive” Keynesian externalities: after all there is nothing quite like a “limited” war to boost a nation’s GDP. In this case, the nation being the US of course, by way of its military-industrial complex, which is to US military spending as the US banking criminal syndicate is to the Fed’s monetary policy.

The only question is whether this would be a limited war, and as Syria just revealed it won’t be, because yet again Russia has made it very clear that any US military intervention in Syria, no matter how depleted the Syrian army is due to fighting ISIS on the ground every day, will be met with a proportional Russian response.

As Reuters reported, Syria’s foreign minister said on a visit to Moscow on Monday that top ally Russia had promised to send political, economic and military aid to his country.

“I got a promise of aid to Syria – politically, economically and militarily,” Walid al-Moualem said at a televised news conference in Moscow after meeting Russian President Vladimir Putin.

And so the US gambit for a quick and painless annexation of the only country that stands in the way of European energy independence from Gazprom has failed and if John Kerry’s diplomatic apparatus wants to continue its crusade against Assad, it will have to do so against Russian and, shortly thereafter, China which has also made it quite clear any US aggression in the middle east will be met with an appropriate response.

Keep a close eye as this story unfolds because as the Greek (and perhaps Puerto Rican) debt crisis hits a crescendo, the world’s largest military force will be sure to not let it “go to waste.”



Finally this blockbuster

(courtesy Dave Kranzler/IRD)

BlackRock’s Warning: Get Your Money Out Of All Mutual Funds

BlackRock Inc. is seeking government clearance to set up an internal program in which mutual funds that get hit with client redemptions could temporarily borrow money from sister funds that are flush with cash.  –Bloomberg News

We may have been early on warning about leaving your savings in the financial system. It’s okay to be too early getting your money out of the system but it’s fatal to be just one second too late.  The gates are already in place in money market funds just waiting for the signal to be lowered

BlackRock’s filing with the SEC to enable “have cash” funds to lend to “heavy redemption” funds should send shivers down the spine of anyone with funds invested in any BlackRock fund.  In fact, it should horrify anyone invested in anymutual fund.

Larry Fink, BlackRock’s chief executive officer, said in December that U.S. bond funds face increased volatility, adding that he expected a “dysfunctional market” lasting days or even weeks within the next two years.   – Bloomberg

I warned last summer when the money market funds received authorization to put redemption gates in place that it was time to remove your money from these instruments.  The only reason a gate would be needed is if the people running the funds believed that there were risk events coming that would necessitate the gates.

BlackRock has already arranged credit lines from banks to cover the possibility of a redemption stampede from its riskier funds.  It’s clear the elitists running BlackRock now foresee events coming that will trigger a redemption run because the fund company is seeking SEC approval for the ability to take cash from funds with cash and lend that cash to funds that will need cash when the redemption rush begins.

Rather than let the market decide the value of the investments in BlackRock’s riskier funds, Larry Fink is going add even more leverage to the equation by enabling riskier funds to take on debt in order to avoid having to sell positions into a market that won’t be able to handle the selling.   This adds yet another layer of fraudulent intervention to a system that is ready to blow up from what’s already been done to it.

And let’s not forget, as I pointed out last summer, that BlackRock funds are already riddled with OTC derivatives, which is why Vice Chairman Barbara Novick has been running around Capitol Hill working to get a bailout mechanism in place for the Depository Trust Company’s derivatives clearing unit.

BlackRock Changes The Rules Of The Game Because Of An Outcome It Fears

This move will, in effect, transfer a portion of the risk of BlackRock’s riskier mutual funds – derivative-laced high yield and equity funds – to its more “conservative” funds, like high grade, short duration fixed income funds.


Anyone who invested in less-risky funds did so with an understanding of the definition and risk parameters of the funds at the time of investment.  But now BlackRock is changing the rules and risk parameters of those funds by exposing them to the counterparty risk of the riskier funds in the BlackRock fund complex which will be able to borrow money from the less risky funds.

This means that the Treasury fund in which your IRA or 401k is invested will now be “invested” in any fund that borrows money from the fund with your money.  The risk profile of your “conservative” fund assumes the risk profile of the riskier fund.Because of this, there is absolutely no reason for anyone to leave any of their money in any of BlackRock’s funds.

The SEC should deny BlackRock’s filing.  But it won’t because Wall Street is the SEC.

This move by BlackRock also signals that the elitists at BlackRock foresee an event that will disrupt the markets and trigger “bank” run on mutual funds.  What or when is anyone’s best guess.  But the fact that Larry Fink has decided to implement internal lending among funds indicates that he and his band of merry criminals believe an event will happen sooner rather than later.

To me, this is the signal that everyone should call up their mutual fund company, financial adviser or 401k administrator and get all of their the money out of any mutual fund.  Larry Fink has done everyone invested in any mutual fund a favor:  he’s unwittingly signaled that it’s time to get out – now.   Anyone who is aware of this and does not take action immediately is either a complete idiot or simply does not care about having their money taken from them by the criminal elite.

Your more important currency/interest rate yields and bourses results overnight from Europe and Asia:


Euro/USA 1.1115 down .0048

USA/JAPAN YEN 122.86 down .857

GBP/USA 1.5689 down .0001

USA/CAN 1.2361 up .0065

This morning in Europe, the Euro fell by a considerable 48 basis points, trading now just below the 1.11 level at 1.1115; 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, an imminent  default of Greece and the Ukraine, rising peripheral bond yields 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 86 basis points and trading well below the 123 level to 122.86 yen to the dollar.

The pound was again down this morning as it now trades well below the 1.57 level at 1.5689, still 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 down by 65 basis points at 1.2361 to the dollar.

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: this morning :  down 596.20  points or 2.88%

Trading from Europe and Asia:
1. Europe stocks  all in the red (except Spain)

2/ Asian bourses mostly in the red … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai in the red (massive bubble ready to burst), Australia in the red: /Nikkei (Japan) red/India’s Sensex in the red/

Gold very early morning trading: $1178.80


Early Monday morning USA 10 year bond yield: 2.34% !!! down 14 in basis points from Friday night and it is trading just above  resistance at 2.27-2.32% and no doubt still setting off massive derivative losses.

USA dollar index early Monday morning: 95.62 down 55 cents from Friday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Monday morning

And now for your closing numbers for Monday:


Closing Portuguese 10 year bond yield: 3.08%  up 37 in basis points from Friday (  very ominous/and dangerous with an accident waiting to happen)

Closing Japanese 10 year bond yield: .45% !!! down 2 in basis points from Friday/ still very ominous

Your closing Spanish 10 year government bond, Monday, up 24 in basis points  ( very ominous)

Spanish 10 year bond yield: 2.35% !!!!!!

Your Monday closing Italian 10 year bond yield: 2.39% up 24 in basis points from Friday: (very ominous)

trading 4 basis points higher than Spain.



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

Euro/USA: 1.1240 up .0078 ( Euro up 78 basis points)

USA/Japan: 122.48 down  1.2311 ( yen up 123 basis points)

Great Britain/USA: 1.5731 up .0041 (Pound up 41 basis points)

USA/Canada: 1.2386 up .0086 (Can dollar down 86 basis points)

The euro rose by a fair amount today. It settled up 78 basis points against the dollar to 1.1240 as the dollar traded in all directions  today against  the various major currencies. The yen was up by 123 basis points and closing well below the 123 cross at 122.480. The British pound gained good ground today, 41 basis points, closing at 1.5731. The Canadian dollar lost huge ground against the USA dollar, 86 basis points closing at 1.2386.

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: 2.32% down 16 in basis point from Monday// (just at the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

94.90 down 129 cents on the day


European and Dow Jones stock index closes:

bad day all around!!

England FTSE down 133.22 points or 1.97%

Paris CAC down 189.35 points or 3.74%

German Dax down  409.23 points or 3.56%

Spain’s Ibex down 518.10 points or 4.56%

Italian FTSE-MIB down 1230.85. or 5.17%


The Dow down 350.33  or 1.95%

Nasdaq; down 122.04 or 2.40%


OIL: WTI 58.19 !!!!!!!



Closing USA/Russian rouble cross: 55.55  down 3/4  rouble per dollar on the day



And now for your more important USA stories.


NY trading for today:


Greece… Mattered: Surveying The Carnage

Greece… mattered!!


The market be like…

*  *  *

It began as FX markets opened ugly in early Asian trading, but once stock markets started to open, the focus shifted there…

Japan spanked… Nikkei 225 down 730 points from Friday’s close…


China collapsed…


When Europe opened it was ugly in stocks…


And bonds… European spreads exploded – biggest risk increase in 7 years…


But The Swiss National Bank did its best to sell Francs and buy EURs to make it all appear “contained”… Which squeezed EURUSD all the way into the green… a 325 pip ramp!!!


And the Sudden “hand of God” move in EUR around 1340ET


While Greek stock markets were closed, their bonds were not.. .and carnaged 420bps higher to 15.10%…


And stock ADRs and ETFs traded in the US:

  • EUFN – European Financials, down 4% – broke below its 200DMA
  • NBG – Nation Bank of Greece, down 26% on record volume
  • GREK – Greek Stocks, down 18% on record volume


*  *  *

In The US, the initial carnage dip was bought with gusto but that ramp failed and by the close we were testing new lows…


Trannies managed to get back to unchanged before plunging…


Cash markets were a one-way street from just after the open…


Financials hammered!!


Post-FOMC: Bonds best, Gold glitters, but Stocks stink…


Leaving The Dow red and S&P unch for the year…


All major indices broke significant technical levels today…


VIX surged to 19.00… (from 11 handle last Tuesday)


As the 50.98 million share short of the 63.9 million outstanding in VXX suffered greatly… above 20 to 7-week highs on massive volume


The last time VXX rose more than 14% in a day was 913 trading days ago (more than 3 years ago on November 9, 2011) and Bernanke bailed out Europe


Treasury yields plunged as a near-record short position felt the squeeze… this was the best day for 10Y yields since January


The dollar tumbled as the manipulated EUR surge “proved” there was nothing to fear… USDJPY did not play along wioth the manipulation.


Gold held onto gains but copper, silver and worse Crude (down 2.4%) all slide despite the USD weakness…


*  *  *

Oh and then there is Puerto Rico collapsing…


And Bitcoin is surging…

*  *  *

Amid all this with stocks down just 3% from their highs… The Fear & Greed Index collapsed to just 12!!!!



But apart from that…

Charts: Bloomberg


Sunday night: Puerto Rico announces that it cannot pay its debt. Thus we have two default situations occurring simultaneously, the Greek and Puerto Rico debt.

(courtesy zero hedge)



Here Comes “Prexit”: Puerto Rico In “Death Spiral”, Debts Are “Not Payable”, Governor Refuses To “Kick The Can”

As we noted last night, for a whole lot of time nothing at all can happen under the guise of “containment”… and then everything happens all at once. Because not even two full days after Greece activated the “Grexit” emergency protocol, leading to capital controls, and a frozen banking system and stock market, moments ago the NYT reported that the default wave has jumped the Atlantic and has hit Puerto Rico whose governor Alejandro García Padilla, saying he needs to pull the island out of a “death spiral,” has concluded that the commonwealth cannot pay its roughly $72 billion in debts, an admission that will probably have wide-reaching financial repercussions.

In other words, first Greece, and now Puerto Rico may be in a state of Schrodingerian default. Why the ambiguity? Because while Greece is not technically in default until July 1, Puerto Rico does not even have an option to declare outright default. But that doesn’t mean that the commonwealth will service it.Quoted by the NYT, García Padilla said “The debt is not payable.” He added that “there is no other option. I would love to have an easier option. This is not politics, this is math.

Funny: math went out the window in 2009 when central bank “faith” took over. The problem is that faith has run out, as has the “political capital” to keep an insolvent global system running, and first Greece now Puerto Rico are finally realizing it.

As the NYT adds, this is “a startling admission from the governor of an island of 3.6 million people, which has piled on more municipal bond debt per capita than any American state.”


A broad restructuring by Puerto Rico sets the stage for an unprecedented test of the United States municipal bond market, which cities and states rely on to pay for their most basic needs, like road construction and public hospitals.


That market has already been shaken by municipal bankruptcies in Detroit; Stockton, Calif.; and elsewhere, which undercut assumptions that local governments in the United States would always pay back their debt.

The immediate implication, as accurately presented by the NYT, is that Puerto Rico’s call for debt relief on such a vast scale could raise borrowing costs for other local governments as investors become more wary of lending. Indicatively, Puerto Rico’s bonds have a face value roughly eight times that of Detroit’s bonds.

What is worse for the illusions that is US “capital markets” is that virtually all the same hedge funds who are long Greece on hopes of some central bank bailout, are also long Puerto Rico. As such, while tomorrow most will be spared...

… some of the most “respected” US hedge funds will suffer a gruesome bloodbath.

What happens next is unclear: “Puerto Rico, as a commonwealth, does not have the option of bankruptcy. A default on its debts would most likely leave the island, its creditors and its residents in a legal and financial limbo that, like the debt crisis in Greece, could take years to sort out.”

So without the “luxury” of default, what is PR to do? Why petition to be allowed to file Chapter 9 naturally: after all everyone is doing it.


In Washington, the García Padilla administration has been pushing for a bill that would allow the island’s public corporations, like its electrical power authority and water agency, to declare bankruptcy. Of Puerto Rico’s $72 billion in bonds, roughly $25 billion were issued by the public corporations.


Some officials and advisers say Congress needs to go further and permit Puerto Rico’s central government to file for bankruptcy — or risk chaos.


“There are way too many creditors and way too many kinds of debt,” Mr. Rhodes said in an interview. “They need Chapter 9 for the whole commonwealth.”

García Padilla said that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts. Where have we heard that before…

He said creditors must now “share the sacrifices” that he has imposed on the island’s residents.


“If they don’t come to the table, it will be bad for them,” said Mr. García Padilla, who plans to speak about the fiscal crisis in a televised address to Puerto Rico residents on Monday evening. “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

And the punchline:

“My administration is doing everything not to default,” Mr. García Padilla said. “But we have to make the economy grow,” he added. “If not, we will be in a death spiral.”

And this one: any deal with hedge funds, who are desperate to inject more capital in PR so they can avoid writing down their bond exposure in case of a default, “would only postpone Puerto Rico’s inevitable reckoning. “It will kick the can,” Mr. García Padilla said. “I am not kicking the can.”

We wonder how long before Tsipras, who earlier was quoting FDR, steals this line too.

And speaking of Prexit, how long before Puerto Rico exits the Dollarzone… and will there be a Preferendum first or will the governor, in his can kick-less stampede, just make a unilateral decision to join Greece, Ukraine, Venezuela and countless other soon to be broke countries in the twilight zone of Keynesian sovereign failures?




And the story continues this morning:

(courtesy zero hedge)

Puerto Rico Bonds Are Collapsing

With all eyes focused on Greek ATM lines, collapsing Chinese ponzi schemes, and European bank implosions, one could be forgiven for forgetting about another crisis occurring closer to home. As we detailed here, Puerto Rico is now “in a death spiral” and PR bonds are collapsing this morning



Puerto Rico’s debt is nearly half that of California for a population one-tenth the size… (via WSJ)


As we explained previously,

What happens next is unclear: “Puerto Rico, as a commonwealth, does not have the option of bankruptcy. A default on its debts would most likely leave the island, its creditors and its residents in a legal and financial limbo that, like the debt crisis in Greece, could take years to sort out.”

So without the “luxury” of default, what is PR to do? Why petition to be allowed to file Chapter 9 naturally: after all everyone is doing it.

In Washington, the García Padilla administration has been pushing for a bill that would allow the island’s public corporations, like its electrical power authority and water agency, to declare bankruptcy. Of Puerto Rico’s $72 billion in bonds, roughly $25 billion were issued by the public corporations.


Some officials and advisers say Congress needs to go further and permit Puerto Rico’s central government to file for bankruptcy — or risk chaos.


“There are way too many creditors and way too many kinds of debt,” Mr. Rhodes said in an interview. “They need Chapter 9 for the whole commonwealth.”

García Padilla said that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts. Where have we heard that before…

He said creditors must now “share the sacrifices” that he has imposed on the island’s residents.


“If they don’t come to the table, it will be bad for them,” said Mr. García Padilla, who plans to speak about the fiscal crisis in a televised address to Puerto Rico residents on Monday evening. “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

And the punchline:

“My administration is doing everything not to default,” Mr. García Padilla said. “But we have to make the economy grow,” he added. “If not, we will be in a death spiral.”

And this one: any deal with hedge funds, who are desperate to inject more capital in PR so they can avoid writing down their bond exposure in case of a default, “would only postpone Puerto Rico’s inevitable reckoning. “It will kick the can,” Mr. García Padilla said. “I am not kicking the can.”

We wonder how long before Tsipras, who earlier was quoting FDR, steals this line too.

And speaking of Prexit, how long before Puerto Rico exits the Dollarzone… and will there be a Preferendum first or will the governor, in his can kick-less stampede, just make a unilateral decision to join Greece, Ukraine, Venezuela and countless other soon to be broke countries in the twilight zone of Keynesian sovereign failures?


Dallas Fed surges back from the dead but still negative (recessionary)
(courtesy zero hedge)

Dallas Fed Surges Back, Beats By Most Since Jan 2012 But Hope Tumbles

After breaking to 6 year lows in May, expectations were for a bounce in Dallas Fed’s Manufacturing Outlook from -20.8 to -16. After missing expectations for six straight months, June’s bounce to a -7.0 print is the biggest best since January 2012. This surge was all due to the current conditions shift as future hope for new orders and production tumbled. While most subindices rose, we note that CapEx fall once again to 3-month lows.This is the 6th consecutive negative (contractionary) print in a row for Dallas Fed – something not seen outside of a recession.

Bounce… or Trend?


The imrpovement was all current conditions as future hope tumbled…


Why is it still not growing again? Simple – rain!

Fabricated Metal Manufacturing


We currently believe we are seeing the bottom of the downturn in oil and gas. So far, it appears it is holding true as new orders received in June are equal to the prior month for the first time in 2015. Sales and orders are increasing, but costs are increasing at a greater rate.


First we faced strikes, now storms. It is tough out there. Signs of some stability in oil and gas exploration and production are emerging. If that continues, then our business conditions will benefit in the coming months.


Weather in the Texas region continues to slow home building and renovation. Due to the wet conditions, most of my customers are unable to work on projects and their backlog continues to grow.


May’s rains will impact construction activity over the next couple of months.

Charts: Bloomberg


Your next defaulting crisis:
(Student loans)
courtesy zero hedge

Moody’s, Fitch Fret Over Billions In Student Loan ABS As Defaults Loom

Back in April we asked if the student loan bubble was about to witness its 2007 moment.

The reference, of course, was to a wave of MBS downgrades in July of 2007 which sent a series of tremors through global financial markets and triggered an asset backed commercial paper crisis in Canada which, although no one knew it at the time, presaged the crisis that would wreak havoc in the US a year later. As a reminder, on July 10, 2007 Moody’s downgraded 399 bonds backed by subprime mortgages which together totaled some $5.2 billion. Meanwhile, S&P suggested it was close to cutting ratings on more than $12 billion in mortgage-backed securities due to declining home prices and rising default rates. On July 12, Fitch Ratings placed 19 structured collateralized debt obligations on Ratings Watch Negative due to a significant deterioration in the underlying portfolios of residential mortgage-backed securities. That same day, S&P cut its ratings on 498 subprime mortgage related bonds worth some $6.39 billion.

We’re starting to see a similar situation unfolding in the market for student loan backed paper.  In April, Moody’s put some $3 billion in student loan backed ABS on review for downgrade citing an increased likelihood of default. Now, Moody’s has placed more than 100 tranches across 57 student loan-backed deals totaling some $34 billion on review. The rationale? “Low” payment rates, deferment, forebearance, and IBR. From Moody’s:

Moody’s Investors Service has placed on review for downgrade the ratings of 106 tranches in 57 securitizations backed by student loans originated under the Federal Family Education Loan Program (FFELP). The loans are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest.


The reviews for downgrade are a result of the increased risk that the tranches will not fully pay down by their respective final maturity dates. Failure to repay a note on the final maturity date represents an event of default under the trust documents.


The elevated risk is a result of low payment rates on the underlying securitized pools of student loans, driven by a combination of low rates of voluntary prepayments, persistently high volumes of loans in deferment and forbearance, and the growing popularity of the Income-Based Repayment (IBR) and extended repayment programs.

And BofAML has more color:

Moody’s announced that it has placed on review for downgrade the ratings of 106 tranches in 57 securitizations backed by FFELP loans. This announcement follows a similar announcement made on April 8, 2015, which stated 14 tranches in 14 securitizations backed by FFELP loans were placed on review for downgrade. 


The data shows deferment and forbearance levels for FFELP Stafford/PLUS and Consolidation Loan ABS have recently trended down, although 30+ days have increased. The increase could lead to higher involuntary prepayments (i.e., defaults). A portion of the increased use in IBR plans noted by Moody’s could be a substitution effect, as certain borrowers may have reached the time limits on economic deferment and forbearance.



As we indicated in an earlier report, the use of income based repayment (IBR) plans has increased for FDLP loans. A similar upward trend is likely occurring for FFELP loans but the magnitude is likely less, especially for Consolidation loans. 


To be fair, numerous payment options under the Federal student loan programs make the cash flow analysis for FFELP loan ABS relatively complex for rating agencies, issuers, investors, and other market participants. Market participants must consider payment options that are influenced by economic and legislative/regulatory factors (e.g., PAYE and REPAYE) and generally, not available in other retail loan products (e.g., auto loans), along with delinquencies, defaults, claim rejections, interest rates and payment delays, among others. 


In other words, there are all kinds of reasons to expect this paper not to perform well that do not apply to ABS backed by other types of credits.

Meanwhile, as discussed at length in these pages, the Education Department is aggressively promoting the IBR program, which is bad news for taxpayers. These plans allow borrowers whose incomes are not deemed sufficient to service their debt to make monthly ‘payments’ of zero. After 300 months, the loans are forgiven. In other words, it’s theoretically possible to remain ‘current’ on a student loan and have that loan legally discharged after 25 years without ever making a single payment. It’s easy to see how this type of arrangement might negatively affect the cash flows in a student loan backed securitization and hence it comes as no surprise that the proliferation of IBR is cited by Moody’s as a contributing factor to its review.

Lending some credence to our 2007 MBS comparison, Fitch has also moved to place 57 tranches of FFELP-backed paper on Ratings Watch Negative.

The fact that Moody’s and Fitch are beginning to reevaluate student loan ABS is indicative of an underlying shift in the market. Between the proliferation of IBR and the Department of Education’s recent move to open the door for debt forgiveness in the wake of the Corinthian collapse, financial markets are beginning to see the writing on the wall. Perhaps Bill Ackman said it best: “there’s no way students are going to pay it all back.”

*  *  *

Full Moody’s statement:

Approximately $34 billion of asset-backed securities affected.

New York, June 22, 2015 — Moody’s Investors Service has placed on review for downgrade the ratings of 106 tranches in 57 securitizations backed by student loans originated under the Federal Family Education Loan Program (FFELP). The loans are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest.


The reviews for downgrade are a result of the increased risk that the tranches will not fully pay down by their respective final maturity dates. Failure to repay a note on the final maturity date represents an event of default under the trust documents. Because of the government guarantee and the available credit enhancement, recoveries upon default would be very high, although the timing of such recoveries would depend on the transaction structures and voting rights upon default for each transaction.

The elevated risk is a result of low payment rates on the underlying securitized pools of student loans, driven by a combination of low rates of voluntary prepayments, persistently high volumes of loans in deferment and forbearance, and the growing popularity of the Income-Based Repayment (IBR) and extended repayment programs.

During the financial crisis, prepayment rates dropped to historically low levels. Although prepayments have risen in the last few years, partly as a result of borrowers refinancing their FFELP student loans through federal Direct consolidation loans, prepayment rates of near zero in 2008-09 slowed pool amortization rates and resulted in pool balances exceeding the original projections.

The percentage of FFELP loans in various payment plans, including deferment, forbearance, IBR or extended repayment, has remained between 20% and 30% for consolidation loan pools and between 40% and 50% for non-consolidation loan pools. Borrowers in these plans either suspend repayment of their student loans or make reduced payments of principal and interest. Although the level of loans in deferment has declined over the last two years by approximately 7%, the level of loans to borrowers in IBR has increased by approximately the same amounts and offset this recent decline in deferments. IBR and extended repayment option plans that can extend loan repayment periods up to 25 years, from the standard 10-year term for non-consolidation loans, are significantly lengthening the weighted-average life of FFELP loan collateral pools. In some FFELP securitizations, loans to borrowers in either IBR or extended repayment represent approximately 10%-15% of the balance of loans in repayment



Well that about does it for tonight

Please forgive me as to the length of the commentary.  The events of today are simply extraordinary and deserve a lot of your attention.

I will see you tomorrow night



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