June 30/Greece officially defaults to the IMF/Ukraine stops all purchases of gas from Russia/J.P.Morgan now controls 96% of all commodity derivatives/Puerto Rico defaults and thus setting up huge derivative losses for MBIA and other insurers of bond debt/First day notice for the silver contract month/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1171.50 down $7.00  (comex closing time)

Silver $15.55  down 11 cents

In the access market 5:15 pm

Gold $1172.45

Silver: $15.70

 

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

At the gold comex today, we had a poor delivery day, registering 1 notice serviced for 100 oz for the June delivery month and zero deliveries for the first day notice for the non active July month.  Silver comex is now officially in the record books for June and July saw 746 notices filed for 3,730,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 250.01 tonnes for a loss of 53 tonnes over that period.

In silver, the open interest rose by 34 contracts as Monday’s price was down 7 cents. The total silver OI continues to remain extremely high, with today’s reading at 196,198 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. This is the first time in almost two years that the open interest in an active delivery month did not collapse in number.

In silver we had 746 notices served upon for 3,730,000 oz. for July

In gold, the total comex gold OI rests tonight at 443,223 for a gain 1,216 contracts as gold was up $5.60 yesterday. We had 1 notice filed for 100 oz to complete June and zero notices for July.

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 sizable withdrawal in inventory at the SLV to the tune of 621,000 oz/ Inventory now rests at 323.718 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 rise by 34 contracts to 196,198 as silver was down 7 cents yesterday. The OI for gold rose by another 1216 contracts up to 443,223 contracts as the price of gold was up $5.60 on yesterday.

(report Harvey)

2. Today, 7 important commentaries on Greece

 

(zero hedge, Reuters/Bloomberg/)

3.the impending default for Puerto Rico and a potential black swan emanating from a bond collapse of Puerto Rico bonds

(2 stories)

(zero hedge/Dave Kranzler/IRD)

4. China stock market initially crashes and then its protection team shows up

(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:  topic Market Intervention Creep

(Dave Kranzler IRD)

9. Bill Holter:  two important papers;

i)   You gotta scratch your head!

ii)   Was the Greek development already “in the market”?

10. Alasdair Macleod delivers a great commentary on the huge problems facing the euro due to the Greek problems

(Alasdair Macleod)

11.  Huge commentary on the massive derivatives undertaken by JPMorgan as they corner just about all derivatives related to commodities

(courtesy zero hedge)

12 Chicago manufacturing pMI worst showing in over 7 years:

(zero hedge)

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 1,216 contracts from 442,007 up to 443,223 as gold was up $5.60 cents in price yesterday (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 34 contracts to 411.  The next big delivery month after June will be August and here the OI fell by only 116 contracts down to 286,114. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 61,421. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 152,450 contracts. Today we had 0 notices filed for nil oz.(one notice was filed late last night to complete June)

And now for the wild silver comex results. Silver OI rose by a small 34 contracts from 196,164 up to 196,198 as the price of silver was down 7 cents in price with respect to Monday’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 9,525 contracts down to 2,699.Today is first day notice.   The next major active delivery month is September and here the OI rose by a huge 9,290 contracts to 137,701. This is the first time we did not witness the collapse of OI in an active delivery month.  All of the longs that stayed to the end in July rolled into September.. The estimated volume today was fair at 24,135 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 74,341 contracts which is excellent  in volume.  We had 746 notices filed for 3,730,000 oz for first day notice deliveries.

 

July initial standing

June 30.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 13,692.337 oz (SCOTIA,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 160,643.500 oz (Scotia, JPM)total: 5090 kilobars
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 411 contracts 41,100 oz
Total monthly oz gold served (contracts) so far this month 0 contracts
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil oz
Total accumulative withdrawal of gold from the Customer inventory this month 13,692.337   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 2 customer withdrawal

i) Out of Scotia: 13,660.187 oz

ii) Out of Manfra; 32.15 oz (1 kilobars)

 

total customer withdrawal: 13,692.337 oz

We had 2 customer deposits:  (and the farce continues)

i) Into JPMorgan: 160,750.000 oz  (5,000 kilobars)

ii) Into Scotia:  2893.50 oz (90 kilobars)

Total customer deposit: 163,643.500 oz (5090 kilobars)  or 5 tonnes

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

For completeness: we had one delivery noticed filed upon for 100 oz to complete the june delivery month.

Thus the final number of oz standing for gold in June is 2959 contracts or 295,900 oz.

To calculate the total number of gold ounces standing for the July contract month, we take the total number of notices filed so far for the month (0) x 100 oz  or 0 oz , to which we add the difference between the open interest for the front month of June (411) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

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

No of notices served so far (0) x 100 oz  or ounces + {OI for the front month (411) – the number of  notices served upon today (0) x 100 oz which equals 41,100 oz standing so far in this month of July (1.278 tonnes of gold).  .

Total dealer inventory 517,216.902 or 16.08 tonnes

Total gold inventory (dealer and customer) = 8,043,593.303 oz  or 250.01 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.02 tonnes for a loss of 53 tonnes over that period.

 

end

And now for silver

July silver initial standings

June 30 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 630,432.89  oz (Delaware,Brinks,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 601,703.118 oz (HSBC,CNT)
No of oz served (contracts) 746 contracts  (3,730,000 oz)
No of oz to be served (notices) 1953 contracts (9,765,000 oz)
Total monthly oz silver served (contracts) 746 contracts (3,730,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 630,432.89 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 2 customer deposit:

i) Into CNT 599,772.818 oz

ii) Into HSBC: 1930.200 oz

total customer deposit: 601,703.118  oz

 

We had 3 customer withdrawal:

i) Out of Delaware:  4094.600 oz

ii) Out of Brinks: 25,99.78 oz

iii) Out of Scotia: 600,538.510 oz

 

total withdrawals from customer; 630,432.89   oz

 

we had 1 gigantic adjustment

out of the CNT vault:

We have a transfer of 1,822,680.39 oz out of the customer and this landed into the dealer account of CNT.  This will be used in the settling process.

 

Total dealer inventory: 59.689 million oz

Total of all silver inventory (dealer and customer) 182.389 million oz

The total number of notices filed today for the July contract month is represented by 746 contracts for 3,730,000 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 (746) x 5,000 oz  = 3,730,000 oz to which we add the difference between the open interest for the front month of June (2699) and the number of notices served upon today (746) x 5000 oz equals the number of ounces standing.

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

746 (notices served so far) + { OI for front month of June (2699) -number of notices served upon today (746} x 5000 oz ,= 13,495,000 oz of silver standing for the June contract month.

these are initial standings for the July contract month.

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

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

end

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 30/no change in inventory/rests tonight at 711.44 tonnes

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

end

And now for silver (SLV)

June 30/we lost another 621,000 oz of silver form the SLV/Inventory rests at 323.718 oz (somebody must be in great need of physical silver)

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 another withdrawal of 621,000 oz of  silver inventory/SLV inventory rests tonight at 323.718 million oz

end

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 7.4 percent to NAV usa funds and Negative 7.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.9%

Percentage of fund in silver:37.7%

cash .4%

( June 30/2015)

2. Sprott silver fund (PSLV): Premium to NAV rises to 1.40%!!!! NAV (June 30/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to – .57% toNAV(June30/2015

Note: Sprott silver trust back  into positive territory at +1.40%

Sprott physical gold trust is back into negative territory at -.57%

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.
* * * * *

end

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)

Greece Shows Importance of Gold as Europeans Buy Coins and Bars

– Demand for physical gold from Europeans surges
– Greek ATMs limit withdrawals to €60 per day
– Greeks panic buy food, fuel and medicine
– European elites threaten Greece with expulsion
– Gold not subject to capital controls or “bail-ins”

British Gold Sovereign Gold Coin

 

Demand for gold coins and bars from European investors has increased significantly in the past month as the Greek crisis enters a new phase.

As reported in our statement – to which Bloomberg referred in their piece – we saw a significant increase in demand from the U.K. and Ireland yesterday where sales of coins and bars were three times the average of the previous three Mondays.

The Royal Mint said that Greek demand for coins in June was double the average for the last five months and the U.S mint saw the highest sales of bullion coins since January.

Bloomberg report that many buyers want to store their gold outside of the Eurozone, citing Switzerland as an example. We advise our clients to do the same and many have opted for storage in Singapore also.

As the crisis in Greece accelerates the value of owning gold will become more apparent to everyday people.

What is happening in Greece today may well await the citizenry of other developed economies tomorrow – as recently warned by well placed observers in notable institutions such as HSBC, Goldman Sachs and Fidelity.

Greek banks remain closed and ATM withdrawals have been limited to €60 per day. There has been panic buying of various essentials such as food, fuel and medicines across Greece, as reported by the New York Times.

This is in anticipation of chaos and disruptions of supply chains should the country be forced out of the euro and onto a much depreciated drachma.

European elites have threatened Greece with expulsion from the euro currency should Sunday’s referendum – on using austerity as a tool to deal with Greece’s unpayable debt – return a “no” vote.

Greece has fought back with Finance Minister Yanis Varoufakis telling the Telegraph,

“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable.”

What happens next in Greece is unsure. What is assured is the insurance gold will provide going forward. Physical gold, held outside the banking system, is not subject to capital controls.

With the ECB reneging on its responsibility as lender of last resort – not the first time it has used its power to political ends in Greece – Greek banks may soon be forced to “bail-in” deposits – i.e. confiscate the cash of their customers.

American Silver Eagle 1 0z Coin

 

Those holding cash “under the mattress” and physical gold and silver coins will be provided a degree of security in such an environment.

Precious metals can be used directly in exchange for goods or are readily converted to cash for the same purpose while retaining their store of value until required.

Should the Greek crisis morph into a full-scale euro-crisis – if, for example, Credit Default Swaps were triggered which provoke a derivatives crunch – gold and silver would still enable you to secure life’s necessities if the value of one’s cash savings should collapse.

The euro, like all paper and digital currencies, is backed by nothing more than the faith in the institution that issues it. Faith in central banks is rapidly evaporating.

Physical gold, on the other hand, is a time-tested and academically proven store of value or safe haven in times of crisis. It will likely be recognised as such by the wider public in the coming months and years.

Must Read Guide:7 Key Gold Must Haves

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,175.00, EUR 1,053.01 and GBP 747.08 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,176.50, EUR 1,060.82 and GBP 749.10 per ounce.

Gold climbed $5.10 or 0.43 percent yesterday to $1.179.20 an ounce. Silver slipped $0.08 or 0.51 percent to $15.72 an ounce.

Gold in Singapore for immediate delivery ticked lower by 0.3 percent to $1,176.35 an ounce near the end of the day. Gold is on track for a 1 percent decline this month.

Even with Greece just hours from defaulting on its 1.6 billion euro loan from the IMF, safe haven bids for gold are weak. The U.S. dollar gained 0.4 percent against other currencies, while U.S. and Asian stock markets rose.

Greek Prime Minister Alexis Tsipras is calling for a bailout referendum on July 5. The Greek drama is not finished.

In late morning European trading gold is fell 0.20 percent at  $1,176.62 an ounce. Silver fell 0.10 percent at $15.71 an ounce and platinum rose 0.19 percent at $1,079.00 an ounce.

Breaking News and Research Here

Dave Kranzler: Market intervention creep

Section:

Don’t Panic — The Fed Is Control of the Markets

By Dave Kranzler
Investment Research Dynamics
Monday, June 29, 2015

If today’s market action does not convince the last skeptics that the U.S. financial markets are completely rigged, nothing will.

The action in the U.S. markets today after the Greece/EU situation hit a wall today demonstrates the degree of control the Fed and the U.S. central planners have over the markets now. …

Ever since 1987, and since President Reagan signed the executive order that authorized the Plunge Protection Team to prop up the stock markets, there’s been market intervention “creep” in this country. Robert Rubin’s role as secretary of treasury was to transition the Working Group on Financial Markets from its stock market-propping function into a full-fledged, all-encompassing market intervention mechanism. …

… For the full commentary:

http://investmentresearchdynamics.com/dont-panic-the-fed-is-control-of-t..

end

Alasdair Macleod on the Euro/very important

(courtesy Alasdair Macleod)_

The euro crisis

Make no mistake; the Greek crisis is a euro crisis that threatens the solvency of the ECB itself, and therefore confidence in the currency.

Before going into why, a few comments on Greece will set the scene.

Last weekend it became clear that Greece is heading for both a default on its government debt and also a failure of its banking system. With the benefit of hindsight it appears that the Greek government was unwilling to pretend that it was solvent and extend its financial support as if it was. The other Eurozone finance ministers and the troika were not prepared to accept this reality.

There is no immediate benefit from debating why. What matters now are the economic and financial consequences, which are basically two: the Eurozone’s banking system is very fragile and cannot absorb any sovereign default shocks easily, and the ECB itself now needs refinancing. Let’s concentrate on the ECB first.

The losses the ECB face from Greece alone are about twice its equity capital and reserves. The emergency liquidity assistance (ELA) owed by Greece to the ECB totals some €89bn, and the TARGET2 balance owed by the Bank of Greece to the other Eurozone central banks is a further €100.3bn, which at the end of the day is the ECB’s liability. The total from these two liabilities on their own is roughly twice the ECB’s equity and reserves, which total only €98.5bn. Given the likely collapse of the Greek banking system and the government’s default on its debt, we can assume any collateral held against these loans, as well as any Greek bonds held by the ECB outright are more or less worthless.

The ECB has two courses of action: either it continues to support Greece to avoid crystallising its own losses or it recapitalises itself with a call upon its shareholders. The former appears to have been ruled out by last weekend’s events. For the latter a rights issue looks challenging to say the least, because not all the EU national central banks are in a position to contribute. Instead it is likely that some sort of qualifying perpetual bond will be issued for which there should be ready subscribers.

How this is handled is crucial, because there is considerable danger to the ECB from the instability of the whole Eurozone banking system, which is highly geared and extremely vulnerable to any reassessment of sovereign credit risk. If you believe that the Greek crisis has no implications for Italy, Spain, Portugal and even France, you will rest easy. This surely is how the ECB would like to represent the situation. If on the other hand you suspect that the collapse of the Greek banking system, plus their sovereign default, together with a knock-on effect in derivative markets, have important implications for euro-denominated bond markets, you will probably run for the hills. The latter being the case, highly geared Eurozone banks are likely to face difficulties, and they will affect the ECB’s own holdings of all bonds, both owned outright and held as collateral against loans to rickety banks.

In short, the ECB’s balance sheet, which is heavily dependent on Eurozone bond prices not collapsing, is itself extremely vulnerable to the knock-on effects from Greece. As the situation at the ECB becomes clear to financial markets, the euro’s legitimacy as a currency may be questioned, given it is no more than an artificial construct in circulation for only thirteen years.
In conclusion, the upsetting of the Greek applecart risks destabilising the euro itself, and a sub-par rate to the US dollar beckons.

End note on gold

This week should see the dollar strong against the euro and the euro price of gold can be expected to rise. The extent to which these happen may depend on whether or not central banks intervene. For what it’s worth last time this happened (over Cyprus February 2013) Europeans were reported to be requesting physical delivery against their unallocated gold accounts. The following April a co-ordinated bear raid of unprecedented size pushed the gold price down from $1580 to a low of $1183. The purpose of the raid was to disabuse investors of the safe-haven trade, in which it succeeded.

There is little such appetite for gold bullion today so a similar move is probably viewed by central banks as unnecessary; but if the gold price was to move significantly higher attempts to defuse the rise are less likely to succeed because there are very few sellers in western markets and the short positions on Comex in the Managed Money category start at record levels.

end

(courtesy Koos Jansen)

Posted on 29 Jun 2015 by

Gold Fund To Serve The New Strategy Of The Silk Road, Lead The New Gold Development

Not surprisingly there is little official documentation on the recently launched Silk Road Gold Fund. However, the translation below (original article published on ifeng) provides an intriguing insight at what this Fund is about. On May 22 Chinese financial policy makers from the PBOC, Chinese gold industry executives from commercial banks, mining companies, the Shanghai Gold Exchange and the China Gold Association together with representatives of the Western gold industry discussed gold’s future role in finance and how it will serve the New Silk Road Initiative.

Representatives from gold and financial institutions talked freely about bringing gold’s superiority into full play, seizing the historic and strategic opportunity of the “One Belt And One Road”…

The holding of the conference enhanced the communication and cooperation between the western gold industry and countries along the line of the “One Belt And One Road”, clarified the development direction of the gold industry under the economic background of the new normal … and unlocked a new chapter of the gold industry development.

Largest Domestic Special Fund of Silk Road Positioned in Xi’an For Assisting “One Belt And One Road”

May 25, 2015, 08:34

Source: ifeng Shaanxi

Goldfund 1
“One Belt And One Road” Conference of Promoting Gold Industry Development was held in Xi’an
Goldfund 2
“One Belt And One Road” Conference of Promoting Gold Industry Development was held in Xi’an

In the afternoon of May 22, the “One Belt And One Road” Conference of Promoting Gold Industry Development & Launching Ceremony of Silk Road Gold Fund hosted by Shanghai Gold Exchange and Shaanxi Provincial Government and co-hosted by Shaanxi Gold Group Incorporation Co., Ltd. was held grandly in Xi’an. As an important part of the Investment & Trade Forum for Cooperation between East & West China and the Silk Road International Expo agenda,the conference officially initiated the Silk Road Gold Fund with the subject of “Serve the New Strategy of the Silk Road, Lead the New Development of the Gold”; discussed the innovative thinking and specific measures on grasping the great development opportunities of “One Belt And One Road” and enhancing the synergetic development with the gold industry of the countries and regions along the line of “One Belt And One Road” under the new normal of the economy, and initiated the new era of the gold industry development.

Wei Minzhou, Standing Committee member of Shaanxi Province and municipal party secretary of Xi’an, attended the conference and gave a speech; deputy head of the financial market department of People’s Bank of China Zou Lan gave a speech about the consistent support on the sustainable and healthy development of China’s gold market; vice president of the Shanghai Gold Exchange Song Yuqin made a keynote speech that profoundly analyzed the development direction of China’s gold market and the policies on the gold industry; Sun Feng, chairman of the Shaanxi Gold Group, addressed the development report of the Shaanxi Gold Group; vice president of precious metal department of Industrial and Commercial Bank of China Qiu Yi gave his report on how to adapt to the new normal and how to develop new business. Chairman of Shaanxi Non-ferrous Metal Holding Group Co., Ltd Huang Xiaoping, vice chairman of China Gold Association Cui Jianguo, president of Industrial and Commercial Bank of China Shaanxi Branch Shang Jun, president of Bank of China Shaanxi Branch Li Ruiqiang, Industrial Bank Co., Ltd. Xi’an Branch Guo Qiujun and president of Industrial and Commercial Bank of China Sinkiang Branch Sun Jianyong gave their speech successively; Chen Yumin, general manager of the Shandong Gold Group, introduced the basic information of the Silk Road Gold Fund. Representatives from gold and financial institutions talked freely about bringing gold’s superiority into full play, seizing the historic and strategic opportunity of the “One Belt And One Road”, strengthening the bank-enterprise cooperation and financial-industrial combination, and leading the transformation and upgrading of the gold industry under the economic background of the new normal.

During the conference, vice governor of Shaanxi Provincial Government Wang Lixia and vice president of the Shanghai Gold Exchange Song Yuqin signed the agreement of comprehensively enhancing the strategic cooperation of the gold industry, which indicated promoting the Shaanxi gold industry to be superior and strong by establishing the fixed cooperative mechanism, setting up gold trading center, etc. Shaanxi Gold Group signed the comprehensive strategic cooperation agreement with 8 banks as Shaanxi Branch of ICBC, Sinkiang Branch of ICBC, Shaanxi Branch of CCB, Shaanxi Branch of Bank of China, Shaanxi Branch of Bank of Communications, Xi’an Branch of Industrial Bank Co., Ltd., Bank of Xi’an and Shaanxi Rural Credit Cooperative Union.

As an important agenda of this conference, Shandong Gold Financial Holding Capital Management Co., Ltd., Shaanxi Gold Group Incorporation Co., Ltd., China Industrial Asset Management Limited, China Industrial Wealth Asset Management Limited, Western Capital Investment Co., Ltd. and Shenzhen Gold Information Group Co., Ltd. signed the Sponsorship Agreement of the Xi’an Silk Road Gold Fund Management Co., Ltd. The guests activated the specially designed trigger and initiated the Silk Road Gold Fund in the form of turning stone into gold by touching. The Silk Road Gold Fund, with the Shanghai Gold Exchange as the leading initiator and the win-win cooperation of the Shandong Gold Group with the strongest comprehensive strength in domestic gold industry and the Shaanxi Gold Group with regional advantage, attracted large financial institution to work together on its establishment.“The Silk Road Gold Fund” (hereinafter short as “Fund”) will raise and manage one mother Fund and several sub-Funds, including a Gold ETF Fund, Gold Resource Merger and acquisition Fund, Gold Investment Fund, etc. The Fund will be issued in 3 phases with the first phase as 5 billion yuan, second phase as 30 billion and estimated gross as 100 billion, and it will become the largest gold fund in the domestic gold industry.

The holding of the conference enhanced the communication and cooperation between the western gold industry and countries along the line of the “One Belt And One Road”, clarified the development direction of the gold industry under the economic background of the new normal, and facilitated the western gold industry and gold market to grasp the opportunity under the motivation of the grand pattern of “One Belt And One Road”, it added new vitality and injected new energy to the prosperity of the development of the gold industry and gold market of China, and unlocked a new chapter of the gold industry development.

Koos Jansen

end

S. Africa’s gold mines offer wage increases of up to 13%

Section:

By Kevin Crowley
Bloomberg News
Monday, June 29, 2015

South African gold-mining companies tabled a five-year wage offer to the industry’s unions that falls short of demands for increases of more than 80 percent.

AngloGold Ashanti Ltd., the world’s third-biggest producer of the metal, offered to raise entry-level workers’ pay by 13 percent annually starting July 1, while Sibanye Gold Ltd. and Harmony Gold Mining Co. proposed 11 percent and 7.8 percent respectively, they said in a joint statement on a website set up for the wage talks.

The National Union of Mineworkers, the industry’s biggest labor group, wants basic pay to be raised to at least 10,500 rand ($854) monthly from about 5,700 rand now. The inflation rate was 4.6 percent in May. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2015-06-29/south-africa-s-gold-pr..

end

OCC derivatives report suggests U.S. govt. has seized all commodity markets

Section:

10:56p ET Monday, June 25, 2015

Dear Friend of GATA and Gold:

Citing the latest quarterly report of the U.S. Office of the Comptroller of the Currency, Zero Hedge concludes tonight that JPMorganChase has “cornered the commodity derivative market,” the notional value of the investment bank’s commodity derivative position having just exploded from around $200 billion to nearly $4 trillion.

The OCC report, Zero Hedge adds, has ceased distinguishing gold derivatives from foreign exchange derivatives, but the combined total of gold and FX derivatives held by investment banks is shown to have exploded as well.

Zero Hedge’s analysis is headlined “JPMorgan Just Cornered the Commodity Derivative Market, and This Time There Is Proof” and it’s posted here:

http://www.zerohedge.com/news/2015-06-29/jpm-just-cornered-commodity-der…

Your secretary/treasurer is, of course, inclined to construe this astounding anomaly as comprehensive intervention in the markets by the U.S. government using Morgan as its broker, since it’s unlikely that a single investment bank would have the wherewithal to establish such fantastic positions on its own. The OCC report may mean that, with the fiat currency system cracking under the weight of years of abuse, the U.S. government has felt compelled to seize emergency control of all markets to bolt the exits from the system, gold being the primary exit, and to forestall hyperinflation.

This would signify the government’s belief that only totalitarian means — “financial repression” squared — can sustain the system now.

Venezuela already has shortages and rationing. Today Greece got capital controls, if indeed there is any capital left there. But before Americans snicker too much at those troubled countries, they should ponder the meaning of their country’s huge trade deficit, a privilege of issuance of the world reserve currency, a currency that is in effect a great tax on the world, a tax that, if Zero Hedge gets the OCC report right, now encompasses the destruction of all markets worldwide.

Immoral as it would be, it’s almost certainly all legal under the Gold Reserve Act of 1934 as amended in the 1970s —

http://www.treasury.gov/resource-center/international/ESF/Pages/esf-inde…

— the Trading with the Enemy Act of 1917, and the International Emergency Economic Powers Act of 1977:

http://www.gata.org/node/5606

It just hasn’t been conducted in the open yet. But maybe with the OCC report we’re almost there, and pushing this totalitarianism into the open is probably the best we can hope for.

Of course the Financial Times, Wall Street Journal, and the other mainstream financial news organizations will report it only to rationalize it and make excuses for it, whereupon they will sound a bit like the old Daily Worker. Barron’s may have a little more trouble with it. But they’re all going to look pretty silly — not that they care.

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

end

WOW!!!

(courtesy zero hedge)

JPMorgan Just Cornered The Commodity Derivative Market, And This Time There Is Proof

For years there had been speculation, rumor and hearsay that JPM had cornered the US commodities market. Now, finally, we have documented proof.

* * *

Traditionally, we look at the OCC’s Quarterly Bank Report on derivatives activities to see which was the largest bank in the US in terms of total notional derivative holdings. The reason being that like on frequent occasions in the past, we find some stunning  results, such as most recently in January when we wrote that, for the first time, Citigroup had eclipsed JPM as the largest US bank in total derivatives, with just over $70 trillion compared to perennial megabank JPM’s $65.3 trillion as of the third quarter of 2014, explaining also why Citigroup had drafted the Swaps push out language in the Omnibus Bill.

 

And while this time there was little exciting to report at the consolidated level (JPM overtook Citi in Q4 only for Citi to once again become the world’s largest bank in total derivatives with $56.6 trillion compared to $56.2 trillion for JPM and $52 trillion for Goldman as Bloomberg reported earlier), and in fact total notional derivatives tumbled from $220.4 trillion in Q4 to $203.1 trillion in Q1 the lowest level since 2008…

… an absolutely shocking blockbuster emerges when looking at the underlying component data.

Presenting Exhibit 12: Notional Amounts of Commodity Contracts by Maturity: even a CFTC regulator would be able to spot the outlier charted below.

 

What the chart above shows is that after fluctuating around the low to mid $200 billion range for the past 5 years, in Q1 the amount of Commodities with a maturity of under 1 year exploded to a record $3.9 trillion!

Sadly, the OCC provides no actual explanation for why there was such an epic surge in commodity derivatives within the US banking system in the first quarter, so we decided to explore.

What we found is what those who have for years accused JPM of cornering the commodity markets, have known: because it is none other than JPMorgan’s Commodity derivative book primarily in the <1 maturity bucket, which exploded from just $131 billion to a gargantuan and never before seen $3.8 trillion!

In fact as the chart below shows, while historically JPM has accounted for just over 50% of total commodity holdings among all US commercial banks, in the Q1 this number soared to a stratospheric 96% which by anybody’s standards is the very definition of cornering the market!

 

We don’t know what prompted JPM’s derivative book to soar to such a never before seen amount, but the number most certainly looks abnormal on both an absolute and a relative basis, especially considering that no other banks boosted their particular derivative book with the same vigor.

So what is going on here?

We decided to dig down some more when we encountered something even more perplexing. Because whereas in previous quarterly updates, the OCC broke out the FX and Gold categories as separate derivative items as seen in this most recent chart from the Q4 update…

… in Q1, once again quite inexplicably, the OCC decided to lump these two products together, thus making any credible observation about the total notional outstanding of just gold derivatives, impossible! But wait, we thought that according to former Chairman Bernanke, gold anything but currency: is the OCC suddenly disagreeing with that assessment?

 

Furthermore, while in all previous iterations of the OCC’s Table 9, gold derivative notionals by maturity were explicitly broken out as can be seen in this Q4, 2014 table below:

 

Starting in Q1, 2015 the “gold” section in Table 9 no longer exists (although we can see that while JPM cornered “commodities”, it was Citi that had its total derivative notional of “precious metals” undergo a massive jump, also for reasons unknown).

One would almost think the OCC is hiding something as the demand of US commercial banks. So while we no longer know what just total gold derivatives outstanding is, for some unexplained, reason, we do know that the combined total of FX and gold just hit an all time high.

* * *

And while the OCC did all it could to mask the “gold” line item by lumping it with FX, it still kept “Precious Metals” as is, although we assume that this too will be lumped with FX and gold shortly.

It is this chart that shows something is truly odd when it comes to the US commercial bank industry’s activity in the precious metals space.

 

So in summary, this is what we do know:

  • in Q1, JPM cornered the commodity derivative market, with a total derivative exposure of just over of $4 trillion, an increase ot 1,691% from just $226 billion in one quarter!

What we don’t know is:

  • why did the OCC decide to effectively eliminate its gold derivative breakdown by lumping it with FX,
  • why there was a 237% increase in the total amount of precious metals (which include gold) contracts in the quarter, from $22.4 billion to $75.6 billion

We have sent an email requesting much needed clarification from the Office of the Currency Comptroller, although we are not holding our breath.

Source: OCC’s Quarterly Report on Bank Trading and Derivatives Activities  First Quarter 2015

 

end

 

 

Two very important commentaries tonight from Bill Holter

 

First:

Was the GreeK development already “in the market”?

 

Now that we know Greece will default, where do things go from here?  Before getting to that very tough question (with no concrete answers), I would ask another stinging question.  “Was a Greek default really “already in the market”?  I have to chuckle just a little as Zerohedge did an article quoting many “talking heads” who as of last Friday were still doing their best Bruce Willis imitations and advising “come out to the coast, we’ll have a BLAST”!  How Could The “Greek Experts” Be So Wrong?  As I questioned last week, a Greek default and Eurozone exit was in no way already factored into the market …unless you believe today’s carnage is a result of Puerto Rico ‘fessing up to their bankruptcy!

  Where exactly does this go from here?  First and foremost, Greece is on par with Lehman Bros. of 2008 or may even be worse!  For a sovereign government to go down, or I should say “be allowed” to go down is worse than Lehman.  Lehman Bros. was “forced down” and put out of business before anyone figured out what the actual ramifications were.  Now, everyone knows of the interconnected ramifications yet Greece was still “allowed” to default (yes I know, whether it is classified truly as a default remains to be seen?).  My point is this, if the central banks were truly omnipotent, then how could “a Greece” ever happen?  For those of you who believed it would be “papered over” as everything else up until now has …something has changed!
  But what exactly has changed?  Greece, or Detroit, or Puerto Rico or wherever, are all small but they are REPRESENTATIVE of what is wrong with the entire system.  In fact, if you truly break the numbers down I believe you will find the U.S. is actually in a deeper hole than Greece.  Before you scream at me, please include all of the guarantees and future U.S. obligations, if you do this you will see Greece is actually a fiscal tightwad!
  Beginning immediately it is important to understand any institution can seem healthy one day yet announce insolvency the following day.  This is NO JOKE and I am not grandstanding.  We just do not know who owns or is obligated to “what”.  The financial markets and the individual players are so levered in various directions, volatility as we are now seeing can easily bankrupt the underfunded overnight.  I believe this has already happened over the last few years but clandestine funding has kept it hidden.  The recent volatility may have been too sharp, sudden or violent to keep the evil genie in the bottle, we will soon see.
  I cannot stress how important it is now for you to be on guard for anything at any time.  A market closure, though likely over a weekend can occur during ANY WEEKDAY!  Do not allow yourself to be lulled to sleep by any rallies from here or stories of how “the storm has passed”.  It is ONLY BEGINNING!  Greece is absolutely nothing compared to what is to come.  Even the Chinese market has entered bear market (-20%+) from just a month ago and the leverage in that market is huge with an unwinding due.  Ultimately however, this will end up taking out most all of the major money center banks worldwide.  To see London, Frankfurt, Washington D.C. and even Basel Switzerland buckle under the coming CDS/derivatives meltdown will not be a shock to me.  As this progresses, it may take weeks or months to unfold but be aware 48 hours is truly all that’s needed.
  The only thing I can tell you with certainty is this; as the meltdown proceeds I can guarantee physical gold and silver will still be standing.  My thought is they will be standing “much taller” than they are today as they truly are “money” and global “monies” are going to come under scrutiny.  This is at the core question to be answered of it all …”what is money”?  The current belief is that “debt is money”, it is not and never was.  Debt may have been perceived as money or even an asset …it has and always will be a liability!  THIS IS THE KEY LESSON MANKIND IS ABOUT TO LEARN!
Standing watch for you,
Bill Holter
Holter-Sinclair collaboration
end
And now his second paper:
(courtesy Bill Holter/Holter-Sinclair collaboration)

 

 

You gotta scratch your head!

 

Not that almost any and all news today is enough to make you scratch your head, two pieces of news yesterday were bombshells! I am talking about Greece’s stance of staying IN the Eurozone and the Zerohedge article regarding JPM “cornering” the global commodity markets.

Let’s first start with Greece, who could have seen this one coming? They are taking the stance “Greece and ONLY Greece” can decide if they leave the EU. Greece Threatens ‘Unprecedented’ Injunction Against EU To Block Grexit I believe this is correct, there is no law allowing the EU to kick someone out. The only way an exit can occur is if a nation decides to leave. This is incredibly interesting because Greece can default and put a moratorium on payments yet remain as a Euronation. I guess you might call it “squatter’s rights”, they stay …but don’t pay. Before going any further, I do understand Greece originally entered the EU “fraudulently” and with well cooked numbers. As I understand it, “too bad so sad” it is water under the bridge, was not caught upon their entrance and cannot be used to negate their inclusion now.

What is extremely interesting is this, the Greek debt has already been largely offloaded onto the balance sheet of the ECB. This was done to try to insulate private bank balance sheets from the risk of default and thus being underfunded. But a fork in the road now exists, as I understand it, if Greece leaves then the debt goes back to the original banks who own the debt. If Greece stays, the debt will stay on the ECB’s balance sheet. Do you see the ramifications? If Greece leaves, we have a banking failure through Europe … but if they stay then the ECB eats the losses. Thinking this through, if Greece stays they will effectively force a mass printing by the ECB to cover up the losses. This will effectively dilute the euro and certainly hamper the ECB’s ability to function as they desire.

Call me crazy but I don’t think this is by any mistake at all. This is a financial chess match where Mr. Tsipras/Varoufakis and Vladimir Putin (socialists) are using great gamesmanship. I believe it was decided Greece will stay, not pay ..and watch the ECB/Eurozone suffer with this. Eventually Greece will leave but that will be AFTER the fire and AFTER the smoke clears. I also believe a pipeline deal through Greece is a foregone conclusion and as this whole thing plays out, Europe will become “closer” to Russia, China, India and the BRICS …which means what exactly? They will be further away from the U.S.!!! This is not rocket science, we are watching socialists who have legally hacked into one of the West’s “cars” … and have the ability to control it! They can start it, stop it, make it go right, left or even just turn it off! Maybe I am giving too much credit and this was just a coincidence, I highly doubt it! To top this strategy off, I still believe we will be served a “truth bomb” by Mr. Putin which will effectively cut the dollar off at the knees!

The other head scratcher is the revelation JP Morgan has cornered the commodity markets http://www.zerohedge.com/news/2015-06-29/jpm-just-cornered-commodity-derivative-market-and-time-we-have-proof . Before starting on this one, let me say there are many moving parts and unknowns (probably designed this way). I have queried my mentor and spoken with Jim, I have spoken to several others whom I respect and value their opinions. Though the takeaway was by no means unanimous, the following is my personal opinion.

To set the stage, it must be understood the U.S. is at WAR, a financial war where the survival the dollar is at stake. We watched late last year and early this year where huge pressure was put on the price of oil. This I believe was done to pressure Russia as energy is their biggest export. Oddly enough, Russia and our “ally” Saudi Arabia just signed six deals last week. We do not even know what these deals were but a good speculation is Saudi Arabia is moving toward Russia and away from the U.S.. Remember, the Saudis are the cornerstone underlying the petrodollar. Gold and silver have also been pressured at every turn over the last four years and in particular the last 12 months.

I assume JP Morgan and the Fed are one and the same. There have been stories JPM has amassed 350 or more ounces of silver. We also know China/Russia/India have been huge buyers of gold. We now know JPM has increased their derivatives by over $3 trillion in just one quarter. It is obvious to me, they are the ones sitting on the paper prices of gold and silver. This would make sense for the Fed to attack the metals and thus support the dollar. In fact, standard procedure in any war is to strengthen your currency while weakening your opponents. I believe the neocons know the bottom of our “gold barrel” is close at hand, they have decided to go all in on price suppression knowing full well “contracts were made to be broken” (defaulted on).

The flip side is this, silver is too cheap in relation to gold. It is also “the stuff” which will have massive future demand for medicine, technology and green energy (think solar). What if the price of silver were to equal gold or even surpass it in the future? I ask this because I think not listening to Jamie Dimon may be a mistake. He has clearly told us a panic is coming, he has told us to take our GOLD out of safety deposit boxes …and he is buying silver. Could the plan be to mark up silver to unbelievable (today) levels that rival gold? Is JP Morgan short or long gold or silver? We don’t know for sure but would appear they have been all over the suppression business. One last question, could a “confiscation” of gold be in the offing …but not silver? Do you see the connection?

I know, a lot of speculation but remember this, there are FAR more uses for silver than gold. Wouldn’t COMEX be forced to “force majeure” gold contracts in the event of a re-signing of the 1933 executive gold confiscation order? If Morgan has wording in their OTC contracts similar, wouldn’t that close out their gold side …and leave them holding physical silver? Please also remember, it was the big banks who made the huge money from $200 to $875 in the late 1970’s, NOT the goldbugs who were largely shaken out (sound familiar to current times?). The banks as Jim has always said “trade both sides all the time”. I believe they have been in the process of extricating themselves from their dilemma for quite a while, physical silver may just be the key!

I know this is much in the way of speculation but thought has to start somewhere and I have not seen any theories with hard facts or answers. Maybe this is off the mark, or, maybe close to the target in some fashion. All I know is JP Morgan is not manned by crazy maniacal fools. On the contrary, they may be greedy and evil amongst other poor traits but “stupid” is not one of them. Don’t get me wrong, I am not saying the price of gold will go down. No, I believe China will unveil a gold backed yuan later this year and the U.S. will be found not to have any gold … China will mark up gold. But, there are more uses for silver and “we” (not really “us”) happen to have MASSIVE TONNAGE?

If you disagree with this, fine. If you would like to fireball it, please have a theory ready to replace it because as I said up top, truly a head scratcher!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome!
bholter@hotmail.com

end

 

And now overnight trading in equities, currencies interest rates and major stories from Asia and Europe:

 

1 Chinese yuan vs USA dollar/yuan strengthens to 6.2007/Shanghai bourse green and Hang Sang: green  (on POBC intervention)

2 Nikkei closed up by 125.78  points or 0.63%

3. Europe stocks all in the red (except Spain) /USA dollar index up to 95.22/Euro falls to 1.1118

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 58.67 and Brent:  62.72

3f Gold down/Yen up

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

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

3h Oil up for WTI and up 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 37.32%/Greek stocks this morning: stock exchange closed again/ still expect continual bank runs on Greek banks /Greek default inevitable for tomorrow/

3j Greek 10 year bond yield rise to: 15.07%

3k Gold at 1173.00 dollars/silver $15.70

3l USA vs Russian rouble; (Russian rouble down 1/10 in  roubles/dollar in value) 55.62,

3m oil into the 58 dollar handle for WTI and 62 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 .9301 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0398 well below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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 closer to 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!!! Today we find out if Greece will default on the IMF loans.

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

 

4. USA 10 year treasury bond at 2.35% early this morning. Thirty year rate well above 3% at 3.10% / yield curve flatten/foreshadowing recession.

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

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

Greek D(efault)-Day Arrives, As Does China’s Plunge Protection Team

The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts.

And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another “report/rumor” of a last minute detente between Greece and the Troika when Greek Ekathimerini said that  “Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini.”

According to the Greek newspaper’s rumor “the pressure caused by the closure of banks as well as the expiration of the Greek bailout program on Tuesday has caused some members of the government to urge Tsipras to accept Juncker’s offer. Sources said the prime minister’s office has already informed the Commission that it is examining the proposal. According to what is known of the proposal Tsipras would have to send a written acceptance of the version of proposals from the lenders published on Sunday, with a pledge to campaign for them to be accepted in the planned July 5 referendum.”

This follows a report yesterday that following his clearly intoxicated speech, Juncker had sent a last minute, ad hoc offer to Greece, one without Troika preapproval, which Greece quickly rejected had ever been received.

However, as last night, so today there was little sign that Tsipras was prepared to drop his repeated rejections of the bailout offer, which he has dismissed as a “humiliation” for Greece.

Sure enough, just a few moments after the Kathimerini rumor emerged it was denied.

Then again, since this is last minute endgame posturing mostly as to who gets stuck with the blame, expect a relentless surge of such rumors and denials, starting off stop hunt avalanches and epic momentum ignitions in today’s market in which there will be zero liquidity, until the very last minute, which means midnight for Athens, at which point the IMF program runs out unless there is a €1.6 billion payment, which however there won’t be as the wheels of the last bluff are now in motion, which will ultimately end with the bursting of the “irreversible currency and union” bubble.

And in other bursting bubble news, after an early crash which sent the Shanghai Composite down 5.1% in early trading and nearly down 20% in just 4 days, the Chinese Plunge Protection Team finally arrived and after the PBOC almost literally threw the kitchen sink at the stock market as described yesterday, decided to go all in stocks,leading to an unprecedented 11.2% swing from the lows to close up 5.6% – this was the single biggest intraday swing since 1997 and the largest point swing since 1992!

Because when you are a central bank, you go big or go home, and when the opportunity cost is civil war, as is the case in China, one can be sure that 11% intraday swings are just the beginning.

It remains to be seen if this clear intervention will do anything to halt the public panic that the stock bubble has indeed finally burst.

However, with the PBOC finally doing its sworn duty, it meant that the SNB did not have to intervene for a second consecutive day and bid up the EUR. As a result the EUR tumbled from its “tractor beam” level around 1.125 dropping nearly 100 pips overnight before the fake rumors drove it modestly higher.

As a result, Asian equities mostly rose to shrug off yesterday’s global sell-off, which saw the S&P 500 and DJIA erase their YTD gains. Nikkei 225 (+0.6%) and ASX 200 (+0.7%) failed to sustain any solid direction as participants traded cautiously amid the continued Greek bailout drama. Elsewhere, the Shanghai Comp. (+5.5%) set its biggest gains since 2009. As a guide, volatility in Chinese stocks are now at its highest level since 2007. Furthermore, participants continue to digest reports from China that the government are considering cutting the stamp tax for stock trading as well as talk of suspending IPOs, while the PBoC injected CNY 50bIn into the market. JGBs fell amid profit taking in long end following yesterday’s risk off trade coupled with a lack of BoJ buying.

In Europe, so far today the session has seen the continuous conflicting newsflow that has been typical of the Greek saga with stocks initially selling off in a similar, although less dramatic fashion to yesterday. Sources then noted a poll suggesting that Greece is currently in favour of a no vote in the upcoming referendum, with this meaning that Greece would reject the latest bailout terms, with European leaders suggesting that a No vote is a vote to leave the Eurozone. However shortly after sources in Greek press stated that the Greek government is reconsidering EC President Juncker proposal made last night, which they initially rejected. However, this was later denied by a Greek official although did claim Greece may make a counter proposal.

As such, despite the initial weakness in equites, European indices did see a bid later on in the morning (Euro Stoxx: 0.0%), with the periphery trade back green. Elsewhere, the news that Syriza are reconsidering Juncker’s offer has seen Bunds come off their highs to fall into negative territory, however the German benchmark still outperforming its US counterpart, with USTs down around 9 ticks heading into the North American crossover.

In FX markets, EUR lifted off lows following the Juncker news, with the currency broadly weaker throughout the morning. EUR/GBP briefly broke below 0.7100 amid EUR weakness and after GBP saw a bout of strength on the back of an improved final reading of UK GDP, with the Y/Y figure beating expectations (2.9% vs. Exp. 2.5%, Prev. 2.4%.), however the cross was unable to sustain the move, with source comments from Europe seeing the pair break back above the level.

The USD (+0.25%) resides in positive territory, bolstered by EUR weakness as a consequence of the aforementioned Greek uncertainty as the pair trades back below the 1.1200 handle, while other pairs fairly unmoved during the European session. Of note, RBA Stevens continued his recent jawboning rhetoric and stated it is highly probable that AUD will weaken and that the country needs it to.

The commodity complex has seen little price action throughout the session, with commodity specific news flow fairly light, with Brent crude futures outperforming WTI after Libya’s Nafoura and Majid oilfields have shut due to recent protests; an electricity outage has also led to the closure of the Albayda oilfield, according to the AGOCO spokesman

 

In summary: European shares fall with the basic resources and oil & gas sectors underperforming and banks, autos outperforming. Greece said to reconsider yday’s Juncker offer, Ekathimerini reports. Greek stocks trading outside of Athens are either falling or untouchable after this weekend’s drama. The U.K. and Swedish markets are the worst-performing larger bourses, the Italian the best. The euro is weaker against the dollar. Japanese 10yr bond yields rise; Irish yields increase. Commodities gain, with zinc, nickel underperforming and corn  outperforming. U.S. consumer confidence, ISM Milwaukee due later.

Market Wrap

  • S&P 500 futures up 0.7% to 2065.2
  • Stoxx 600 down 0.3% to 384.9
  • US 10Yr yield up 4bps to 2.36%
  • German 10Yr yield little changed at 0.79%
  • MSCI Asia Pacific up 0.8% to 146.2
  • Gold spot down 0.4% to $1174.8/oz
  • Asian stocks rise with the Shanghai Composite outperforming and the Sensex underperforming; MSCI Asia Pacific up 0.8% to 146.2
  • Nikkei 225 up 0.6%, Hang Seng up 1.1%, Kospi up 0.7%, Shanghai Composite up 5.5%, ASX up 0.7%, Sensex up 0.5%
  • All 10 sectors rise with staples, financials outperforming and consumer, tech underperforming
  • Basque Phone Carrier Euskaltel Valued at $1.3b in IPO
  • Sumitomo Mitsui Said Poised to Buy GE Europe Buyout-Funding Unit
  • Sony to Raise $3.6b Selling Stock and Convertible Bonds
  • Willis Group, Towers Watson Agree to Combine in All-Stock Merger
  • Euro down 0.52% to $1.1178
  • Dollar Index up 0.46% to 95.22
  • Italian 10Yr yield down 2bps to 2.37%
  • Spanish 10Yr yield little changed at 2.35%
  • French 10Yr yield little changed at 1.24%
  • Greek 10Yr yield up 31bps to 15.39%
  • S&P GSCI Index up 0.4% to 433.5
  • Brent Futures up 1% to $62.6/bbl, WTI Futures up 0.6% to $58.7/bbl
  • LME 3m Copper down 1.1% to $5727/MT
  • LME 3m Nickel down 1.4% to $11665/MT
  • Wheat futures up 0.6% to 587.3 USd/bu

Bulletin headline summary from RanSquawk and Bloomberg

  • Today’s session has seen the continuous conflicting newsflow that has
    been typical of the Greek saga, with European equities coming off their
    worst levels heading into the North American crossover
  • Sources
    noted a poll suggesting that Greece is currently in favour of a ‘no’
    vote in the upcoming referendum, before sources in Greek press suggested
    that the Greek government is reconsidering EC President Juncker
    proposal, which was denied shortly after
  • Looking ahead, this
    afternoon sees Canadian GDP, US Chicago PMI, API Crude Inventories as
    well as Fonterra Dairy Auction and comments from ECB’s Nowotny, Fed’s
    Bullard and Dudley
  • Treasuries decline, headed for first quarterly loss since 2013 as expectations Fed to raise interest rates later this year offset looming possibility of Greek default.
  • Greece said it will miss a payment to the IMF today, leave the protection of Europe’s bailout regime at midnight as PM Tsipras dared European leaders to throw his country out of the euro
  • EC President Juncker contacted Tsipras Monday and set out details of how a bailout accord could still be reached, according to an EU official
  • To keep the money flowing, Greeks must first endorse in a July 5 referendum the package of austerity measures rejected by Tsipras this weekend; should the “yes” side prevail, voters then might need to elect a government that can return to the negotiating table
  • BofAML head of European currency strategy Athanasios Vamvakidis expects Greeks banks will soon exhaust cash supplies, leading to shortages of imports including medicine unless the ECB expands assistance
  • Failure to resolve crisis has the potential to prompt a Greek withdrawal from NATO, increase the influx of refugees into Europe and threaten Greek support for international sanctions against Russia over Ukraine
  • Britain’s economy grew 0.4% in 1Q,, the Office for National Statistics said, revising its previous figure of 0.3%
  • Euro-area consumer prices rose 0.2% in June, gaining for a second month
  • German joblessness fell a seasonally-adjusted 1,000 to  2.79m,  the Federal Labor Agency in Nuremberg said on Tuesday; economists had predicted a drop of 5,000
  • Eleven of 21 economists surveyed by Bloomberg expect the PBOC will cut rates at least once more by year end, according to a June 27-29 poll after the weekend’s stimulus announcement
  • Sovereign 10Y bond yields mostly higher; Greece 10Y yields over 15%. Asian stocks gain, European stocks mixed, U.S.equity-index futures gain. Crude oil higher, copper and gold fall

 

DB’s Jim Reid completes the overnight recap

Welcome to the last day of H1 2015, the good news is that we’ll all get a second extra in bed tonight due to an adjustment made to international clocks in response to the earth’s ever slowing rotation. Enjoy the lie-in tomorrow. Apparently when the dinosaurs ruled the planet there were only 22-23 hours in the day. How they managed to fit everything in I’ll never know.
There might be a few days ahead that feel like a few hours have been added. The market at the moment is in controlled risk-off mode with little panic yet following the weekend developments. However this could change with any opinion polls that come in ahead of the Greek referendum. It seems how the question is interpreted by the electorate could be the decisive factor. Prior to the announcement of the poll, the Greeks were firmly in favour of remaining in the Euro. However the Government will likely want to try to make the vote about austerity not Greek Euro membership. In contrast, yesterday slowly saw a procession of EU spokespeople and Government leaders try to emphasis that this could be more of an ‘in-out’ vote.

The European Commission President Juncker grabbed most of the spotlight, saying that the ‘whole planet’ would see a ‘no’ vote as Greece turning its back on Europe while the ECB’s Coeure, in an interview with Les Echos, said that ‘exit from the eurozone, which was a theoretical point, can unfortunately no longer be excluded’. Elsewhere, despite German Chancellor Merkel still somewhat waiting on the sidelines, her Vice-Chancellor Gabriel said that a ‘no’ vote was ‘a clear decision against staying in the euro’.

Meanwhile, in a live interview on Greek TV station ERT, PM Tsipras was typically defiant saying that ‘the referendum will give us a stronger negotiating position when the talks resume’ before then going on to say that the higher the participation and number of people voting ‘no’, the stronger the government’s position will be. There was a hint however that in the event of a ‘yes’ outcome, Tsipras would honour the result saying that he ‘would act in line with the constitution’ and when questioned on whether or not he would resign in the face of a ‘yes’ outcome replied ‘I’m not attached to the chair’.

On a DB conference call yesterday, I was slightly surprised DB’s George Saravelos suggested a no vote would just about be his current expectation. Over the weekend I was thinking a yes vote slightly more likely. I suspect that the market was also leaning towards a yes yesterday and as George said the relative calm (albeit at lower levels) for risk could be down to two reasons. Firstly due to expectations of a yes vote or secondly due to investors generally being relatively relaxed by the thought of a no vote and a potential Greek exit. The first one would be more worrying for risk if George is right.

As mentioned earlier the risk-off move yesterday was one that was well contained on the whole, although saying that we did see US equities drift steadily lower into the close. The moves were in fact enough to take US equities back into negative territory YTD although it’s a slightly better start in markets in Asia this morning. The Nikkei (+0.48%), Hang Seng (+1.21%) and Kospi (+0.39%) have all moved higher in choppy trading. The Euro is down around 0.4% against the Dollar while Asia credit is around a basis point wider.

Over in China meanwhile and after another volatile session yesterday where we saw the weekend’s rate cut positively impact the Shanghai Comp for all of 30mins before then plummeting to finish -3.34% at the close (including an 8% fall intraday), the index has followed up this morning with another hugely volatile session. Having fallen as much as 5% intraday, the Shanghai Comp is currently unchanged (-0.01%) as we go to print although again this may look very different by the time this reaches your inbox. With the bear market run the index is now 20% off the peaks of June 12th, which includes daily declines of at least 3% in 6 of the 12 trading sessions since that date (including the previous 3 sessions). In fact, we’ve heard this morning that the China government is considering a delay in the IPO of China Nuclear Engineering on the back of the volatility. There also appears to be signs in the Chinese press of a ramping up of soothing rhetoric. The Economic Observer is running a story that the China regulator is mulling measures to stabilize the stock market, while the China Securities Journal is running a front page story with the headline ‘An improving economy and continued loose liquidity will provide support for China’s stock market’.

Back to markets yesterday, having moved nearly 3.5% lower at the open, the Stoxx 600 recovered slightly over the course of the session to trade in a roughly 5 point range, eventually ending -2.69% at the close. There were similar moves for both the DAX (-3.56%) and the CAC (-3.74%), while the bulk of the pain was felt in the periphery where the IBEX (-4.56%) and FTSE MIB (-5.17%) both tumbled although again with much of the sharp move lower coming at the open before the rest of the day’s trading was relatively well contained. The Greek equity market was closed yesterday however we saw hints as to the pain there with a US ETF tracking Greek stocks tumbling 19% and another Athex ETF falling 15% before trading was suspended. In the US meanwhile, the S&P 500 (-2.09%) and Dow (-1.95%) both moved steadily lower after the European close. The fourth consecutive daily move lower for the S&P 500 has taken it to -0.06% YTD now, while the fall in the Dow saw it drop back to -1.27% YTD. In terms of credit, Crossover (+48bps) and Main (+10bps) ended the session at the wides, while there were meaningful moves in wider in Senior (+15bps) and Sub (+21bps) Fins in Europe. The cash credit market was marked wider but in a low liquidity market not much traded.

It was a similar story in sovereign markets for the most part yesterday. 10y Bunds eventually closed 12.7bps lower in yield at 0.793%, having gone as low as 0.703% at the open. There was a predictable sell-off in the periphery meanwhile, although again much of the move was fairly orderly. 10y BTP’s went as much as 50bps wider at the open, before then rallying back to close at 2.383% on the day, an overall move wider of 25.2bps on Friday’s close and the highest level now since early November. There were similar moves for Spain (+23.6bps) and Portugal (+33.8bps) also, while other core European markets saw a decent flight-to-quality bid including Netherlands (-9.2bps), Sweden (-8.0bps) and Switzerland (-6.0bps). There was an unsurprising sell-off in the Greek curve as we saw 2y (+1430bps), 4y (+730bps) and 10y (+387bps) yields move sharply higher. The risk-off tone extended into the US where we saw 10y Treasuries eventually end -14.8bps tighter at 2.325% and more or less at the lows (and have declined a further 1.1bps this morning). In terms of Fed Funds contracts the Dec15, 16 and 17 contracts fell 2.5bps, 8bps and 12.5bps respectively.

Some of the interesting price action yesterday was in FX markets. We noted in yesterday’s EMR that the Euro was around 1.5% lower versus the Dollar in the Asia session (with similar moves against other currencies). Well, as the day wore on we saw the Euro actually recover and more than reverse the early declines to eventually finish +0.62% up at the end of the US session at $1.124. The Euro has largely traded in an inverse relationship with European equity markets of late. The re-pricing of the Fed may have played a part in yesterday’s move, while there have also been suggestions that weakness in European equities of late is seeing prior QE trades unwind and triggering a stronger Euro.

Despite all the Greece attention, there was also some data for the market to keep an eye on yesterday. In the US in particular we got a slightly softer than expected pending home sales print for May (+0.9% mom vs. +1.0 expected), which was enough to drag the non-seasonally adjusted annualized rate down to +8.3% yoy from +12.6%. Meanwhile, we saw some improvement in the Dallas Fed manufacturing activity index, rising 13.8pts in June although to a still lowly -7.0 (vs. -16.0 expected). Before this in Europe, the main data release was out of Germany where we saw the preliminary June CPI reading come in well below expectations (-0.1% mom vs. +0.2% expected), the first negative print since January. Elsewhere, economic confidence for the Euro area for June (103.5 vs. 103.8 expected) was slightly below consensus, although there was no change to the final consumer confidence print of -5.6.

Before we take a look at today’s calendar, if Greece wasn’t enough, Puerto Rico is also generating some default-related headlines too after the Island Governor Padilla said that the nation will look to delay payments on the current debt load of around $72bn for ‘a number of years’, while also seeking a debt restructuring plan. Quoted in the NY Times, Padilla said that ‘there is no other option’ while a House Speaker for the government said that ‘it’s not that the debt will not be paid, it’s a matter of when Puerto Rico can pay’.

Looking ahead to today’s calendar now, the Euro area CPI print for June will be closely watched this morning, while we also get German retail sales and unemployment data, as well as French consumer spending and the final UK Q1 GDP print today. Over in the US this afternoon, the May Chicago PMI is due, as is the ISM Milwaukee, S&P/Case Shiller house price index and June consumer confidence reading. Of course the IMF repayment for Greece is due today and given the likely scenario of non-payment, there will be much focus on whether or not we see subsequent cross-default provisions triggered. For us it’s unlikely that any official institution will want to escalate this situation too aggressively ahead of the vote on Sunday though.

end
Let us start with news from China!!

Early trading from China this morning:

Strap In! China Is Crashing Again

In the last 2 days, PBOC has thrown everything at the ponzi-fest they call a rational market. An RRR cut, a Benchmark rate cut, a rev repo rate cut, a CNY50 Bn rev repo injection, a stamp duty cut, IPO halts (cut supply), and last but not least permission to speculate with a reassurance that shares on a solid foundation. The outcome of all this policy-panic – CHINEXT (China’s Nasdaq) is down another 6% today (down 25% in 3 days) and aside from CSI-300 futures, all other major Chinese indices are in free-fall.

The message from The PBOC:

  • Don’t believe or follow negative rumors against Chinese economic development
  • *LOOSE LIQUIDITY TO SUPPORT CHINA’S STOCK MARKET: SEC. JOURNAL
  • *IMPROVING ECONOMY TO SUPPORT CHINA’S STOCK MARKET: SEC. JOURNAL

The result:

 

Some context…

 

So much for these flows:

  • *CHINA MAJOR BLUE-CHIP ETFS HAVE $1.5B NET PURCHASE MONDAY: NEWS

Add to that the fact that industrial metals are collapsing with steel rebar limit down…

 

…and it appears Central Bank Omnipotence is under threat.

end

Late yesterday afternoon, we heard that Greece is threatening to go to court to obtain an injunction against the EU for its austerity actions.

Basically Greece is stating and they are correct, that only Greece itself is allowed to say whether they leave the European Monetary Union. They cannot be kicked out. Also Greece will argue that the ECB has been playing unfair with Greece.  The ECB has been engaging in QE with all nations yet they leave out Greece.

The question is what is Greece’s strategy. It looks to me like they do not want to leave the Eurozone.  They would probably leave the Euro for new drachmas.  Then they would join the new BRICS zone and thus have the best of two worlds:  free trade with the BRICS nations as well as the Eurozone. They would probably default on all of their debt to the West and even though the west will be furious, there is nothing that cold force Greece to leave the zone. The entire west’s banking sector will blow up in disarray.

 

Here is this important announcement from Greece/at around 6 pm yesterday.

 

(courtesy zero hedge)

 

 

Greece Threatens ‘Unprecedented’ Injunction Against EU To Block Grexit

Having told the citizens of Greece that the European leaders will not kick them out of Europe because “the cost of throwing them out is too high, enormous,” it appears Greek PM Tspiras has another plan to ensure – no matter what the outcome of the forthcoming referendum – that there is no actual Grexit.As The Telegraph reports, Greece has threatened to seek a court injunction against the EU institutions, saying “we are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable.

 

Speaking earlier Tsipras stated:

  • *TSIPRAS: REFERENDUM PROVIDES STRONGER NEGOTIATING POSITION
  • *TSIPRAS: CREDITORS’ PLAN IS NOT TO THROW COUNTRY OUT OF EURO
  • *TSIPRAS: COST OF THROWING COUNTRY OUT OF EURO AREA IS ENORMOUS
  • *TSIPRAS: GREECE WILL NOT BE THROWN OUT OF EURO, COST TOO GREAT

And now, as The Telegraph reports, Plan B is in place…

Greece has threatened to seek a court injunction against the EU institutions,both to block the country’s expulsion from the euro and to halt asphyxiation of the banking system.

 

“The Greek government will make use of all our legal rights,” said the finance minister, Yanis Varoufakis.

 

“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable,“ he told the Telegraph.

 

The defiant stand came as Europe’s major powers warned in the bluntest terms thatGreece will be forced out of monetary union if voters reject austerity demands in a shock referendum on Sunday.

 

Any request for an injunction against EU bodies at the European Court would be an unprecedented development, further complicating the crisis.

*  *  *

With JC Juncker lies and propaganda this morning, Tsipras main goal now is to keep anarchy from breaking out before the potential vote on Sunday.

end
This morning: Germany crushes all rumour mills saying it is too late to discuss a Greek program extension:
(courtesy zero hedge)

Germany Pre-emptively Crushes Today’s Rumormill, Says Too Late To “Discuss Greek Program Extension”

In our overnight market wrap, we said that with the Greek D-Day doubling as quarter end for countless hedge funds most of which are now suddenly underwater, there would be a plethora of rumors designed to spark buying momentum algos which would provide brief selling opportunities. Alas, Germany appears to have crushed that particular option, when moments ago a German made it clear that at this point the only catalyst will be the now virtually certain Greek default to the IMF at midnight (+/- 1 leap second) Greek time. To wit (from BBG):

  • TOO LATE TO DISCUSS GREEK PROGRAM EXTENSION: GERMAN OFFICIAL

Greece on the other hand kept the hope alive as Athens still doesn’t get that to the Eurozone it lost the blame game and as such the European population is now, supposedly, convinced that a Grexit will be its own doing, when it said:

  • TSAKALOTOS: WILL RECONSIDER VOTE IF WE GET DEAL WE CAN’T REFUSE

Which doesn’t mean that rumors won’t end. They just won’t be credible, and as such in just about 10 hours time we expect to have the first official Eurozone default in (its brief) history.

 

end
Late this morning;  European regulators suspend trading in Greek bonds:
(courtesy zero hedge)

European Regulators Suspend Trading In Greek Bonds Citing “Trading Harmony”

Regulators across Europe are beginning to curtail trading in Greek assets as the country’s stock market remains closed and Greeks grapple with capital controls and prepare for a default to the IMF at midnight.

Luxembourg’s market regulator has suspended trading in bonds issued by National Bank of Greece, Alphabank, Eurobank, Piraeus Bank, Eurobank, the Hellenic Railways Organisation and the Hellenic Republic. 

“The request for the suspension of trading came from the Luxembourg regulator- the ESSF. A spokesperson for the Bourse said that since the Greek stock exchange was closed meaning trading was not possible in Greece, the Luxembourg regulator said trading should be suspended in Luxembourg too in the interests of European trading harmony,” FT says.

“There’s a variety of reasons and criteria as to why we would be asked to suspend. I can’t remember the last time we were asked, it would have been a while ago. The one I can remember was a request for Banco Espirito Santo when we were asked to suspend trading in shares and bonds,” an exchange official told Reuters.

Meanwhile , the UK’s FCA has asked Tradeweb to block Greek bond trading. 

So while some regulatory bodies are indeed concerned about the idea of “trading harmony”, Global X apparently isn’t because the FTSE Greece 20 ETF is still trading despite the “holiday” in Athens, meaning any retail investors hoping to BTFD ahead of a “Nai” Greferendum outcome are effectively trading a CEF without knowing it.

 

end

Varoufakis signals Greece will default to the IMF tonight:

 

(courtesy zero hedge)

Varoufakis Confirms Greece Will Default To IMF Today

 

May as well spoil the ending of what happens at midnight local time today. Nothing (as previously reported). From Reuters:

  • GREEK FINANCE MINISTER SAYS GREECE WILL NOT PAY IMF ON TUESDAY.

Visually:

AP has the well-known by now details:

Greek Finance Minister Yanis Varoufakis confirmed that the country will not make its payment due later to the International Monetary Fund.

 

When asked while walking out of the Finance Ministry about whether Greece will pay the 1.6 billion euros due to the IMF, Varoufakis said “no.”

 

His comment came amid speculation that Greek Prime Minister Alexis Tsipras is trying to craft some sort of last-minute deal with creditors before the payment is due and before the European part of Greece’s bailout comes to an end.

 

A Greek official said Tsipras has spoken with European Commission President Jean-Claude Juncker, European Central Bank chief Mario Draghi and European Parliament president Martin Schulz.

 

The official did not reveal what was discussed.

To which Merkel had a prompt reply:

  • MERKEL SAYS GREECE’S BAILOUT RUNS OUT AT MIDNIGHT

The default may be in the books, but the bluff continues: can Greece default in the Eurozone as Varoufakis has claimed all along, or will the collapse of the Greek banking system tomorrow after the ECB makes the ELA illegal topple the government? Find out in a few short days.

 

 

end

 

Strange:  Schauble hints that Greece can default and stay in the Euro.

Answer:  under their constitution, yes they can!

(courtesy zero hedge)

 

 

In Big Boost To “No” Vote, Schauble Hints Greece Can Default And Stay In Euro

In what appears to be some level of German backing down, fiery FinMin Schaeuble has, reportedly said the following:

  • SCHAEUBLE SAID TO SAY GREECE MAY BE ABLE TO TAP EU SUPPORT FUND
  • SCHAEUBLE SAID TO SEE GREECE STAYING IN EURO EVEN IF ‘NO’ VOTE

More from Bloomberg:

German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece would stay in the euro for the time being if Greek voters reject austerity in a referendum scheduled this week, according to three people present.

 

Schaeuble also said the European Central Bank would do what’s needed to protect the euro if Greeks voted against the bailout terms in the July 5 referendum, according to the people, all of whom participated in the closed-door meeting on Tuesday. They asked not to be identified, citing the private nature of the discussion.

 

The German Finance Ministry declined to comment.

Which incidentally, is good news for Tsirpas as it spurs the probability of a consequence-less “no” vote on Sunday enabling the increased negotiating position that The Greek government had hoped for. Of course, with month-end looming and a market that just gave up all 2015 gains, stocks and EUR are rallying on this and bonds are selling off, if only until the next rumor, and then the next, until we finally get clarity at 5pm Eastern when the news of whether Greece defaulted to the IMF or not hits, and is therefore officially out of its bailout program.

 

 

So now EUR is rallying because an EU with Greece is a stronger EU?

Charts: Bloomberg

end
Another strange day as Greece asks for a 2 year bailout package so that they can repay notes owing:
(courtesy zero hedge)

Greece Asks For 2-Year Bailout From ESM/Merkel Promptly Shoots It Down

With a sovereign default now just hours away, both Greece and Europe may be starting to second guess the decision to open Pandora’s Box with both sides cancelling press events citing “emergency meetings”. The latest headlines have Greece requesting an ESM bailout and pressing for debt restructuring.

  • GREECE ASKS FOR 2-YR BAILOUT PROGRAM FROM ESM: PM’S OFFICE
  • GREECE ASKS FOR FINANCING, DEBT RESTRUCTURING: PM’S OFFICE
  • GREEK GOVT WILL SEEK VIABLE AGREEMENT WITHIN EURO: PM’S OFFICE
  • Dijsselbloem Cancels TV Interview Due to Urgent Obligations
  • Greek Govt Cancels Press Briefing Citing Emergency Meetings

More, from Bloomberg:

Greek govt submitted request to European Stability Mechanism today for a two-year agreement, which will fully cover country’s financing needs and includes debt restructuring at the same time, according to an e-mailed statement from the PM’s office.

 

Greek govt will strive for a sustainable agreement within euro area; that will be the message of a No vote to a bad deal in Sunday’s referendum Referendum isn’t the end of negotiations, but the beginning of talks under better terms for the Greek people; Greece remains at the negotiating table

 

To which we said:

And sure enough:

  • MERKEL SAID TO SEE NO NEW GREECE TALKS, MUST AWAIT REFERENDUM

Meanwhile, German lawmakers

Not surprisingly, German lawmakers — who have grown increasingly frustrated with Chancellor Angela Merkel’s lenient negotiating tactics — are aggravated with the stream of headlines emanating from Athens and Brussels (via Bloomberg again):

It’s quite surprising that there are new proposals coming out of Brussels,” says Volker Kauder, parliamentary leader of German Chancellor Angela Merkel’s party.

 

“Things haven’t changed: Greece has broken off negotiations, there will be a referendum and the second aid program is expiring tonight.”

end
here are the 5 choices facing Greece as it faces default tonight:
(courtesy zero hedge/Wall Street Journal/Stephen Fidler)

These Are Greece’s 5 Possible Paths

Greece is poised between remaining a member of the eurozone or leaving it. In fact, as WSJ’s Stephen Fidler explains, there are five possible future currency arrangements for Greece. Here they are…

1. Greece stays in the eurozone: This is the option likely to cause the smallest short-term disruption to the Greek economy.  The Greek central bank would retain access to liquidity from the European Central Bank, and the Greek banks would stay on life support. This looks increasingly likely to be accompanied by some kind of further negotiated debt relief. To get it, Greece would almost certainly have to agree to more conditions of the sort successive Greek governments have found it hard to accept.

 

2. Greece keeps the euro, but sits outside the eurozone: Jacob Funk Kierkegaard of the Peterson Institute for International Economics in Washington calls this the “Montenegro option” and argues this is the most likely outcome should Greece exit the eurozone. This would not be “a new drachma, but Montenegro—i.e. Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy,” he writes here. In some ways, this would be the worst of all worlds because Greece would lose access to the ECB. Countries using a foreign currency as legal tender have no access to a lender-of-last-resort, which means that every bank liquidity crisis becomes a solvency crisis. They therefore tend to have stunted domestic financial sectors — which almost every academic study shows is bad for growth — or have a banking system owned by foreigners, which exports the lender-of-last resort role to other countries’ central banks. (Mexico didn’t adopt the dollar after the 1994-95 financial crisis — but in order to avoid an undue shrinkage of its banking sector, it allowed most of its banks to be bought by foreigners.)

 

3. A currency board: In this case, Greece would create a new currency but lock it to the euro  – as Estonia did with the German mark in 1992 after it gained independence from the Soviet Union. The amount of new drachmas in circulation would be limited by the size of Greece’s international reserves: about $5.8 billion at the last count. Advocates argue that this would impose discipline on the Greeks — poor economic policies lead to an outflow of reserves and therefore of the domestic monetary base, which pushes up drachma interest rates, while good policies have the reverse effect. The drawback is that again the central bank is limited in its lender-of-last resort powers because it cannot create money freely. It also imposes discipline that, for now, may make it look unappetizing to Greece’s current rulers. It’s not much talked about, has a few enthusiastic and long-standing cheerleaders, but is a theoretical possibility. Here’s Steve Hanke arguing in favor.

 

4. A dual system: Here the drachma and the euro would circulate side-by-side. This has many historical precedents going back centuries. In practice, a dual system is likely to emerge when the Greek government runs out of euros and has to pay its domestic bills in government IOUs. The IOUs could at some future date be redeemed in euros, or could be eventually redeemed in drachmas, but they would initially be euro-denominated obligations of the government that would have a lesser value in the public mind than euro notes or coins. This state of affairs could continue for a long time, but there is an economic tendency called Gresham’s Law: ”Bad money chases out good.” Over time, euros would disappear from circulation because people would hoard them as a store of value  – and people would spend the government IOUs. De facto, the drachma, whether or not it would so be called, would become the main means of exchange.

 

5. The new drachma: The move to the new drachma may well not come with a bang, but gradually — as described in 4 above. But an eventual formal switch of the currency would give Greece control over its own monetary policy.  However, a new currency — which would likely float against the euro and other major currencies — would likely create enormous short-term disruption, not least because a heavy devaluation would follow and the banks would in effect be insolvent.Longer-term, it could be a motor for future growth of the Greek economy — because it would stimulate demand for Greek exports by lowering in real-terms the price of goods and services produced in Greece.  Longer term, the effects of a devaluation depends on the quality of economic policies that accompany it. It will create inflation, by increasing the costs of imports. One important issue is how much the government raises wages and pensions to compensate for higher inflation. The more domestic wages and pensions are allowed to rise, the less impact the devaluation will have in simulating Greek exports longer term and the lower the benefits to economic growth.

*  *  *

Place your bets.

end
And it just passed midnight in Athens and thus Greece defaults to the IMF:

Greece Becomes First Developed Country To Default To The IMF

Faced with almost impossible choices…

 

And just as promised earlier in the week, Greece has now passed the midnight deadline for repayment of the €1.6 billion bundled loans due to the IMF and in thus in default.

As AP reports,

Greece’s international bailout formally expires, country loses access to existing financing.

Yes we are fully aware that using the pejorative term ‘default’ makes us members of the ignorati, but what else do you call it when you fail to pay back a contracted debt in a timely fashion? (and don’t say deferment) Anything else is semantics. This is the first time an advanced economy has defaulted to The IMF and is by far the largest default The IMF has ever faced.

 

What happens next…

end

 

Ukraine halts all gas purchases for itself. It still transits gas through the Ukraine for European countries.  The fun will begin once winter begins:
(courtesy zero hedge)

Ukraine Halts Russian Gas Purchases After Price Talks Fail

It has been a bad day for deals and deadlines all around: first Greece is about to enter July without a bailout program and in default to the IMF with the ECB about to yank its ELA support or at least cut ELA haircuts; also the US failed to reach a nuclear deal with Iran in a can-kicking negotiation that has become so farcical there is no point in even covering it; and now moments ago a third June 30 “deal” failed to reach an acceptable conclusion when Russia and Ukraine were unable to reach an agreement on gas prices at talks in Vienna on Tuesday.As a result, Ukraine is suspending its purchase of Russian gas.

According to RT, Russian Energy Minister Aleksandr Novak and Ukraine’s Energy and Coal Minister Vladimir Demchishin both admitted to reporters that the negotiations had born no fruit. Demchishin added that there would be a new round of talks in September.

Meanwhile, Ukraine’s energy company, Naftogaz, will stop buying gas from Russia as of Wednesday, July 1.

“As of June 30, 2015, the agreement between Naftogaz and Gazprom runs out, and conditions for continued supply of Russian gas to Ukraine have not been agreed upon; Naftogaz will no longer be purchasing gas from the Russian company,” a press release by Naftogaz said.

The Russian minister seemed unhappy and said it was politically motivated and there were no grounds for it.

So what will prevent Ukraine from simply siphoning off Russian gas transiting its territory for Europe? Nothing, except its word:

Naftogaz gave assurances that “the transit of Russian gas through Ukrainian territory to Gazprom’s European clients will continue in full, according to contracts agreed.”

Russia will not increase the discount it has offered to Ukraine on gas purchases, Novak told the media. “The price of $247 [per cubic meter of gas] is completely uncompetitive, that is why we are very surprised that Ukraine wants a much lower price – it is out of line with the current market environment.” He stressed that the price “is not subject to correction.”

Ironically, even as Kiev will begin counting down the days until the winter, Russia will continue direct supplies of gas to Ukraine’s southeast, the Donbas separatist region which has been all but forgotten by the Ukraine capital due to the ongoing civil war on location. It has been doing so since February, when Kiev claimed that it could no longer supply gas to the conflict-torn regions due to damaged pipelines.

While Gazprom insists that Kiev is still responsible for paying for the gas that goes to Donbas, it probably should not hold its breath.

Incidentally, just like the Eurogroup launched shock treatment on Greece with capital controls first and shortly deposit haircuts, all in order to force the Greek government to resign by peaceful means or otherwise, the Kiev government, just as broke and about to default on its own bonds, may have just lit the fuse under its own cabinet, because while nobody needs heating in the summer when it is hot, in 5 months it will get very cold and as Greece has shown a desperate people are unpredictable.

Should the gas cutoff continue well into the cold winter, it just may be the catalyst that forces the revulsion against a regime that has so far done the bidding of the US State Department, if not so much its own people.

 

end

 

Wikileaks sent this out late last night:

(courtesy zero hedge)

French Economy In “Dire Straits”, “Worse Than Anyone Can Imagine”, Leaked NSA Cable Reveals

 

Earlier today Wikileaks released a new batch of NSA intercepts among which one in particular stands out: an intercepted communication which reveals that then French Finance Minister Pierre Moscovici believes the French economic situation was far worse, as of mid-2012, than perceived.

Specifically, Moscovici who served as French finance minister until 2014 and then became European commissioner for Economic and Financial Affairs, Taxation and Customs, used some very colorful language, i.e., the French economic situation was “worse than anyone [could] imagine and drastic measures [would] have to be taken in the next two years”. 

Needless to say, no drastic measures were taken. In fact, no measures at all were taken because thanks to the ECB’s “whatever it takes” 2012 intervention and subsequent QE, pushed French yields to record low levels making the need for any reform moot (a la Greece, until the whole circus exploded).

He remarks about that the situation with the automotive industry was more critical than a pre-retirement unemployment supplement known as AER, which he also thought wouldn’t have had a severe impact on elections (while senator Bourquin thought would have driven voters to right-wing National Front).

Moscovici’s conclusion was that “the situation is dire” although the finance minister ignored warnings that without a “pre-retirement unemployment supplement known as the AER… the ruling Socialist Party will have a rough time in the industrial basin of the country, with voters turning to the rightwing National Front.”

Moscovici disagreed. Fast forward 3 years, and not only did French unemployment just hit an all time highconfirming that the economic situation has indeed never been more dire…

 

… but the frontrunner for the next French president is none other than National Front’s Marine Le Pen, who will no doubt seize this memo as further proof of the terrible economic state of the country and leverage it even more to her benefit, and add even more fuel to the Frexit fire. As a reminder, Le Pen now prefers to be called Madame Frexit because as she warned last week, when she becomes president, unless the Eurozone yields to her demands, France will be the next country out of the monetary project effectively ending the Eurozone. For more read “Forget Grexit, “Madame Frexit” Says France Is Next: French Presidential Frontrunner Wants Out Of “Failed” Euro.”

Here is the intercept (link):

French Finance Minister Says Economy in Dire Straits, Predicts Two Atrocious Years Ahead (TS//SI//NF) (TS//SI//NF) The French economic situation is worse than anyone can imagine and drastic measures will have to be taken in the next 2 years, according to Finance, Economy, and Trade Minister Pierre Moscovici.

 

On 19 July, Moscovici, under pressure to reestablish a preretirement unemployment supplement known as the AER, warned that the situation is dire. Upon learning that there are no funds available for the AER, French Senator Martial Bourquin warned Moscovici that without the AER program the ruling Socialist Party will have a rough time in the industrial basin of the country, with voters turning to the rightwing National Front. Moscovici disagreed, asserting that the inability to reinstitute the AER will have no impact in electoral terms, besides, the situation with faltering automaker PSA Peugeot Citroen is more important than the AER.

 

(COMMENT: PSA has announced plans to close assembly plants  and lay off some 8,000 workers.)

 

Moscovici warned that the 2013 budget is not going to be a “good news budget,” with the government needing to find at least an additional 33 billion euros ($39.9 billion). Nor will 2014 be a good year. Bourquin persisted, warning that the Socialist Party will find itself in a situation similar to that of Socialist former Spanish President Zapatero, who was widely criticized for his handling of his country’s debt situation. Moscovici countered that it was not Zapatero whose behavior the French government would emulate, but rather Social Democrat former German Chancellor Gerhard Schroeder.

 

(COMMENT: Schroeder, chancellor from 1998 to 2005, was widely credited with helping to restore German competitiveness. He favored shifting from pure austerity measures to measures that encourage economic growth and advocated a common EU financial policy.)

 

Unconventional

 

French diplomatic

end

 

 

Oil related stories:

 

Crude Slips On Surprise API Inventory Build

After 8 weeks of drawdowns in crude inventories, API reports a 1.9 million barrel build in the past week. Crude’s response is a 60c drop for now…

 

A crude build after 8 weeks of draws…

 

And the result…

end

Your important early morning currencies/interest rates and bourses results overnight:

<

end

 

Euro/USA 1.1118 down .0035

USA/JAPAN YEN 122.37 down .299

GBP/USA 1.5716 down .0010

USA/CAN 1.2377 down .0035

This morning in Europe, the Euro fell by a considerable 35 basis points, trading now just above the 1.11 level at 1.1118; 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 30 basis points and trading well below the 123 level to 122.37 yen to the dollar.

The pound was again down this morning as it now trades just above the 1.57 level at 1.5716, 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 up by 35 basis points at 1.2377 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 :  up 125.78  points or 0.63%

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

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

Gold very early morning trading: $1173.00

silver:$15.70

Early Tuesday morning USA 10 year bond yield: 2.35% !!! up 3 in basis points from Monday 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 Tuesday morning: 95.22 up 23 cents from Monday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Tuesday morning

And now for your closing numbers for Tuesday:

 

Closing Portuguese 10 year bond yield: 3.00%  down 8 in basis points from Monday (  very ominous/and dangerous with an accident waiting to happen)

Closing Japanese 10 year bond yield: .47% !!! up 2 in basis points from Monday/ still very ominous

Your closing Spanish 10 year government bond, Tuesday, down 5 in basis points  ( very ominous)

Spanish 10 year bond yield: 2.30% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 2.34% down 5 in basis points from Monday: (very ominous)

trading 4 basis points higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

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

 

Euro/USA: 1.1145 down .0073 ( Euro down 73 basis points)

USA/Japan: 122.33 down  0.318 ( yen up 32 basis points)

Great Britain/USA: 1.5717 down .0008 (Pound down 8 basis points)

USA/Canada: 1.2486 up .0100 (Can dollar down 100 basis points)

The euro fell by a fair amount today. It settled down 73 basis points against the dollar to 1.1145 as the dollar traded in all directions  today against  the various major currencies. The yen was up by 32 basis points and closing well below the 123 cross at 122.33. The British pound lost tiny ground today, 8 basis points, closing at 1.5717. The Canadian dollar lost huge ground against the USA dollar, 100 basis points closing at 1.2486 and was the biggest loser amongst the major currencies today.

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

 

Your closing 10 yr USA bond yield: 2.35% up 3 in basis point from Monday// (just at the resistance level of 2.27-2.32%)/ and ominous

Your closing USA dollar index:

95.48 up 49 cents on the day

.

European and Dow Jones stock index closes:

 

England FTSE down 99.50 points or 1.50%

Paris CAC down 79.62 points or 1.63%

German Dax down  138.23 points or 1.25%

Spain’s Ibex down 84.40 points or 0.78%

Italian FTSE-MIB down 109.24. or 0.48%

 

The Dow up 23.16  or 0.13%

Nasdaq; up 28.40 or 0.57%

 

OIL: WTI 58.19 !!!!!!!

Brent:61.53!!!!

 

Closing USA/Russian rouble cross: 55.17  up 4/10  rouble per dollar on the day

end

 

And now for your more important USA stories.

 

NY trading for today:

Stocks Turmoil To End Q2 With Worst Run Since Lehman

Overheard at The PBOC, The SNB, The ECB, and The Fed…

 

Before we start, it is worth noting that this is the first consecutive quarterly loss for Trannies since Lehman…

 

S&P 2067.89 was all that mattered today – for the biggest US equity market to avoid its first quarterly loss since Q4 2012… It Failed!!

 

Q2 ends with crude the big winner, bonds the big loser, and stocks and gold modestly lower…

 

Q2 saw Dow Transports ugly, Dow Industrials lower, and S&P teetering on the brink. Small Caps managed a small gain as Nasdaq outperformed…

 

Biotechs (healthcare) dominate Q2 with Financials and Discretionary ekeing out gains. Utes were monkey-hammered and Tech closed lower on the quarter…

 

Ugly quarter for bonds… (30Y up 57bps in Q2!, 2Y +8bps)

 

*  *  *

Year-to-Date, the picture does not change too much with bonds the laggard, Crude #winning, Silver flat, gold and stocks down…

 

And Trannies are a disaster in 2015…

 

Year-to-Date, 2Y and 5Y yields are still lower but 30Y is up 37bps…

 

*  *  *

Overnight China hope provided some news chatter into the open…

 

But Greece dominated…

On the day, stocks went into full schizophrenia mode as the inevitable default and Merkel’s “Nein” was whipsawed by rumors of a last minut deal and of Greeks suspending the referendum…

 

From pre-Greferendum, US equity indices are all lower still…

 

With Financials, Materials, and Tech worst…

 

FX markets remain “well managed” post Greece…

 

Treasury yields appeared to be pulled and pushed between safety bids and month- and quarter-end positioining… (ECB Sells ’em, Fed Buys ’em)

 

Crude rallied as the Iran Deal deadline was delayed (again) but bullion limped lower and Copper slipped…

 

You can’t keep an over-priced irrationally bid Biotech bubble down… Investors saw bonds rallying and stocks volatility, were stunned by the moves around Greek rumors and decided to pile into the safety of Biotechs…

 

Charts: Bloomberg

end

The all important national Chicago PMI  (manufacturing) sends out the worst print in over 7 years:

(courtesy Chicago PMI/zero hedge)

Chicago PMI Prints Worst June Since 2008 As Employment Tumbles

Chicago PMI has now missed 4 of the last 5 months and printed sub-50 contractionary indications for 4 of the last 5 months. June’s data improved from May (rising from 46.2 to 49.4) but missed expectations and is the weakest June print since 2008. Notably, away from 2015, June’s print is the weakest since September 2009. Under the covers it was ugly – employment plunged to the weakest since Nov 2009, order backlogs plunges to the lowest since September 2009, and prices paid rose again (pressuring margins).

June’s print is the weakest June since 2008!

 

Charts: Bloomberg

end
Puerto Rico announces a bond payment moratorium.  In plain English they are defaulting:
(courtesy zero hedge)

Puerto Rico Announces Bond Payment “Moratorium”

Having concluded last night that Puerto Rico debt is “unpayable,” and 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, Padilla confirmed tonight that(from Bloomberg):

  • *PUERTO RICO TO SEEK “NEGOTIATED MORATORIUM”, ‘YEARS’ OF POSTPONEMENT IN DEBT PAYMENTS

Likening his state’s situation to that of Detroit and New York City (though not Greece), Padilla concluded, the economic situation is “extremely difficult,” which is odd because just a few years ago when they issued that bond – everything was awesome?

When will PR overtake Greece again?

 

Puerto Rico’s Governor is speaking on national TV:

  • *PUERTO RICO DEBT IS UNPAYABLE, GOVERNOR SAYS
  • *PUERTO RICO DEBT LOAD WON’T LET ISLAND OVERCOME RECESSION: GOV.
  • *PUERTO RICO GOV. SAYS HE DOESN’T AGREE W/ ALL OF KRUEGER REPORT
  • *PUERTO RICO GOVERNOR SEEKS CREATION OF FISCAL BOARD
  • *PUERTO RICO NEEDS COMPLETE RESTRUCTURING PLAN: GOVERNOR
  • *PUERTO RICO TO SEEK `NEGOTIATED MORATORIUM’ W/ BOND HOLDERS
  • *PUERTO RICO MUST HAVE BETTER TERMS TO PAY DEBT: GOVERNOR
  • *PUERTO RICO SEEKS ACCORD ON FISCAL REFORMS BY AUG. 30

And the punchline:

  • *BONDHOLDERS SHARE RESPONSIBILITY FOR PUERTO RICO’S DEBT: GOV.
  • *PUERTO RICO TO SEEK `NEGOTIATED MORATORIUM’ W/ BOND HOLDERS
  • *PUERTO RICO BONDHOLDERS MUST MAKE SACRIFICES TOO: GOVERNOR
  • *PUERTO RICO TO SEEK `YEARS’ OF POSTPONEMENT IN DEBT PAYMENTS

We suspect the 70 handle will quickly become a 50 handle or less…

As AP reports,

Puerto Rico’s governor says he will create a financial team that will meet with bondholders and seek a moratorium on debt payments.

 

Gov. Alejandro Garcia Padilla made the announcement Monday night after saying that the U.S. territory’s $72 billion public debt is unpayable. He said he would seek a moratorium of several years but did not provide specifics.

 

Garcia’s comments come just hours after international economists released a gloomy report on Puerto Rico’s economy.

 

Legislators are still debating a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday.

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?

*  *  *

But Puerto Rico is not Detroit… well actually it is… worse:

  • *PUERTO RICO FACES SIMILIAR SITUATION AS DETROIT, NYC: GOVERNOR

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

end

I have been highlighting the plight of Puerto Rico bonds for many years due to the huge amounts of credit default swaps written on them plus insurance contracts and VIE’s.  Dave Kranzler believes that we may have another Black Swan event upon a failure of Puerto Rico bonds:

(courtesy Dave Kranzler/IRD)

Will Puerto Rico Cause An Inadvertent “Black Swan” Derivatives Melt-Down?

I really had not been paying much attention to the Puerto Rico debt situation.  After all, $72 billion in debt that might go bad – big deal.  The Fed can print up $72 billion in credit lines with the push of a button.

But a friend of mine happened to mention to me today (Monday) that MBIA’s stock was down over 23% and Assured Guaranty’s stock was down over 13%.  That woke me up.

MBIAMBI guarantees $4.5 billion in par amount of Puerto Rico muni paper.  As of it’s latest 10-Q (March 31, 2015), MBI showed a book value of $3.9 billion.Puerto Rico alone could more than wipe out MBI’s net worth.  But that’s only a portion of the story. The bigger part of the story is buried off-balance sheet in the footnotes in opaque financial structures called Variable Interest Entities (VIE’s). Remember those from 2008?  I remember them vividly.

The VIEs are the off-balance sheet vehicles that triggered the massive chain of counterparty defaults which de facto collapsed the U.S. financial system in 2008.  The VIEs are where the credit default swaps and other nebulous forms of OTC derivatives bet slither around.

Companies like MBI and AMBAC underwrite  credit “enhancement” guarantees on these massive cesspools of debt – and the associated derivatives that are “wrapped around” the debt structures – and stick them in VIEs.  MBI’s 10-K has several pages of footnotes which vaguely describe the contents of its VIEs.   The problem is that MBI and its ilk are thinly capitalized relative to the potential size of the liabilities they face if the credit markets become volatile to the downside.

mushroomcloud1

Toxicity plus toxicity does not equal purification.  But VIEs that contain off-balance sheet debt and derivative guaranteed equals toxicity cubed, at least.   In other words, whatever MBI lists as its “net” credit exposure in its financials, take that number and, at the very least, triple it.

But wait, the story gets even better.  As it turns out Warburg Pincus, one of the loftiest private equity firms on Wall Street,  is by far MBI’s largest shareholder.  Warburg announced a little over five weeks ago that it was going to unload 60% of its stake via over the counter negotiated sales – LINK.   The firm has been unloading these shares since May 18th.  We won’t know how successful this effort has been until the selling is completed.

Does Warburg Pincus sound recently familiar?   It’s the firm that hired “Turbo Tax” Tim Geithner shortly after he left his post as Treasury Secretary.   Remember, Geithner was head of the NY Fed at the time of the 2008 financial collapse.  In other words, he knows where a lot of the bodies in the financial system are buried.  I have no doubt that Geithner has played a significant role in advising Warburg on the need to unload its exposure to MBIA.  Anyone who takes the other side of this trade is a complete idiot.  

But this story isn’t just about MBI.  It’s about the companies that, along with MBIA, provide “insurance” for bonds and derivatives.  These firms have assumed potential liabilities that dwarf their ability to cover them.  Not just in the worst case scenario.  I believe Puerto Rico’s financial demise could trigger the dreaded financial nuclear daisy chain of counterparty defaults.

The problem with creating “actuarial” payout models for insurance guarantees on financial assets, and this especially true for derivatives, is that the outcome is pretty much binomial.  Either the assets pay off or they become worthless or near worthless.  Furthermore, with the extreme degree of Central Bank intervention, which has enabled literal financial zombies to continue living and has enveloped the entire financial system with opacity, it’s impossible to model in expectations on, and potential sources of, counterparty default risk.  It’s like lightening.  It can unexpectedly strike anywhere – just ask Hank Paulson and Goldman Sachs…

This is exactly what occurred in 2008.  Only this time around the problem is significantly greater than it was in 2008.  Global debt and gross derivatives outstanding are much bigger than in 2008.   And, except for the Plan B hyperinflation of the money supply, Central Banks are out of bullets.

I believe it is highly probable that the crashing stocks of MBIA, AMBAC and AGO are the alarm bells of a black swan landing.  And, of course, no one has been talking about them until today.  Although these firms are somewhat obscure and small compared to the size of the majority of financial companies, they are highly leveraged with massive off-balance-sheet liabilities for which they have zero hope of covering in the event of even relatively small bond defaults.   In other words, these firms are the ones most likely to set off the next financial collapse triggered by their counterparty defaults.

end

Well that about does it for tonight

Tomorrow is Canada day but I will still provide a commentary for you.

I will see you tomorrow night

Harvey

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