MAR 9/The bums orchestrate a gold and silver raid/Circuit breakers called into effect in Japan after yield rose from negative .10 to -.015/ New Zealand enters the currency wars by cutting its interest rate causing the Kiwi to fall/USA Inventory to Sales ratio reaches a high of 1.35: this level reached ony one time and that was during Lehman/

Gold:  $1,256.60 down $5.50    (comex closing time)

Silver 15.36  down 2 cents

In the access market 5:15 pm

Gold $1253.00

silver:  15.30

 

The open interest at the gold comex is extremely high at almost 500,000 contracts.  We are now at multi year highs despite the lower price of gold.  For comparison purposes, the last time we had OI this high was in 2013 with gold at $1700.00.  The crooks will try anything to cause the spec longs to liquidate their positions. Normally the bankers flood  the comex with massive non backed paper  tripping many longs with stop losses.  The crooks who have our longs as clients know what these stop loss levels are and thus it is easy for them to drive the price down tripping these losses which in turn causes a greater downfall in price.Once the price is lower they cover their shorts and make a profit.  Rinse and repeat. This  has been going on for the past 10 years. What he need is for the physical market to overtake the paper gold market leaving the bankers with a commercial failure to deliver..

At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces and for silver we had 7 notices for 35,000 oz for the active March delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 212.04 tonnes for a loss of 91 tonnes over that period.

In silver, the open interest rose by 1507 contracts  to 169,875. In ounces, the OI is still represented by .849 billion oz or 122% of annual global silver production (ex Russia ex China). Generally as we go into an active delivery month the liquidation is much bigger.

In silver we had 7 notices served upon for 35,000 oz.

In gold, the total comex gold OI rose by 938 contracts to 499,110 contracts despite the fact that the price of gold was down $6.70 with yesterday’s trading.(at comex closing).  We are now at multiyear highs in OI.  Actually the last time OI was at 500,000 contracts gold was trading around 1700.00 USA in 2013.

We had a rather large change  in gold  inventory at the GLD, a withdrawal of 2.38 tonnes of gold from the GLD/ thus the inventory rests tonight at 790.74 tonnes.If the GLD folks received any gold in the past few months, this gold would be headed over to Shanghai. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex.   In silver,/we again had a major change in inventory/this time another huge deposit of 2.856 million oz  and thus the Inventory rests at 322.632 million oz

.

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

 

1. Today, we had the open interest in silver rose by 1507 contracts up to 169,875 as the price of silver was down 24 cents with yesterday’s trading. The total OI for gold rose by 938 contracts to 499,110 contracts even though gold was down $1.10 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

 

3. ASIAN AFFAIRS

 

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN BY 38.83 POINTS OR 1.34% DESPITE A LAST  HR RESCUE, /  Hang Sang closed DOWN by 15.32 points or  0.08% . The Nikkei closed DOWN 140.95 or 0.84%. Australia’s all ordinaires was UP 0.96%. Chinese yuan (ONSHORE) closed DOWN at 6.51200.   Oil GAINED  to 37.01 dollars per barrel for WTI and 40.34 for Brent. Stocks in Europe so far IN THE GREEN RESPONDING TO THE OIL RAMP UP . Offshore yuan trades  6.5151 yuan to the dollar vs 6.5120 for onshore yuan/ LAST WEDNESDAY, MOODYS DOWNGRADES CHINA’S CREDIT FROM STABLE TO NEGATIVE.  At the big people’s congress where they meet to set a 5 year plan, the leaders failed to deliver a major fiscal stimulus package. However instead they made very promises.

 

ii)report from Japan:

during the night, a huge plunge of 5 full basis points on government bonds triggers a halt to trading as circuit breakers kicked in. Even though the government is essentially buying 100% of bonds, we still have pricing issues.  It surely indicates that the entire globe is in trouble:

( zero hedge)

 

iii)David Stockman reports on the huge problems facing Japan:

( David Stockman/ContraCorner)

iv)Report from China:

for those of you who are thinking of an increase in demand for oil coming from China,
wish again:  demand will fall and fall dramatically!
( zero hedge)
4.RUSSIAN AND MIDDLE EASTERN AFFAIRS
Great reason for gold going down this morning; iRAN LAUNCHES TEST MISSILES
WITH THE WORDS:  “ISRAEL MUST BE WIPED OFF THE FACE OF THE EARTH”
( zero hedge)
5.GLOBAL ISSUES
i)Late this afternoon currency wars continue unabated as New Zealand announced a surprise rate cut, from 2.5% down to 2.25%.  This caused the KIWI  to drop from .68 to the dollar to .6650 kiwi dollars  per usa dollar. They also warn China of their huge buildup of debt.
( zero hedge)
ii)
Although the Baltic Dry Index has risen from its low of 290 to today’s 349, international trade is basically awful!
( James Hall/Daily Business Report)
6.OIL MARKETS

i)We are witnessing huge record increases in storage at Cushing plus a build up in crude supplies according to DOE and API. However the market focused on the 4.5 mm barrel drawdown in gasoline inventories to ramp up crude oil to over 38. dollars.

(courtesy zero hedge/DOE/API/Cushing)
ii Chevron protects its current dividend but instead slashes another 36% off its cap ex due to lower revenue:
 (Nick Cunningham/Oil Price.com)
7.PHYSICAL STORIES

i) A terrific commentary from Dutch economist, Jaco Schipper.  He explains that even though Europe states that 98% of its gold is allocated, the various European countries have swapped gold for cash.  However the gold remains in situ at the various central banks with obligations flying all over the place.  He states correctly that the only way out for the authorities is to revalue gold…

a must read.

( Jaco Schipper/GATA)

 

ii)Another superb commentary from Bill Holter/

(:Holter-Sinclair collaboration)
 His piece is entitled:
“Doorways and Liquidity?”
8.USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER

i) The ratio of inventory/sales in the USA has only reached 1.35 once and that was in 2008.(Lehman chaos). Today, wholesale sales tumbled- 1.3%, worse than the expected -.3% while inventories rose .3% instead of dropping .l%.  That put the ratio at exactly 1.35%. As zero hedge states:  this will not end well!( zero hedge)

 

ii)Bank of American is reporting that the “smart money’ is getting out of the market as sells has been greater for a sixth straight week:

( zero hedge)

iii) Dave Kranzler talks about the deteriorating state of affairs in the USA auto industry. He states that used cars are heading south in price and in quantity.( Dave Kranzler/IRD)

 

iv)Again we get a warning on the huge counterparty risk exposure of our major USA banks

( Wall Street Journal)

Let us head over to the comex:

 

The total gold comex open interest rose to a high of 499,110 for a gain of 938 contracts despite the fact that the price of gold was down $1.10 in price with respect to yesterday’s trading. We must be close to a multi year high in gold OI.  For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month or for that matter an inactive month, and 2) a continual drop in the amount of gold standing in an active month.   Today, only the first scenario was in order as we actually gained in number of ounces standing for March.  The front March contract month saw its OI rise by 13 contracts up to 96.We had 1 notice filed upon yesterday, and as such we gained 14 contracts or an additional 1400 oz will stand for delivery. After March, the active delivery month of April saw it’s OI fall by 6,468 contracts down to 294,908. Almost all of the sold 6468 contracts rolled into June.The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 220,424 which is  good.  The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was very good at 231,306 contracts. The comex is not in backwardation .

 

Today we had 0 notices filed for nil oz in gold.
And now for the wild silver comex results. Silver OI rose by 1,507 contracts from 168,368 up to 169,875 as the price of silver was down by 24 cents with yesterday’s trading.  The next big active contract month is March and here the OI fell by 273 contracts down to 1547 contracts. We had 7 notices served upon yesterday, so we lost 266 contracts or an additional 1,330,000 ounces will  not stand for delivery. The next contract month after March is April and here the OI rose by 2 contracts up to 418.  The next active contract month is May and here the OI rose by 401 contracts up to 118,194. The volume on the comex today (just comex) came in at 42,252 , which is very good. The confirmed volume yesterday (comex + globex) was excellent at 60,116. Silver is now in backwardation at the comex until July as well as in backwardation in London.
 
We had 7 notices filed for 510,000 oz.
 

March contract month:

INITIAL standings for MARCH

March 9/2016

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 257.20 oz(MANFRA)

8 kilobars

Deposits to the Dealer Inventory in oz NIL oz
Deposits to the Customer Inventory, in oz   396.772 OZ

DELAWARE

No of oz served (contracts) today 0 contract
(nil oz)
No of oz to be served (notices) 96 contracts(9600  oz)
Total monthly oz gold served (contracts) so far this month  576 contracts (57,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 104,139.6 oz
Today, we had 0 dealer transaction
total dealer deposit; NIL oz
we had no dealer withdrawals
total dealer withdrawals nil. oz
We had 1  customer withdrawals:
i) Out of Manfra: 257.2 oz (8 kilobars)
total customer withdrawal: 257.200  oz (8 kilobars)
we had 1 customer deposit:
i) Into Delaware:  396.772 oz
total customer deposit: 396.772 oz oz

we had 0 adjustment

.

 JPMorgan has a total of 46,083.778 oz or 1.4333 tonnes in its dealer or registered account.
***JPMorgan now has 634,356.528 or 19.734 tonnes in its customer account
.
Today, 0 notices was issued from JPMorgan dealer account and 0 notice were issued from their client or customer account. The total of all issuance by all participants equates to 0 contract of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
 
To calculate the initial total number of gold ounces standing for the Mar contract month, we take the total number of notices filed so far for the month (576) x 100 oz  or 57,600 oz , to which we  add the difference between the open interest for the front month of March (96 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the INITIAL standings for gold for the March. contract month:
No of notices served so far (576) x 100 oz  or ounces + {OI for the front month (96) minus the number of  notices served upon today (0) x 100 oz which equals 67,200 oz standing in this non  active delivery month of March (2.090 tonnes).  This is an excellent showing for gold deliveries in this non active month of March.
we gained  1400 oz of additional gold standing for March delivery.
 
We thus have 2.090 tonnes of gold standing and 10.490 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
We now have partial evidence of gold settling for last months deliveries We now have 2.090 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes = 9,14 tonnes standing against 10.490 tonnes available.  .
 
Total dealer inventor 337,274.58 oz or 10.490 tonnes
Total gold inventory (dealer and customer) =6,817,090.548 or 212.04 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 212.03 tonnes for a loss of 91 tonnes over that period. 
 
JPMorgan has only 21.16 tonnes of gold total (both dealer and customer)
end
 
 
And now for silver
 

MARCH INITIAL standings/

March 9/2016:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  523,597.923 oz (Delaware)
Deposits to the Dealer Inventory 1,211,554.800 oz

BRINKS

Deposits to the Customer Inventory 1,158,223.590 oz
(SCOTIA)
No of oz served today (contracts) 7 contracts 35,000 oz
No of oz to be served (notices) 1540  contract (7,700,000 oz)
Total monthly oz silver served (contracts) 339 contracts (1,695,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month 8,415,633.2 oz

Today, we had 0 deposits into the dealer account: 

 

total dealer deposit; nil  oz

 

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

 

we had 1 customer deposit

i) Into Scotia:  1,158,223.590 oz

:

total customer deposits: 1,158,223.590   oz

We had 1 customer withdrawals:
i) Out of Delaware:  523,597.923 oz
 
 

total withdrawals from customer account 523,597.923   oz

 

 we had 1 adjustment

i) Out of Delaware:

61,959.820 oz was adjusted out of the customer account and this landed into the dealer account of Delaware

 

The total number of notices filed today for the March contract month is represented by 7 contracts for 35,000 oz. To calculate the number of silver ounces that will stand for delivery in March., we take the total number of notices filed for the month so far at (339) x 5,000 oz  = 1,695,000 oz to which we add the difference between the open interest for the front month of March (1547) and the number of notices served upon today (7) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the March. contract month:  339 (notices served so far)x 5000 oz +(1547{ OI for front month of March ) -number of notices served upon today (7)x 5000 oz  equals  9,695 oz of silver standing for the March contract month.
we lost a whopping 266  contracts or an additional 1,330,000,000 oz  that will not stand.
No doubt these were cash settled as they are running out of real silver.
 
Total dealer silver:  27.492 million  (near all time recorded low level)
Total number of dealer and customer silver:   153.417 million oz
Question: 1. why so much activity in the silver comex?
Question   2.  why so much deposits of silver and yet tiny delivery notices?
 
 
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

And now the Gold inventory at the GLD:

 

March 9/a withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 790.74

March 8/no changes in inventory at the GLD/Inventory rests at 793.12 tonnes

MARCH 7/a tiny loss of .21 tonnes of gold probably to pay for fees/inventory 793.12 tonnes

MARCH 4/another mammoth sized deposit of 7.13 tonnes of gold into GLD/Inventory rests at 793.33 tonnes.  This is no doubt a “a paper addition” and not physical

MAR 3/another good sized deposit of 2.37 tonnes of gold into the GLD/Inventory rests at 788.57 tonnes

MAR 2/another mammoth paper gold addition of 8.93 tonnes of gold into the GLD/Inventory rests at 786.20 tonnes.

March 1/a mammoth 14.87 tonnes of gold deposit into the GLD/inventory rests at 770.27 tonnes

FEB 29/another deposit of 2.08 tonnes of gold into the GLD/Inventory rests at 762.40 tonnes

Feb 26./no change in gold inventory at the GLD/Inventory rests at 760.32 tonnes

Feb 25./we had a huge deposit of 7.33 tonnes of gold into the GLD/Inventory rests at 760.32 tonnes. No doubt that this is a paper gold deposit/not real as the price of gold hardly moved on that huge amount of deposit.

FEB 24/no change in gold inventory at the GLD/Inventory rests at 752.29 tonnes

FEB 23./another huge addition of 19.3 tonnes of gold into its inventory/Inventory rests at 752.29 tonnes.  Again how could they accumulate this quantity of gold with backwardation in London/this vehicle is nothing but a fraud

Feb 22/A huge addition of 19.33 tonnes of gold to its inventory/Inventory rests at 732.96 tonnes/ How could this happen: a huge addition of gold coupled with a huge downfall of 20 dollars in gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

March 9.2016:  inventory rests at 790.74 tonnes

 

end

 

Now the SLV
March 9/no change in inventory at the SLV/Inventory rests at 322.632 million oz/
March 8/no change in inventory at e SLV/Inventory rests at 322.632 million oz
MAR 7/another huge deposit of 2.856 million oz/inventory rests at 322.632 million oz/
MAR 4/another huge deposit of 5.426 million oz /inventory rests at 319.776
MAR 3/a huge deposit of 2.732 million oz/inventory rests at 314.350 million oz
MAR 2/no change in silver inventory/rests tonight at 311.618 million oz
March 1/no change in silver inventory/rests tonight at 311.618 million oz
FEB 29/no change in inventory/rests at 311.618 million oz
Feb 26./no change in inventory/rests at 311.618 million oz
Feb 25/no change /inventory rests at 311.618 million oz
FEB 24/no change/inventory rests at 311.618 million oz
FEB 23/no changes in inventory at the SLV/Inventory rests at 311.618 million oz
.
March 9.2016: Inventory 322.632 million oz.
1. Central Fund of Canada: traded at Negative 8.4 percent to NAV usa funds and Negative 8.2% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.1%
Percentage of fund in silver:35.9%
cash .0%( Mar 9.2016).
2. Sprott silver fund (PSLV): Premium to NAV rises to  2.09%!!!! NAV (Mar 9.2016) 
3. Sprott gold fund (PHYS): premium to NAV falls to -.46% to NAV Mar 9.2016)
Note: Sprott silver trust back  into positive territory at +2.09%/Sprott physical gold trust is back into negative territory at -.46%/Central fund of Canada’s is still in jail.
 
 
 

end

 

And now your overnight trading in gold, WEDNESDAY MORNING and also physical stories that may interest you:

 

Trading in gold and silver overnight in Asia and Europe
 
(COURTESY MARK O’BYRNE)

Gold Could Surge To $8,000/oz On Negative Interest Rates – Lassonde

By Mark O’Byrne March 9, 2016 0 Comments

The gold bull market has returned and gold could surge over 1,000% to $8,000 per ounce in the coming years according to legendary gold investor, Chairman of Franco-Nevada Corporation and former Chairman of the World Gold Council, Pierre Lassonde.

Lassonde_gold

Pierre Lassonde on BNN

Gold prices are heading higher, much higher and he is “very sure” that the five-year bear market for gold is over and we are at the beginning of a new bull market, the gold insider told leading Canadian business channel, BNN.

The primary reason for his very bullish outlook for gold is negative interest rates and the $7 trillion in bonds that now have negative yields:

“One of the big knocks on gold is that you have to pay to hold it,” Lassonde said. “Now even bonds have a negative carry.”

He also believes that the Dow Gold ratio suggests much higher gold prices:

During strong gold bull markets, the price of gold often hits a one-to-one ratio with the Dow Jones industrial average, says the chairman of Franco-Nevada Mining and former president of Newmont Mining.

That means gold could surge to US$8,000 an ounce or even higher, he says.

“In 1980 gold was at US$800 and the Dow was at 800; in 1934 gold was US$36 and the Dow was at 37 – where is the Dow today?” he asks BNN’s Catherine Murray. “Do I know it’s going to go back to 1:1 – I don’t know… even if it gets to 2:1, that’s US$8,000 –.

Lassonde says with understated humour that he is “slightly optimistic.”

The interview with Catherine Murray can be watched on BNN here.

LBMA Gold Prices
09 Mar: USD 1,258.25, EUR 1,146.69  and GBP 884.16 per ounce
08 Mar: USD 1,274.10, EUR 1,155.69 and GBP 894.35 per ounce
07 Mar: USD 1,267.60, EUR 1,156.96 and GBP 896.13 per ounce
04 Mar: USD 1,271.50, EUR 1,158.67  and GBP 898.93 per ounce
03 Mar: USD 1,241.95, EUR 1,141.48 and GBP 882.24 per ounce

Gold News and Commentary
Gold’s Best Start Since 1974 Shows It’s Not Just Inflation Hedge – Bloomberg

Gold’s Rally Belies Confidence in Global Stocks Rebound – Bloomberg

Gold slips as euro dips ahead of likely ECB easing – Reuters

Gold ETF Holdings Rise For Record 40 Straight Days – Bloomberg

Chinese exports plunge 25% in February – BBC

Video: Gold’s “Medium Term Outlook” Remains Positive – Bloomberg

“Battling” A Technically-Overbought Gold Market – Dollar Collapse

Exclusive: U.S. watchdog to probe Fed’s lax oversight of Wall Street – Reuters

These “X Factors” Could Send Silver Prices Soaring in 2016 – Profit Confidential

The Big Beneficiary of Negative Rates: Gold – WSJ

Read More Here

7RealRisksBanner

‘7 Real Risks To Your Gold Ownership’ – New Must Read Gold Guide Here

Please share our website with friends, family and colleagues who you think may benefit from.

Thank you

Mark O’Byrne

end

 

 

A terrific commentary from Dutch economist, Jaco Schipper.  He explains that even though Europe states that 98% of its gold is allocated, the various European countries have swapped gold for cash.  However the gold remains in situ at the various central banks with obligations flying all over the place.  He states correctly that the only way out for the authorities is to revalue gold…

a must read.

(courtesy Jaco Schipper/GATA)

 

Jaco Schipper: Why the allocated status of the ECB’s gold is so important

Submitted by cpowell on Tue, 2016-03-08 21:43. Section: 

4:42p ET Tuesday, March 8, 2016

Dear Friend of GATA and Gold:

Our friend the Dutch economist Jaco Schipper, who four years ago discovered the acknowledgement by a former president of the Bank for International Settlements that the gold market long had been rigged by central banks at the behest of the United States —

http://www.gata.org/node/11304

— today explains why he believes that the European Central Bank’s recent assertion that its gold is almost fully allocated is so important.

Like some others in the GATA camp, Schipper anticipates an official upward revaluation of gold as the primary mechanism for reliquefying central banks and lifting the world’s burden of unredeemable debt.

Schipper’s analysis is headlined “ECB: Eurozone Almost Fully Allocated” and it’s posted at his Internet site here:

http://www.jcaschipper.nl/2016/03/ecb-eurozone-almost-fully-allocated/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 end
Another superb commentary from Bill Holter/
(courtesy:Holter-Sinclair collaboration)
Doorways and Liquidity?
A very curious thing happened overnight in Japan, trading in their 10 year bonds was briefly halted.  This was the result of a selloff that pushed yields from minus .10% up to minus .015%.  The price move in the bonds was only .6%, so not a huge move but the circuit breakers were hit and trading stopped.
 http://www.zerohedge.com/news/2016-03-09/sudden-plunge-japanese-government-bonds-triggers-circuit-breaker-halts-market-30-sec
  So why is this a big deal, or is it?  First, the JGB market is second or third largest and most liquid in the world behind U.S. Treasuries and maybe Eurobonds.  This sort of chaotic movement should not happen.  More importantly, I believe the circuit breakers are so “tight” because a panic event can not be allowed to gain ANY momentum.  Any “momentum in the wrong direction” at this point could easily become self reinforcing because of leverage or margin used to carry positions today. Please understand I am not picking on JGB’s as the same thing could be said of many if not ALL markets today as markets are so intertwined.  The point we are driving at here is “volatility kills”!
  This thought that volatility kills has become the absolute center of ALL financial markets on the planet.  Because everything has become derivatized, the “leverage” has expanded much further than just credit outstanding or margin balances.  You see, derivatives morphed into the tool of choice to “price” or manage markets.  Now, because these derivative markets have gotten so large, volatility cannot be allowed.  Whether it be circuit breakers, “mysterious software ” problems or simply pulling the plug, volatility must be tamped down at all costs.
It is no coincidence volatility is rising now as liquidity has begun to dry up.  All you need to do is talk to an institutional bond trader to know this to be true.  Even small $10 million trades or less are tough to move …and here is the rub.  The “exit door” has drastically shrunk while the population in the room has continually expanded!
  If we look at only the credit markets alone, the “room” is inhabited by $7 trillion worth of bonds trading at negative interest rates.  Stating the obvious, this is the largest “greater fool” trade in all of history.  Are bond traders really buying bonds to lock in a negative return?  Do they really believe they will “win” because the underlying currency will gain value even though the stated goal of every central bank is to debase?  No, the only reason a bond trader would purchase a negative yield is because they believe there is a greater fool out there who will purchase that bond from them at an even greater negative yield.
Now you must ask yourself one more question, are negative interest rates the new normal and here to stay?  Logically the answer is “no” because mathematically a system based on negative rates is like a snake eating its own tail.  Practically speaking, negative rates are an accident waiting to happen when someone finally yells FIRE!
Speaking of “doorways and liquidity”, if you understood what was meant in my last writing when JP Morgan testified “Gold is money, everything else is credit” then you probably have an idea where we are going here.  The entire system is credit based.  Everything you do, use, consume or even touch on a daily basis had the use of credit somewhere along the way, this even includes your dollar bills in your pocket.  Put simply, we are living in a credit mania.
  Gold, and especially silver are ridiculously small markets.  “Real” global production is about $80 billion per year for gold and $12 billion for silver.  Unless you have been sleeping or just don’t get it, the “stock” of silver and gold has been continually diluted by paper over the last 4 years as a means to control the price.  Now, demand has gotten so great they are having a problem creating even paper gold fast enough to contain the price.  The “doorway” into real gold and silver is very very minute and will become 100 times smaller than it already is once people with paper receipts find out they hold nothing.  What I am trying to say here is this, on top of current and  safe haven demand, will also be demand from those who have already “bought”.   In reality they own nothing because their previous purchase was deflected from metal into paper air.
  I know the above is not groundbreaking news to many of you but it needs to be reminded once in a while.  The exit door for the massive paper credit buildup is small and getting smaller as liquidity shrinks and leverage grows.  The entrance door for real gold and silver may not even exist once people understand they are the very core to the strong dollar fraud.  You see, “liquidity” has a direct effect on how functional any door is whether it be an exit or entrance.  Not enough shrinks the exit, too much closes the entrance!
  As an announcement, many of you have been reading my work for the last nine years.  My work has been found all over the internet on numerous websites.  In the very near future, my work will only be found at http://www.jsmineset.com/ in my partnership with Jim Sinclair.  Jim and I plan to do at least once monthly audio question and answer sessions from subscriber questions.  We have a couple of other plans for additional content in the works as well, so please visit our website to keep abreast with the upcoming additions!
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@hotmail.com
end
Your early morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
 
 

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5120 / Shanghai bourse  IN THE RED, DOWN 38,83 OR 1.34% :  / HANG SANG CLOSED DOWN 15.32 POINTS OR 0.08%

2 Nikkei closed DOWN 140.95 OR 0.84%

3. Europe stocks ALL IN THE GREEN /USA dollar index UP to 97.37/Euro UP to 1.0966

3b Japan 10 year bond yield: RISES  TO -.029%   AND YES YOU READ THAT RIGHT  !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 112.53

3c Nikkei now well below 17,000

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

3e WTI::  37.01  and Brent: 40.34

3f Gold DOWN  /Yen UP

3g Japan 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 RISES  to 0.212%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.89%/: 

3j Greek 10 year bond yield FALL to  : 9.62%   (YIELD CURVE NOW BACK TO INVERTED)

3k Gold at $1253.80/silver $15.30 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble UP 91/100 in  roubles/dollar) 71.95

3m oil into the 37 dollar handle for WTI and 40 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 1.0013 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0981 well above 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 STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 year German bund now  in negative territory with the 10 year RISES to  + .214%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.88% early this morning. Thirty year rate  at 2.68% /POLICY ERROR)

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

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

 

S&P Futures Jump As Rebound In Commodities Helps Defense Of Key Support Trendline

 

After yesterday’s last hour selloff sent the S&P to the very edge of the critical support trendline which, as shown yesterday, meant 1980 had to be defended at all costs…

… so far the support has held, and in overnight trading European stocks have managed to rebound on the back of more levitation in oil, while US equity futures have ignored a drop in the USDJPY which touched 112.20 in morning trading, and have jumped by 0.5% as of this moment, up 10 points to 1,990.

It is worth noting that China opened on the wrong foot, with the Yuan feeling the pain of the recent abysmal trade data, however, after dropping as much as 3%, Chinese stocks managed to crawl back to the highs of the day following another dramatic intervention by the Chinese government’s “National Team”:

Inline image 1

With China’s Plunge Protection Team having intervened and set a positive spin on another poor session, traders put declines in Asia behind them as European markets rose along with U.S. index futures and commodities. European shares advanced for the first time in three days on speculation the region’s central bank will ramp up monetary stimulus on Thursday. A gauge of raw materials rebounded from its biggest selloff in a month, buoyed by gains in oil and copper. Furthermore, the previously noted selloff in Japanese government bonds – one which triggered circuit breakers and which some speculated may have been precipitated by the BOJ itself – dragged Treasuries and German bunds lower, gold fell a second day and the euro dropped versus most of its major peers.

Because the last thing the market needs is negative follow through the day after Jeff Gundlach says that the rally is ending and the the risk/return profile of the S&P is currently 2/20.

To be sure, everyone’s attention will be focused on tomorrow’s ECB, where Draghi will either provide a major upside surprise, or will disappoint massively to the downside: just like in December, there is no middle ground. “We think a 10bp cut and a EU10b top-up in QE purchases won’t do much to extend the equity rally, namely because it’s already priced in. A very generous macro add-on to the two-tiered system would possibly help lenders in the very short term, but realistically, it’s only the threat of credit purchases, corporate and/or financial, that can get the market excited at this point. Even if Draghi pulls another rabbit, the fundamental picture for European banks will remain extremely challenging given the grim outlook for back-end yields,” Ben Camara, head of European strategy at Vanda Securities, writes in note.

Others are just as skeptical: “There’s talk of rates cuts, increasing the size of the asset-purchase program, and expanding the range of products that the ECB will buy,” said Daniel Murray, the London-based head of research at EFG Asset Management. “Let’s see tomorrow how good Draghi is at playing the market: he has built up expectations before and found them hard to meet.”

So while we await the week’s key event, here is where we stand currently.

Market Wrap

  • S&P 500 futures up 0.5% to 1990
  • Stoxx 600 up 1.0% to 341
  • FTSE 100 up less than 0.5% to 6155
  • DAX up 0.5% to 9744
  • German 10Yr yield up 2bps to 0.2%
  • Italian 10Yr yield down less than 1bp to 1.42%
  • Spanish 10Yr yield down less than 1bp to 1.57%
  • MSCI Asia Pacific down 0.3% to 125
  • Nikkei 225 down 0.8% to 16642
  • Hang Seng down less than 0.1% to 19996
  • Shanghai Composite down 1.3% to 2863
  • S&P/ASX 200 up 1% to 5157
  • US 10-yr yield up 5bps to 1.88%
  • Dollar Index up 0.13% to 97.34
  • WTI Crude futures up 1.5% to $37.04
  • Brent Futures up 1.7% to $40.33
  • Gold spot down 0.5% to $1,253
  • Silver spot up 0.1% to $15.37

Top Global News

  • Sanders Stuns Clinton with Michigan Upset: Even with loss, Clinton was able to go to sleep Tuesday with a bigger overall lead than she had when she woke up; Trump Sweeps Republican Primaries in Mississippi, Michigan
  • Swiss Re Said to Be in Talks to Buy Prime Reinsurance From Citi: Deal may value the subsidiary at ~$500m.
  • SunEdison Faces Lawsuits, Cash Crunch After Vivint Cancels Deal: Now that deal has fallen apart, fallout may be significant.
  • Carmike’s Biggest Holder Opposes AMC Buyout Terms as Too Low: Co. responded that it’s pressing ahead with proposed deal.
  • Berkshire Said to Market Euro Bonds Following Biggest Debt Sale: Co. offering 4, 8, 12-yr maturities, partly to help pay off loans used in acquisition of Precision Castparts.
  • IBM Snips Potential Share Buyback Benefits for CEO Compensation: Co. to strip out effects of “unplanned” repurchases from oper. EPS when it assesses CEO’s performance.
  • India Startup Cut Off From Facebook After U.S. Rival’s Protest: FB pulled plug on Houzify page after Sequoia Capital-backed Houzz Inc. complained of trademark infringements.
  • Copper Demand to Overtake Supply in 2017: Freeport Official: Demand will increase slightly over 2%/year on average through 2020.
  • Chipotle Closes Mass. Restaurant After Workers Get Sick: Location in Billerica, outside Boston, was closed for a full cleaning.
  • Google AI Wins First Match Against Korean Go Game Champion:

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European bourses are trading mildly higher despites risk events being in focus, most notably ECB’s Draghi speaking tomorrow after the ECB rate announcement.
  • Brent crude oil has once again reached USD 40/bbl today with WTI following slightly below at USD 37/bbl respectively despite a build in API inventories, with DOE Crude Oil Inventories expected to come in at 2000k.
  • Looking ahead: Bank of Canada Rate Decision, DOE Crude Oil Inventories and RBNZ Official Cash Rate.
  • Treasuries lower in overnight trading; equity markets mostly lower in Asia, rise in Europe before tomorrow’s ECB meeting; week’s auctions continue with $20b 10Y notes, WI 1.87% vs 1.73% in Feb., was lowest 10Y auction stop since 1.652% in Dec. 2012.
  • Current 10Y trading special in the repo market, -3.25% yesterday, a reflection of an increasing short base and shortage of the security, which the Fed cannot alleviate because it doesn’t hold much of the issue
  • Mario Draghi is having no success convincing stock investors that the ECB has the firepower to reignite growth. In the first year of quantitative easing, the Euro Stoxx 50 Index fell 17%, and volatility reached levels not seen since 2008
  • Norway’s sovereign wealth fund, the world’s biggest, hasn’t been part of a global selloff in stocks this quarter, according to its CEO, Yngve Slyngstad. The comments follow evidence that wealth funds across the Middle East and central Asia have sold assets to plug deficits amid plunging oil prices
  • U.K. industrial production posted a modest rebound in January, climbed 0.3% from December, when it declined 1.1%, as manufacturing and energy production jumped, the Office for National Statistics said in London on Wednesday
  • The Chinese stock market has once again turned into a battleground for bearish investors and state-directed funds determined to spark a rally
  • China National Petroleum won’t cut frontline oil and gas workers as it seeks to reduce costs to cope with low energy prices, according to Chairman Wang Yilin. “We are not like international oil companies where layoffs are the most convenient way to cut cost in the capitalist world”
  • Thousands of refugees piled up at the border between Greece and the Republic of Macedonia, unable to continue northward as regional authorities tightened controls before European Union leaders finalize an agreement to stem the flow of migrants
  • Donald Trump beat back a barrage of attacks led by the last Republican presidential nominee and scored major victories over his leading rival in two primaries on Tuesday, strengthening his bid to win the party’s nomination
  • Hillary Clinton was expected to sail to an easy victory in Michigan on Tuesday. Instead, she suffered a narrow yet stunning loss that has the potential to further slow her progress to the Democratic nomination
  • Sovereign 10Y bond yields mixed, mostly steady; European, Asian markets mixed; U.S. equity-index futures rise. WTI crude oil, copper rise, gold falls

Looking at regional markets, stocks in Asia traded mostly lower following the losses on Wall St. after weakness in crude and China concerns continued to dampen sentiment. Nikkei 225 (-1.17%) and ASX 200 (+0.78%) were initially pressured by declines in the commodity-complex, although the latter recovered losses, supported by defensive stocks. Chinese markets continued to underperform with the Shanghai Comp (-1.34%) lower following yesterdays poor trade data, while today’s PBoC operation was a relatively paltry injection. 10yr JGBs declined on profit-taking following yesterdays advances with demand also subdued as participants searched elsewhere for positive yields. Further selling was also observed on resumption from the break due to disappointment from the BoJ’s buying operations which saw 10yr JGBs decline by around 1 point and caused the OSE to issue a circuit breaker. PBoC set the CNY mid-point at 6.5106 vs. last close. 6.5046 (Prey. mid-point 6.5041); 1st time PBoC weakened the fix in 5 days. (RTRS) PBoC injected CNY 15bIn via 7-day reverse repos.

Top Asian News

  • Hong Kong Plans to Uncloak Investors With New See-Through System: Watchdog plans to assign identity record to each investor trading in market.
  • The China Intervention Trade Is Back as State Funds Battle Bears: Pattern of late-day rallies returns as Shanghai Composite Index heavyweights jump.
  • China May Face Japan-Like Slump Unless Yuan Weakens, KKR Says: KKR sees currency’s ‘fair value’ at about 7 per U.S. dollar.
  • PBOC Using Stealth Intervention as Reserves Decline, Daiwa Says: Central bank may have asked wealth fund to sell foreign assets, analysts say.
  • Noble Group Said to Plan Biggest Loan Backed by Inventories: Commodities trader is seeking $2.5b in so-called borrowing base facility guaranteed by oil.
  • Aramco Mulls Indian Refinery in Plan to Boost Asia Footprint: Saudi producer also looking at China, Indonesia, Malaysia.
  • Cathay Pacific Profit Nearly Doubles as Fuel Costs Fall: Full-year net income jumps 90.5 percent from a year earlier

In Europe, participants appear somewhat on edge so far today ahead of the key ECB meeting tomorrow, however with some indications that risk on sentiment has not completely dissipated. Equities trade higher this morning (Euro Stoxx: +0.6%), with the defensive healthcare sector the session’s laggard so far and financials & materials leading the way higher. This comes as materials pare back some of the heavy losses seen yesterday. Bunds remain heavy heading into the north American cross over although off their worst levels, partly in tandem with the downside observed in USTs, which fell following somewhat lacklustre buying op by the BoJ, with profit taking and positioning ahead of supply also noted as factors behind the move.

Top European News

  • Banks Face Billions in Collateral Needs Under EU Swap Rules: May require EU buyers, sellers of swaps to set aside EU200m- EU420m once they are fully effective in 2020.
  • Draghi Stimulus Fails in Stock Market as Volatility Matches 2008: In first year of quantitative easing, Euro Stoxx 50 Index fell 17%, with volatility reaching levels not seen since 2008.
  • Norway’s Sovereign Wealth Fund Has Worst Year Since 2011: The $830b Government Pension Fund Global returned 2.7% in 2015, after rising 7.6% in 2014.
  • Credit Agricole Seeks EU4.2b Annual Profit in 2019: Co. to seek EU900m in annual gross cost savings as it streamlines some businesses, invests in others.
  • Prudential’s Pretax Profit Rises 19% as Asia Life Sales Grow: Co. will also pay special dividend of 10p.
  • Altice Defends Cablevision Purchase as in NYC’s Interest: Subscribers could sign up for broadband service as fast as 300mbps, while low-income New Yorkers can get 30mbps plan for $14.99/month.
  • Bank of France Cuts Growth Forecast as Business Confidence Falls: Sentiment among factory executives dropped to 98 in Feb. from 101 in Jan.
  • Zara Owner Cuts Store Expansion Goal in Favor of Online Growth: Co., which has over 7,000 outlets, aims to increase retail space 6-8% in coming years, vs previous target of 8-10%.
  • U.K. Industrial Output Rises on Manufacturing, Utilities: Output climbed 0.3% from Dec., vs forecasted gain of 0.4%.

In FX, there have been no big moves this morning, but notable was the fresh downturn in USD/JPY, testing the low 112.00’s to hit fresh session lows and a return into the nervy 111.00 zone. Little behind the move apart from some cross JPY flow (EUR selling contributing), with the risk mood relatively positive after yesterdays losses. Elsewhere, UK industrial and manufacturing production data was mixed, but GBP has recovered a little, with EUR/GBP dipping below .7700 to give the Cable rate a lift back into the 1.4200’s. Ahead of the ECB, we saw some early selling of EUR/USD, but this petered out pretty quickly, as the inverse correlation with USD/JPY took hold. AUD/USD is digging in to uphold the risk correlation, while the CAD is pushing higher again also as Oil resumes higher levels — WTI back through $37.0, Brent $40.0+.

In commodities, Brent crude oil has once again reached USD 40/bbl today with WTI following, slightly below at USD 37/bbl respectively with traders looking forward to the possibility of an oil producers meeting on the 20th March. Crude oil rose 1.4 percent to $37.00 a barrel in New York, after a 3.7 percent slide on Tuesday that marked its biggest loss in almost four weeks. The Energy Information Administration cut its U.S. output forecast through 2017 as drillers idle rigs to conserve cash. That helped counter an increase in inventories, which rose by 4.4 million barrels last week, the industry-funded American Petroleum Institute was said to report. Government data Wednesday is forecast to show supplies increased.

Nickel rebounded 2.6 percent after tumbling 8.5 percent on Tuesday, while copper gained 1 percent. Copper demand won’t catch up with supply until 2017, according to a senior official at Freeport-McMoRan Inc., the largest publicly traded producer of the metal. Gold fell 0.4 percent, extending Tuesday’s retreat from a one-year high. The Bloomberg Commodity Index’s rebound comes after a 1.1 percent loss in the last session. It’s dropped 21 percent in the past year.

“The IMF’s latest reading of the global economy shows once again a weakening baseline,” IMF First Deputy Managing Director David Lipton said Tuesday in Washington. “Moreover, risks have increased further, with volatile financial markets and low commodity prices creating fresh concerns about the health of the global economy.”

On today’s US calendar, the only releases of note are the January wholesale inventories and trade sales data with modest declines expected for both

DB’s Jim Reid concludes the overnight wrap

The weaker sentiment has continued during the Asia session this morning where risk assets continue to remain under pressure. It’s China which is leading the way with the Shanghai Comp -2.04%, tumbling into the midday break (although we note that this time yesterday saw the index rally back post the break) while the Hang Seng (-0.34%) and Nikkei (-0.74%) are also struggling. Only the ASX (+0.66%) is up while credit markets are 2 to 4bps wider generally. With little in the way of data, some of the focus has also been on the latest in the US Presidential race where Trump has been victorious in both the Mississippi and Michigan Republican primaries, and thus cementing further his control in the race, while Clinton has defeated Sanders in the Mississippi race with the outcome from the Michigan primary much closer. US equity futures are little changed this morning.

Back to Oil briefly, yesterday our commodities and US fixed income colleagues published an interesting note looking at the impact of the Oil price decline not just in HY credit (where they go into further detail on current and projected default rates and recovery values) but across much of the wider credit spectrum. The note touches on the extent to which CLO’s and CMBS have been affected as an asset class, while also looking at how energy price declines have had a positive impact for consumer ABS and aviation debt.

In truth, aside from the China numbers and focus on moves in commodity markets there wasn’t a whole lot of new news in yesterday’s session. That said some of the more interesting moves were in rates markets where global bond yields moved materially lower. It was Japan where the rally was most evident, helped to a large degree by a record low yield set at the 30y JGB auction yesterday with demand for the bonds the highest since May 2014. That resulted in 30y JGB’s rallying 22bps to a record low 0.468%, an unprecedented rally considering we started the year at 1.265%. Meanwhile 10y JGB’s dived deeper into negative territory at -0.108% (-5.3bps) with the curve now negative up until the 12.5y maturity mark. Yields in Europe followed suit with 10y Bunds in particular down 4.2bps to 0.181% (although still off the low print of last Monday) while similar maturity Treasuries closed down 7.7bps at 1.830%.

With regards to the economic dataflow yesterday, in the US the only release of note was the NFIB small business optimism print for February which was down a disappointing 1pt relative to the prior month to 92.9 (vs. 94.0 expected) and a two-year low. The most significant surprise was reserved for Germany however where industrial production in January was up a much greater than expected +3.3% mom (vs. +0.5% expected) with the December reading revised up nine-tenths also. Our European Economics colleagues cautioned that the data was likely overstated by mild winter weather and one-offs, but that being said it should help put concerns that Germany is at the brink of recession at bay. Away from this there was no change in the second revision of Q4 GDP for the Euro area at +0.3% qoq.

Before the day ahead and anniversary performance review, the latest HY monthly is now out. In the note we highlight the recent outperformance of USD HY vs. EUR HY. This has largely been driven by the improvement in oil/commodity prices, with the Oil & Gas and Basic Materials sectors seeing strong returns. We also take a look at issuance trends and pose the question of whether the lack of supply in European HY is acting as a positive technical support or actually more of a headwind for the market. It seems clear to us that the lack of issuance has probably meant growing investor cash balances, however we argue that performance might actually be supported by a more active primary market at the moment. The lack of new deals and sometimes lack of success in bringing new deals to market may actually be weighing on sentiment. We’ve also provided an update of our table looking at the YTD performance of the largest issuers in the EUR HY market. Email Nick for a copy.

Looking at the day ahead, the calendar is fairly thin on the ground data-wise again today. This morning in the European session the main data of note will be the industrial and manufacturing production reports out of the UK covering the January month (expected at +0.4% mom and +0.2% mom respectively), while the French business sentiment survey is also expected. Over in the US this afternoon the only releases of note are the January wholesale inventories and trade sales data with modest declines expected for both. Away from this the BoE’s Bailey is expected to speak this morning, while central bank wise we’ll get the Bank of Canada decision this afternoon (no change expected).

end

Let us begin;

 

ASIAN AFFAIRS

 

Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN BY 38.83 POINTS OR 1.34% DESPITE A LAST  HR RESCUE, /  Hang Sang closed DOWN by 15.32 points or  0.08% . The Nikkei closed DOWN 140.95 or 0.84%. Australia’s all ordinaires was UP 0.96%. Chinese yuan (ONSHORE) closed DOWN at 6.51200.   Oil GAINED  to 37.01 dollars per barrel for WTI and 40.34 for Brent. Stocks in Europe so far IN THE GREEN RESPONDING TO THE OIL RAMP UP . Offshore yuan trades  6.5151 yuan to the dollar vs 6.5120 for onshore yuan/ LAST WEDNESDAY, MOODYS DOWNGRADES CHINA’S CREDIT FROM STABLE TO NEGATIVE.  At the big people’s congress where they meet to set a 5 year plan, the leaders failed to deliver a major fiscal stimulus package. However instead they made very promises.

 

end

 

report from Japan:

during the night, a huge plunge of 5 full basis points on government bonds triggers a halt to trading as circuit breakers kicked in. Even though the government is essentially buying 100% of bonds, we still have pricing issues.  It surely indicates that the entire globe is in trouble:

 

(courtesy zero hedge)

Sudden Plunge In Japanese Government Bonds Triggers Circuit Breaker, Halts Market For 30 Seconds

It was just yesterday when we observed the record collapse across the Japanese curve when first the 10Y JGB plunged to an all time low -0.10%, followed promptly by 30Y yields dropping 21bps – the biggest absolute drop in over 3 years and biggest percentage drop ever – to a record low 47bps following Japan’s 30Year auction on Monday night. As we further noted, since Kuroda unleashed NIRP, the entire JGB curve has been crushed and the Monday night rush for long duration debt flattened the curve to record lows.

What a difference a day makes.

Just 24 hours later trading of Japan’s government bond futures was halted for less 30 second after the price of the contracts dropped as much as 0.6 percent. As Bloomberg reports, the dynamic circuit breaker on the Osaka Securities Exchange was activated at 12:32 p.m. and was applied to March contracts according to Masaki Takahashi, who works in the market management department at the Osaka Securities Exchange.

The website of the OSE parent Japan Exchange’s website said the circuit breaker is triggered “to temporarily halt trading in order to allow investors to calm down when the market is overly volatile.”

The reason for the trading halt is that a day after sliding to the lowest yield on record, on Wednesday the benchmark 10-year bond tumbled, pushing yields up eight basis points to minus 0.015 percent as of 2:51 p.m. Yields rebounded after dropping more than five basis points to a record minus 0.1 percent Tuesday. The selloff was triggered after an increase in selling into the BOJ’s POMO when the bid-to-cover ratio for debt with 10 to 20 years to maturity rose to 3.58 from 2.93 last week, indicating stronger investor demand to sell, and that investors were looking to offload inventory to the BOJ.

“Weak outcome of BOJ’s bond purchase, especially 10y-25y tenor, spurs selling JGBs given that yesterday’s rally was excessive move,” says Takenobu Nakashima, quantitative strategist at Nomura Securities.

The BOJ’s bond operation result spurred JGB selling “given that yesterday’s rally was excessive,” Nakashima said.

Here is the dramatic surge in yields, the biggest jump since February 12.

And here is the moment the price collapsed triggering the circuit breaker.

And so the market chaos even among the “safest” of securities, the result of central bank intervention, continues. Bloomberg’s Richard Breslow summarized it best:

Even with QEs creating what look an awful lot like bubbles, it’s been fair to say, those distortions reflected the reaction function of how central bankers interpreted the state of play. Yield levels, let alone negative rates, and volatility are making these guideposts increasingly questionable.

If you look at the yield curves of much of the world, you’d be hard pressed not to conclude we are very much still experiencing a severe global recession. Central bankers may strongly disagree, yet Japanese 10-year JGBs haven’t seen 2% this century. German bunds have backed up to 21bps. Both are likely to increase QE. The U.S. is tightening (?) and 10- year yields are still down 42bps on the year

The Fed wants to raise rates but insists on re-investing the take on its massive portfolio. They act like fund managers protecting their AUM.

The Osaka Stock Exchange had to invoke circuit breakers today on the March JGB future for excessive volatility. Buying panic yesterday to front-run today’s QE buying led to panic selling today into BOJ bids 22 bps through Monday’s close. Oh, and did I mention, ahead of an auction tomorrow. The take-away is mayhem, not analysis.

And now we look forward to an even greater surge in volatility first ahead of tomorrow’s ECB meeting, and then first the Fed and BOJ next week, who – just like everyone else – have no idea what is going on any more.

end

David Stockman reports on the huge problems facing Japan:

(courtesy David Stockman/ContraCorner)

Why This Sucker Is Going Down——The Case Of Japan’s Busted Bond Market

by  • March 8, 2016

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The world financial system is booby-trapped with unprecedented anomalies, deformations and contradictions. It’s not remotely stable or safe at any speed, and most certainly not at the rate at which today’s robo-machines and fast money traders pivot, whirl, reverse and retrace.

Indeed, every day there are new ructions in the casino that warn investors to get out of harm’s way with all deliberate speed. And last night’s eruption in the Japanese bond market was a doozy.

The government of what can only be described as an old age colony sinking into certain bankruptcy sold 30-year bonds at an all-time low of 47 basis points. Let me clear here that we are talking about a record low not just for Japan but for the history of mankind.

To be sure, loaning any government 30-year money at 47 basis points is inherently a foolhardy proposition, but its just plain bonkers when it comes to Japan.

Here is its 30-year fiscal record in nutshell. Not withstanding years of chronic red ink and its recent 2014 consumption tax increase from 5% to 8%, Japan is still heading straight for fiscal oblivion. Last year (2015) it spent just under 100 trillion yen, but took in hardly 50 trillion yen of revenue, stacking the difference on its already debilitating mountain of public debt, which has now reached 240% of GDP.

That’s right. A government which is borrowing nearly 50 cents on every dollar of outlays should be paying a huge risk premium to even access the bond market. But a government with a 240% debt-to-GDP ratio peering into a demographic sinkhole would be hard pressed to borrow at any price at all on an honest free market.

The graphs below show what lies 30 years down its demographic sinkhole. To wit, Japan’s population will have declined by 30% to 90 million, while its working age population will have plummeted from 78 million to about 52 million or by 33%. Moreover, its labor force participation rate has been declining for years, but even if it were to stabilize at the current 60% level, it would still mean just 31 million workers.

Japan Labor Force Participation Rate

The trouble is, Japan already has 31 million retirees, and that number is projected to hit 36 million by 2060. In short, at the maturity date of the bonds the Japanese government sold last night, Japan will have more retirees than workers; it will be at a fiscal and demographic dead end.

So how did Japan sell billions of 30-year bonds given these catastrophic fiscal and demographic trends?  The short answer is that it didn’t sell anything to investors. Instead, it rented what amounts to a put option to fast money traders. The latter operate from the assumption that they can cop a capital gain in the next while and then sell the paper back to the BOJ.

And why wouldn’t they make that bet. The lunatics who run the BOJ have essentially guaranteed that they are the buyer of first and only resort for any Japanese government debt that remains outside of their vaults.

Indeed, central bank announcements of negative yield are a form of code in the canyons of Wall Street and other financial markets. It means moar central bank bond-buying ahead, and therefore rising prices on the trading bait infused with the financial Viagra of NIRP.

This is another way of saying that the BOJ has essentially destroyed the government bond market. Indeed, during Q4 2015 monthly volume in the JGB market fell to the lowest level since 2004.  As one bond market observer explained,

“Yields will continue to fall and the curve will continue to flatten under pressure from negative rates and quantitative easing,” said Shuichi Ohsaki, the chief rates strategist at Bank of America Merrill Lynch in Tokyo. “Trading volumes will become even thinner. A typical bond investor probably wouldn’t want to touch this market.”

As of last night’s auction, the entire JGB yield curve is now negative out to 13 years. That means that $5 trillion of bonds issued by the most fiscally impaired major government on the planet have been pushed into the netherworld of subzero returns.

Needless to say, the government of Japan and the BOJ are not in the midst of some exotic experiment that is off the grid relative to the rest of the global financial system. To the contrary, they are implementing Keynesian central banking and fiscal policies on a state of the art basis. They are doing what Bernanke, Krugman, the IMF and heavyweight (on all counts) Keynesian blowhards like Adam Posen have recommended for years.

Indeed, rather than blow the whistle on the obvious lunacy being practiced in Tokyo, the recent G-20 meeting gave Japan a pass on its currency trashing efforts and implied that its
“stimulus” policies were just what the economic doctors and policy apparatchiks assembled in Shanghai ordered.

Later this week, in fact, Draghi will make another plunge in the same direction. Already, more than $2 trillion of European government bonds are trading at negative yields, and for the same reason.

To wit, the central bankers of the world have created a front-runners paradise. Yet so doing they have stood the very concept of a government bond in its head. Whereas the legendary British consol traded for nearly 200 years (outside of war interruptions) at par and to a rock solid 3% yield, today’s sovereign debt is being turned into a gambling vehicle where financial gunslingers and hedge funds play for short-run capital gains on 95:1 repo leverage.

in a word, the central banks have nearly destroyed the government bond markets. In the process, they have flushed trillions of capital into corporate debt and equity in search of yield and momentary trading gains with scant regard for the incremental risks involved.

So, yes, the casino is implanted with FEDs (financial explosive devices) everywhere, including upwards of $60 trillion of sovereign debt that is radically mispriced; and which must eventually implode when the gamblers finally stampede out of the casino.

Shortly thereafter, of course, our befuddled President at the time, George W. Bush explained the macroeconomic situation in a way that even the Congressional leadership assembled at the White House could understand.

Perhaps last night’s Japanese bond auction was an omen, after all. The JGB 30Y yield is now below the UST 2Y for the first time since, well, the Lehman event of September 2008.

“This sucker is going down”, he told them. He got that right. It was just a matter of time.

end
Report from China:
for those of you who are thinking of an increase in demand for oil coming from China,
wish again:  demand will fall and fall dramatically!
(courtesy zero hedge)

“Output Freeze A Joke”, China Demand To Fall, And Other News That Should Be Moving Oil

In this bipolar market, where only momentum, liquidity, technicals and short squeezes matter, as well as the occasional kneejerk reaction to a flashing red headline (usually some lie out of Venezuela or Nigeria about an imminent OPEC meeting which has not even been scheduled), one thing that no longer seems to have an impact on prices is actual news and fundamentals. So to help those who are blindly following the price of oil as an indicator of what is happening, here is a brief recap of the main news and research reports that should be impacting where oil trades today, but almost certainly won’t.

Among today’s key highlights compiled by Bloomberg we learn that JBC Energy doesn’t expect China to maintain record crude imports seen in Feb. as refinery maintenance, elevated storage impact. FGE says proposed producer accord to freeze output a “joke”, while Deutsche Bank says “fading oil demand may hamper price recovery.”

Here are the top stories via Bloomberg:

JBC Energy

  • China probably can’t maintain Feb.’s record crude imports amid refinery maintenance, storage capacity limitations
  • Feb. imports likely were boosted by “continued weakness in outright prices,” higher crude runs at teapot refineries

Facts Global Energy chairman Fereidun Fesharaki

  • Deal to cap crude output at record “a joke”; production freeze is “nonsense”
  • Libya can boost output to 1.2m b/d, taking prices down to $20/bbl

CNPC Chairman Wang Yilin

  • Current $30-40/bbl oil price not sustainable; $50-60 a “reasonable” range
  • Co. drafting development plans for long-term low oil price environment

Bloomberg story

  • Oil producers slow to add hedges as they wait for higher prices
  • As prices continue to rise, “we should see producer hedging accelerate,” says BNP Paribas head of commodity markets strategy Harry Tchilinguirian

Eurasia Group global energy, natural resources director Bruno Stanziale

  • Oil at $50 will bring U.S. producers back to mkt
  • Oil prices to see “gradual” rise to around $40/bbl by yr-end, avg. $50/bbl in 2017; price “volatility will dry up”

Institute for Energy Research

  • U.S. shale oil boom makes renewable fuels standard obsolete, helped to reduce dependence on imports

JBC Energy

  • European gasoline cracks to see further upside in coming wks on higher U.S. consumer demand
  • Increased gasoline imports by Nigeria may be supporting Mediterranean market

Deutsche Bank report

  • Fading Chinese oil demand may hamper price recovery
  • Chinese fuel consumption “may begin to flatten more quickly than some long-term projections indicate.” This could reduce global oil demand growth to 800k b/d by 2024, compared w/ 1.1m b/d from 2000-2016

ESAI report

  • Libyan pro
  • duction will not recover as “the ongoing civil war and the rise of ISIS in Libya will carry on for years”: Boston-based consultant

* * *

And now back to your liquidity/squeeze driven melt up/down.

end

RUSSIAN AND MIDDLE EASTERN AFFAIRS
Great reason for gold going down this morning; iRAN LAUNCHES TEST MISSILES
WITH THE WORDS:  “ISRAEL MUST BE WIPED OFF THE FACE OF THE EARTH”
(courtesy zero hedge)

“Israel Must Be Wiped Off The Face Of The Earth”: Iran Launches Missiles Inscribed For Netanyahu

On Tuesday, Tehran demonstrated its “deterrent” capabilities by launching several mid-range ballistic missiles.

In a show of force dubbed “The Power of Velayat” (a nod to the Republic’s religious doctrine), Iran tested what looked like several medium-range Qiam-1s, missiles based on the Shahab of which Iran has hundreds stashed in underground storage facilities.

“Defensive” or no, the tests obviously fly in the face of western sanctions and underscore the extent to which Tehran deeply mistrusts its regional rivals in Israel and Saudi Arabia.

On Wednesday, the IRGC tested more missiles and this time, they had a name on them – literally.

“Iran’s Islamic Revolutionary Guards Corps (IRGC) test-fired two ballistic missiles on Wednesday morning that it said were designed to be able to hit Israel, defying a threat of new sanctions from the United States,” Reuters reports. “The IRGC fired two Qadr missiles from northern Iran which hit targets in the southeast of the country 1,400 kms (870 miles) away, Iranian agencies said. The nearest point in Iran is around 1,000 km from Tel Aviv and Jerusalem.”

Here are the visuals:

Inline image 1

According to at least one source, the missiles were inscribed with a Hebrew message: “Israel must be wiped off the face of the earth.”

Inline image 2In a testament to the “success” of Washington’s foreign policy towards Iran, Brigadier General Hossein Salami, deputy commander of the IRGC said the following: “The missiles fired today are the results of sanctions. The sanctions helped Iran develop its missile program.”

As much as we support any nation’s right to defend itself and while we think there’s much to be said for the argument that Washington is on the wrong side of history with its unwavering support of Israel and the Saudis in the face of unequivocal evidence that both states have committed human rights abuses, sending messages to Netanyahu on conventional missiles is silly. Israel is sitting on a stockpile of nuclear weapons and could wipe Iran off the face of the planet tomorrow if it decided to.

But that only underlines why the IRGC feels the need to posture. How is it equitable that one modernized country is allowed to build one of the most efficient and intimidating militaries on the planet while another is relegated to stockpiling hundreds of missiles in underground silos that frankly, would be useless against a nuclear state?

Oh, that’s right. It’s fair because this guy is a maniac, hell bent on destroying the modern world…

…and this guy is a revered symbol of international diplomacy…

If you buy that, we’ve got a real estate opportunity in Homs we’d like to sell you…

end

GLOBAL ISSUES
Late this afternoon currency wars continue unabated as New Zealand announced a surprise rate cut, from 2.5% down to 2.25%.  This caused the KIWI  to drop from .68 to the dollar to .6650 kiwi dollars  per usa dollar. They also warn China of their huge buildup of debt.
(courtesy zero hedge)

Kiwi Plunges As New Zealand Announces “Surprise” Rate Cut, Warns On China

They don’t call it a “currency war” for nothing.

Moments ago, the RBNZ cut rates by 25 bps to 2.25% in the latest shot across the bow in what is now a years-long race to the bottom.

Here are the bullets:

  • NEW ZEALAND CUTS KEY INTEREST RATE TO 2.25% FROM 2.50%
  • RBNZ SAYS FURTHER EXCHANGE RATE DEPRECIATION IS APPROPRIATE
  • RBNZ SEES INFLATION REACHING 2% IN 1Q 2018 VS 4Q 2017
  • RBNZ SEES 4Q 2016 ANNUAL INFLATION AT 1.1% VS 1.6%

Cue the kiwi plunge:

RBNZ governor Graeme Wheeler apparently made up his mind last week:

  • WHEELER: DECIDED TO CUT RATES LAST FRIDAY

But someone forgot to tell the PhD’s because 15 out of 17 economists surveyed by Bloomberg expected New Zealand to stand pat.

We don’t blame them. After all, who could have foreseen competitive easing in this environment?

Meanwhile, the RBNZ is going full-Kyle Bass on China:

  • RBNZ SAYS DRAMATIC BUILD-UP IN CHINA CORPORATE DEBT TO “ENORMOUS” LEVEL
  • RBNZ SAYS CHINA BUILDING AND MANUFACTURING SECTORS “VERY MUCH UNDER STRESS
  • RBNZ SAYS CHALLENGE WITH CHINA IS IT IS BUILDING UP A NUMBER OF SERIOUS IMBALANCES
:

end

Although the Baltic Dry Index has risen from its low of 290 to today’s 349, international trade is basically awful!
(courtesy James Hall/Daily Business Report)
special thanks to Robert H for sending this to us

International Trade Sinks with the Baltic Dry Index

Economists and professional investors follow the Baltic Dry Index because it is a leading indicator on the forecast for international trade. A week ago this gauge hit an all time low. Since then a small upturn has moved the index upward slightly. Hellenic Shipping News observes in Baltic Dry Index climbs to 349, up 7.

“Baltic Dry Index is compiled by the London-based Baltic Exchange and covers prices for transported cargo such as coal, grain and iron ore. The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on Wednesday the 10th of February 2016, when the index dropped to 290 points.”

Some financial advisors believe the bottom has taken place. Even if shipping starts to return to levels that keeps the industry profitable, the prospects for a positive trading balance have no prospects to enrich our country.

Read the government’s own Bureau of Economic Analysis just released on March 4, 2016.

“The Department of Commerce, announced today that the goods and services deficit was $45.7 billion in January, up $1.0 billion from $44.7 billion in December, revised.  January exports were $176.5 billion, $3.8 billion less than December exports. January imports were $222.1 billion, $2.8 billion less than December imports.

The January increase in the goods and services deficit reflected an increase in the goods deficit of $1.1 billion to $63.7 billion and an increase in the services surplus of $0.1 billion to $18.0 billion.

Year-over-year, the goods and services deficit increased $2.1 billion, or 4.8 percent, from January 2015. Exports decreased $12.5 billion or 6.6 percent. Imports decreased $10.5 billion or 4.5 percent.”

Now these figures have become routine, but the apologists for the “Free Trade” rip-off have another obstacle that complicates their false promises of beneficial trade practices. China is experiencing a deep contraction in domestic indices activity.  Reuters’ account that China Feb official factory PMI seen shrinking for 7th month, documents that the market for U.S. exports to Red China is collapsing. The net result is obvious.

The Wall Street Journal reports on some ominous news in At U.S. Ports, Exports Are Coming Up Empty. “Major gateways say more ocean containers are shipping out empty, a sign of weak demand in troubled global markets and the tough sell American exporters face abroad.”

This trend has been building for a long time. Zero Hedge publishes an important article, A Third Of All Containers Shipped From Long Beach Port Are Empty, that illustrates the consequences of this one way street of wealth transfer.

“In short: only an economist, either a tenured one or one employed by CNBC, is unable to see that the world is sinking into a global trade recession, with a economic one soon to follow.

Net trade feeds directly into GDP, so the next time an idiot tells you that there are no direct linkages or contagion choke points between China and the US, feel free to take them to the Long Beach and show them the thousands of empty boxes whose contents one can label simply as “recession”.

The reality of this sacred globalist tenant of “interdependence” is that the United States is financing and keeping afloat the cracking Chinese economy. The more America buys from China, the quicker the transfer of money outflow accelerates. Now that US exports are hitting a brick wall, the recession that is ravaging Asia is becoming the next biggest import.

The Baltic Dry Index is a hard standard of measurement to ignore. All the double talk that the financial press can muster will not alter the barren container ships riding high in the water back to pick up more inventories for sale to a suicidal consumer country.

In addition to the Evergreen Marine and Maersk fleet rumbling at half efficiency, theEpic oil glut sparks super tanker ‘traffic jams’ at sea.

“It’s a “super tanker traffic jam,” said Matt Smith, director of commodity research at ClipperData.

Smith first noticed the maritime congestion popping up a month ago off the coast of Singapore. That was alarming because Asia accounts for one-third of global oil demand.

“It was kind of strange to see. The ships didn’t have any buyers,” he said.

And then ClipperData discovered a similar phenomenon off China and even the Arabian Gulf.

“There just appears to be more oil than can be dealt with. They haven’t got anywhere to put it,” said Smith.”

This is definitive evidence that a worldwide recession is already dragging down economic activity. Transferring liquid financial instruments electronically is nothing like moving cargo across the seas. Trade depends upon a market that has demand for products.

It would be folly to believe that reciprocity is not required to maintain an international trading system. This criterion has not been present for many decades. The slowdown in commercial activity between nations offers an opportunity to correct the imbalance that the globalists have forced upon trading practices.

The unmistakable response is to re-industrialize our own domestic capacity. If foreign countries are wallowing in their own domestic economic quagmire, why should America continue buying their wears and keep propping up their balance sheets?

America was once the greatest maritime trading nation. Today, our ports are mere foreign depositories. Off loading has replaced export shipping. What is so difficult to understand?

With the collapse of the Baltic Dry Index, an intelligent and prudent country would reverse course and steer a chart that casts off the odious trade agreements that have systemically dismantled our domestic capacity and has destroyed our independent economic nation.

This point alone, explains the fear within the globalist community that is reflected in the most disgusting assault on the Trump movement in the 2016 election campaign. Cries to devalue the U.S. Dollar even more is no resolution. Such measures only play into the hands of the betrayers of a viable American economy.

James Hall – March 9, 2016

 

end

 

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/WEDNESDAY morning 7:00 am

 

Euro/USA 1.0966 down  .0034

USA/JAPAN YEN 112.53  DOWN .164 (Abe’s new negative interest rate (NIRP)a total bust

GBP/USA 1.4223 UP .0019 (threat of Brexit)

USA/CAN 1.3396 DOWN.0021

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 34 basis points, trading now JUST above the important 1.08 level falling to 1.0883; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and the threat of continuing USA tightening by raising their interest rate / Last  night the Chinese yuan was UP in value (onshore)  The USA/CNY DOWN in rate at closing last night: 6.5120 / (yuan UP but will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

In Japan Abe went BESERK  with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP   . The yen now trades in a NORTHBOUND trajectory RAMP as IT settled UP in Japan by 16 basis points and trading now well BELOW  that all important 120 level to 113.04 yen to the dollar.  NIRP POLICY IS A COMPLETE FAILURE  AND ALL OF OUR YEN CARRY TRADERS HAVE BEEN BLOWN UP

The pound was UP this morning by 19 basis points as it now trades WELL ABOVE the 1.40 level at 1.4211.

The Canadian dollar is now trading UP 21 in basis points to 1.3396 to the dollar.

Last night, Chinese AND JAPANESE bourses were ALL DOWN/Japan NIKKEI  CLOSED DOWN 140.95  POINTS OR 0.84%, HANG SANG DOWN 15.32 OR 0.08%  SHANGHAI DOWN 38.53 OR 1.34% DESPITE LAST HOUR RESCUE  / AUSTRALIA IS HIGHER / ALL EUROPEAN BOURSES ARE IN THE GREEN, EVEN WITH  FAILURE ON USA/YEN RAMP  as they start their morning/.

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 and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

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 WEDNESDAY morning: closed DOWN 140.95 OR  0,84%

Trading from Europe and Asia:
1. Europe stocks IN THE GREEN

2/ CHINESE BOURSES ALL IN THE RED/ : Hang Sang CLOSED IN THE RED. ,Shanghai IN THE RED/  Australia BOURSE IN THE GREEN: /Nikkei (Japan)RED/India’s Sensex in the GREEN /

Gold very early morning trading: $1250.00

silver:$15.25

Early WEDNESDAY morning USA 10 year bond yield: 1.88% !!! UP 5 in basis points from last night  in basis points from TUESDAY night and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.68 UP 5 in basis points from TUESDAY night.  

USA dollar index early WEDNESDAY morning: 97.37 UP 17 cents from TUESDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers WEDNESDAY MORNING

 

end
And now your closing WEDNESDAY numbers

Portuguese 10 year bond yield:  3.16% DOWN 1 in basis points from TUESDAY

Japanese 10 year bond yield: -.011% !! DOWN 8 FULL  basis points from TUESDAY which was lowest on record!!
Your closing Spanish 10 year government bond, WEDNESDAY PAR in basis points
Spanish 10 year bond yield: 1.57%  !!!!!!/
Your WEDNESDAY closing Italian 10 year bond yield: 1.41% DOWN 1 in basis points on the day:
Italian 10 year bond trading 16 points lower than Spain/
IMPORTANT CURRENCY CLOSES FOR WEDNESDAY
 
Closing currency crosses for WEDNESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 

 

 
Euro/USA: 1.1011 up .0016 (Euro DOWN 16 basis points)
USA/Japan: 113.35 UP  0.659 (Yen DOWN 66 basis points) and still a major disappointment to our yen carry traders and Kuroda’s NIRP
Great Britain/USA: 1.4224 DOWN 0.0020 (Pound DOWN 20 basis points
USA/Canada: 1.3251 DOWN .0166 (Canadian dollar UP 166 basis points as oil was higher in price/wti = $37.98)
XXXXXXXXXXXXXXXXXXXXXXXXXXX
This afternoon, the Euro was UP by 16 basis points to trade at 1.1011/
The Yen FELL to 113.35 for a LOSS of 66 basis points as NIRP is still a big failure for the Japanese central bank/also all our yen carry traders are being fried.
The pound was DOWN 20 basis points, trading at 1.4224.( LESS BREXIT concerns)
The Canadian dollar ROSE by 116 basis points to 1.3251 as  the price of oil was up today as WTI finished at $37.97 per barrel,)
The USA/Yuan closed at 6.5127
the 10 yr Japanese bond yield closed at -.015%  DOWN 8 FULL   basis points (SEE STORY ABOVE).
Your closing 10 yr USA bond yield: UP 6 basis points from TUESDAY at 1.89%//(trading well below the resistance level of 2.27-2.32%) policy error
USA 30 yr bond yield: 2.67 UP 4 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries  (policy error)
 
 Your closing USA dollar index: 97.13 DOWN 8 in cents on the day  at 2:30 pm
Your closing bourses for Europe and the Dow along with the USA dollar index closings and interest rates for WEDNESDAY
 
London: UP 20.88 points or 0.34%
German Dax :DOWN 30.27 points or 0.31%
Paris Cac DOWN 21.63 points or 0,49%
Spain IBEX DOWN 21.80 or 0.24%
Italian MIB: DOWN 191.36 points or 1.06`%
The Dow up 36.26  or 0.21%
Nasdaq:up 25.55  or 0.55%
WTI Oil price; 37.98  at 2:30 pm;
Brent OIl:  40.96
USA dollar vs Russian Rouble dollar index:  71.10   (Rouble is UP 1 AND 76 /100 roubles per dollar from yesterday)  as the price of Brent and WTI oil FELL
end
OIL STORIES
We are witnessing huge record increases in storage at Cushing plus a build up in crude supplies according to DOE and API. However the market focused on the 4.5 mm barrel drawdown in gasoline inventories to ramp up crude oil to over 38. dollars.
(courtesy zero hedge/DOE/API/Cushing)

Despite Record Cushing Storage, Oil Jumps As Gasoline Inventories Drop Most In A Year

DOE’s 3.88mm inventory build confirms API’s print and is the 8th weekly rise in the last 9 for overall crude levels. Cushing also saw a build (690k) — the 17th week of the last 18. But the market – for now – is focused on the 4.5mm barrel draw in gasoline inventories – the biggest in a year, as the seasonals pickup. Crude jumped on the news, seemingly ignoring the fact that Cushing inventories now stand at a record high 66.9mm barrels.

DOE:

  • *CRUDE OIL INVENTORIES ROSE 3.88 MLN BARRELS, EIA SAYS
  • *GASOLINE INVENTORIES FELL 4.53 MLN BARRELS, EIA SAYS
  • *DISTILLATE INVENTORIES FELL 1.12 MLN BARRELS, EIA SAYS

And the reaction:

end

 

 

 

Chevron protects its current dividend but instead slashes another 36% off its cap ex due to lower revenues:

 

(Nick Cunningham/Oil Price.com)

Chevron Protects Dividend, Slashes Another 36% Off Spending

Submitted by Nick Cuningham via OilPrice.com,

The largest oil companies are struggling to balance competing objectives with dramatically lower revenues compared to previous years.

Nearly all have taken the axe to their spending levels, although to varying degrees. New exploration projects have been scrapped, suppliers have been squeezed, and workers have been laid off. But the top tier companies are fighting to protect their dividend policies above all else, an increasingly expensive priority that is forcing deeper cuts to spending.

But the strategies differ depending on the company. Chevron, for example, continues to cut spending in order to keep its dividend. The California-based multinational just announced that it would cut its capex in 2017 and 2018 by another 36 percent, bringing annual spending down to between $17 and $22 billion. That is down from an October 2015 estimate, when Chevron said that it expected to spend $20 to $24 billion each year in 2017 and 2018. It is also sharply lower than the $26.6 billion Chevron is spending this year, which itself is a 25 percent reduction from last year’s levels.

The severe cuts come as Chevron has had to take on debt in order to afford shareholder dividends, as the company has not generated enough cash flow to cover the payouts with oil prices as low as they are.Dividends cost the company $8 billion in 2015 alone. Chevron would need oil trading at $50 in order to cover the dividend with cash flow.

This week is also notable for Chevron because the giant Gorgon LNG project in Australia is finally beginning operations. The $54 billion export facility has absorbed much of Chevron’s capital and attention, a project that has suffered from repeated delays and cost inflation. The total price tag is 45 percent higher than the original estimate.

The bad news for Chevron is that the facility is set to export LNG into a market that is already oversupplied. Spot LNG cargoes have plunged by two-thirds over the past two years. For April delivery, LNG cargoes in East Asia have dropped to just $4.25 per million Btu (MMBtu). In early 2014, the same cargoes sold for over $17/MMBtu. Chevron will be insulated somewhat from these forces with contracts lined up for delivery under fixed prices. The long-term picture, the company believes, still looks strong. LNG export terminals can operate for decades. Nevertheless, the massive project is squeezing Chevron in the short-term, a time when it can least afford it. And with dividends untouchable, spending on exploration and production must be cut deeper.

Meanwhile, other companies have instead opted to cut their dividends so as not to hollow out spending too much. They lack the financial heft of ExxonMobil, Shell, or Chevron. Companies like ConocoPhillips, Noble Energy, Anadarko, and Eni have trimmed shareholder payouts over the past year.

Eni, in particular, offers an interesting window into the downturn. Eni is a large oil company, but smaller than Chevron. Eni decided to cut its dividend once oil prices collapsed, and announced a cut to the payout one year ago. That helped provide some breathing room. Although it wasn’t enough for Eni to cover its spending obligations with cash flow – the company needs $50 oil to do that – it still allowed the Italian oil company to cut 2016 spending by a lower proportion than its larger competitors. While Chevron cut spending by a third, Eni is only cutting spending by 20 percent.

With that said, Eni’s oil and gas production will remain flat this year after seeing gains in 2015. New fields starting up in Norway, Egypt, Angola, and Kazakhstan won’t be enough to offset its decline rate from mature fields. On the plus side for Eni though is the fact that last year it announced the largest natural gas discovery ever recorded in the Eastern Mediterranean. Eni is already working to develop the natural gas field off the coast of Egypt. Eni was able to replace more than 148 percent of the reserves it produced in 2015, a metric known as reserve-replacement ratio.

The supermajors might be protecting their dividends, but they are also risking lower long-term oil production. For now, that is a problem for another day. Referring to his company’s first negative reserve-replacement ratio in 12 years, Shell’s CFO said in February: “While we’re not entirely comfortable with a negative number, it’s not the most important thing today.”

END
WTI crude price at 5. 00 pm:  $38.24 up $1.74
Brent: 40.80 up $1.31
This ends the stock indices, oil price, currency crosses and interest rate closes for today.
And now USA stories

“Are You Not Entertained” By This Close: Dow Back At 17K After Last Minute VIX Slam

Your day in the “market”…

 

The “stable” oil market…

 

Following yesterday’s noisy drop, today was the echo with a noisy choppy low volume rally as Oil sparked the momentum in the pre-open, but stocks decoupled lower from both JPY and Oil (smashed lower on weak wholesale trade data and a realization that US crude production rose)…

 

Trannies outperformed as The Dow couldn’t get too far away from unch… and then everyone panicced to buy at the close..

 

On the week, The Dow clung to unchanged thanks to the panic close, but Trannies lag…

 

No bounce at all in financials – even as Treasury yields rose – but energy obviously bounced (even though energy credit risk rose 6bps to 1262bps)

 

Today saw two legs down – the first from a delayed reaction to the fact that crude production rose in the US and the second as Carson Block commented on the “dead cat bounce” – all that mattered today was defending the short-squeeeze trendline at 1980…What a total f##king joke that close was…

 

And the ramp was all about getting The Dow above 17000!!!

 

But VIX remains totally decoupled once again from global financial stress…

 

Treasury yields rose all day pushing all but 30Y higher for the week…with Fischer’s inflation sightings the catalyst

 

Notably the USD Index tumbled as US Inventories data hit – pointing clearly at recessionary pressures building. But JPY plunged…

 

Crude was the day’s big winner for absolutely no good reason, PMs were modestly lower and copper gained back half of yesterday’slosses…

 

Gold was triple-slammed overnight… but bounced back…

 

Charts: Bloomberg

end

The ratio of inventory/sales in the USA has only reached 1.35 once and that was in 2008.(Lehman chaos). Today, wholesale sales tumbled- 1.3%, worse than the expected -.3% while inventories rose .3% instead of dropping .l%.  That put the ratio at exactly 1.35%. As zero hedge states:  this will not end well!

(courtesy zero hedge)

Wholesale Trade “Gap” Reaches Record High As Sales Tumble, Inventories Rise

Worst.Case.Scenario. In 24 years, the ratio of wholesale inventories to sales has only been higher than the current 1.35x once – at the peak of the recession in the last financial crisis. Wholesale sales tumbled 1.3% MoM (worse than the -0.3% exp) and inventories rose 0.3% MoM while expectations were for a drop of 0.1% (inventories over sales difference rose from $143.6BN to $151.2BN in one month,a new record high.And finally, automotive inventories rose to 1.78x sales – the highest since the crisis.

Keep stacking, despite tumbling sales…

Which leaves us firmly in the “recession imminent” section of the business cycle…

And there has never been a wider absolute spread between inventories and sales…

And as far as the automotive sector – that bubble may have a problem…

This cannot end well.

end

And your humour story of the day:

Bangladesh had 100 million dollars stolen from it as hackers provided a fake Swift transaction code.  The country is furious with the USA as it did not verify the money transfer to the Philippines.

(courtesy zero hedge)

“Where’s Our $100 Million?” – Furious Bangladesh Holds Fed Responsible For Historic Theft

Someone at the New York Fed messed up.

On February 5, Bill Dudley was “penetrated” when “hackers” (of supposed Chinese origin) stole $100 million from accounts belonging to the Bangladesh central bank.

As we reported on Tuesday, the money was apparently channeled to the Philippines where it was sold on the black market and funneled to “local casinos” (to quote AFP). After the casino laundering, it was sent back to the same black market FX broker who promptly moved it to “overseas accounts within days.”

Obviously, that’s hilarious, not to mention extremely embarrassing for the NY Fed. Here’s what the Fed had to say yesterday about the “mishap”:

  • NEW YORK FED SAYS HAS BEEN WORKING WITH BANGLADESH C.BANK ON ISSUE OF LOST FUNDS
  • NEW YORK FED SAYS PROBLEMATIC BANGLADESH CENTRAL BANK PAYMENT INSTRUCTIONS ‘FULLY AUTHENTICATED’ BY SWIFT MESSAGING SYSTEM

Right. Someone in the Philippines requested $100 million through SWIFT from Bangladesh’s FX reserves. Nothing suspicious about that.

“Some 250 central banks, governments, and other institutions have foreign accounts at the New York Fed, which is near the centre of the global financial system,” Reuters notes. “The accounts hold mostly U.S. Treasuries and agency debt, and requests for funds arrive and are authenticated by a so-called SWIFT network that connects banks.”

Well, as it turns out, Bangladesh doesn’t agree that the Fed isn’t ultimately culpable.

“We kept money with the Federal Reserve Bank and irregularities must be with the people who handle the funds there,” Finance Minister Abul Maal Abdul Muhith said on Wednesday.

It can’t be that they don’t have any responsibility,” he said, incredulous.

Oh yes it can, Mr. Muhith. Because you are Bangladesh and you are dealing with the NY Fed, a thoroughly corrupt institution which can do and say whatever it wants. If you think anyone at 33 Liberty cares about a lousy $100 million that went missing from the account of a country that most Americans only know exists because they checked the care label on their laundry, you are sorely mistaken. To wit, from Bloomberg:

A Federal Reserve Bank of New York spokeswoman said on Monday there was no sign its systems had been hacked after Bangladesh Bank reported the missing funds.

There is no evidence that any Fed systems were compromised, the spokeswoman said.

Well, yes, there is “evidence that Fed systems were compromised” because $100 million was stolen from Bangladesh and the money ended up in Philippine casinos.

Muhith plans to seek legal recourse to recover the funds, although it wasn’t immediately clear who he’ll target, the “Chinese” hackers, the Philippine black market FX brokers, or Bill Dudley.

In any event, the Fed is sticking with its story. There was no “penetration.” 

“To date, there is no evidence of any attempt to penetrate Federal Reserve systems.” 

*  *  *

From Bangladesh Bank’s statement

It has been possible to recover a portion of the amount ‘hacked’ from Bangladesh Bank’s reserve account in the United States.

Bangladesh Financial Intelligence Unit is engaged with the Philippines’ anti-money laundering authority to trace the destination of the remaining amount and recover the same.

In the meantime, the Philippines’ anti-money-laundering authority filed case in that country and obtained court order to freeze the concerned bank accounts.

end

Bank of American is reporting that the “smart money’ is getting out of the market as sells has been greater for a sixth straight week:
(courtesy zero hedge)

The “Smart Money” Is Quietly Getting Out Of Dodge: Sells For A Sixth Straight Week As Buybacks Soar

One week ago, when looking at the latest BofA client flow trend monitor, we noticed something strange: despite the S&P’s surge higher due to either a record short squeeze or because it is merely another bear market rally, the smart money was selling.

In fact, as BofA’s Jill Hall calculated, the three groups that make up the so-called “smart money” basket, hedge funds, BofA’s institutional clients as well its private clients, had been selling aggressively every week for the prior five. As she explained on March 1, “last week, during which the S&P 500 climbed 1.6%, BofAML clients were net sellers of US stocks for the fifth consecutive week, in the amount of $1.5bn. This was the biggest weekly outflow since mid-December.” Someone clearly was very grateful for the selling opportunity that this squeeze was providing.

Well, we can now add one more week to the total: in BofA’s latest note, “last week, during which the S&P 500 rallied 2.7%, BofAML clients were net sellers of US stocks for the sixth week.

She explains that “similar to the prior week, hedge funds, institutional clients, and private clients were all net sellers, though sales last week were led by private clients (vs. hedge funds the week prior). Our hedge fund clients remain the biggest net sellers of US stocks year-to-date.” 

The full breakdown below:

Clients were net sellers of stocks in five of the ten sectors last week and net buyers of the remaining five, as well as ETFs. Tech and the commodity-oriented sectors of Industrials and Materials saw the largest net sales, while Financials and Utilities saw the largest net buying… All three client groups sold stocks last week, led by private clients.”

 


 

So, like last week, we again know who is selling but what about the other side: was it just shorts covering who are providing the bid? The answer is no: “buybacks by corporate clients accelerated last week to their highest level since August, and are tracking above levels we saw this time last year, though below levels we observed in 2014 (see chart below). Clients sold both large and small caps last week, but continued to buy mid-caps—which have seen the most persistent buying by our clients over the last several years despite being crowded and expensive.

 

In retrospect, this makes a lot of sense: with the debt market for all but the moost pristine issuers jammed up, corporations who have relied on debt-funded buybacks to push their price higher have had to step on the accelerator in their buyback activity, to give the impression that the market is back to stable, which in turn could thaw the frozen debt market, allowing them to issue even more debt, whose proceeds they would then use to buy back even more stock. Indeed, the lower the market dropped, the greater the buyback activity had to be to offset the natural selling by the smart money.

This is what we said one week ago:

In other words, buybacks are on pace to surpass buyback records, and since the debt issuance pipeline has to be unclogged or else risk the failure of hundreds of billions in bond bond refinancings in the coming months not to mention the collapse of the bond-buyback pathway, companies have scrambled to put a “risk on” mood on the market by repurchasing their stock, so that these same companies can issue more debt, so that they can buyback even more debt in the future.

Since then absolutely nothing has changed, and here we are now: 6 weeks of consecutive derisking and selling by hedge funds, institutions and private clients soaked up by what is now a record short squeeze, as well as a near record buyback spree to mask the fact that the “smart money” is bailing.

We leave it up to readers to decide just how healthy is this “rally” if the smart money has been selling for nearly 2 months, and where the two primary buying groups are corporations themselves, and shorts squeezed into covering positions.

end

 

Again we get a warning on the huge counterparty risk exposure of our major USA banks

(courtesy Wall Street Journal)

 

 

U.S. Watchdog Warns on Banks’ Counterparty ExposuresOffice of Financial Research says banks’ counterparty exposures may be larger than stress tests showhttp://www.wsj.com/articles/u-s-watchdog-warns-on- banks- counterparty-exposures-1457463727

March 8, 2016 2:02 p.m. ET

The U.S. Office of Financial Research said the ripple effects from a large bank default could be nine times larger across the banking sector than what is contemplated under existing stress tests of individual firms.

The OFR researchers studied data on the market for insurance-like contracts called credit default swaps,saying that banks face greater risks as a group from their inter-linkages than what bank holding companies face in their one-to-one trading relationships.

We find that indirect effects of this default, through the bank’s other counterparties, are larger than the direct impact on the bank,” OFR researchers wrote in a working paper released Tuesday.

The research comes as OFR pursues its mandate under Dodd Frank to review the effectiveness of U.S. bank stress testing.

The OFR said ignoring the second-order effects would be unwise and claimed their finding “informs the evaluation of stress tests” because “by considering the banking system as a whole, they highlight a macro-prudential perspective on stress testing.”

Some global regulators are pushing to enhance prudential standards for large counterparty exposures of banks. Last week, the Federal Reserve proposed a rule to address risks associated with large banks’ exposures to their most significant individual counterparties.

Fed governor Daniel Tarullo said in an opening statement for a meeting Friday that, “While regulatory reform and better risk management practices have reduced interconnections among the largest financial firms by roughly half from pre-crisis days…the broader issue of common large counterparty exposures among the largest banks is one that we should bear in mind as we continue to develop the macroprudential features of our annual stress tests and capital assessments.”

Credit-default swaps are derivatives that compensate users for debt defaults, and they are contracts that have long been dominated by big banks in their attempts to protect themselves from trading partners going belly up. Banks also sell the insurance to hedge funds, asset managers and other holders of bonds and loans, who buy the contract to protect against the risk of nonpayment on those obligations.

In their analysis, the researchers used data from the Depository Trust & Clearing Corp. and applied the same stress test scenarios that the Fed has used since 2013 under its Comprehensive Capital Analysis and Review. That “CCAR” framework contemplates the exposure a bank has if its most significant trading partner defaulted.

But the OFR researchers said factoring in the default only of the largest counterparty to a bank has some limitations, because it doesn’t account for the interconnectedness of banks as a group and the concentration risks they face.

The research comes nearly eight years after the 2008 meltdown, when the credit-default market rose to prominence. U.S. regulators have since drafted rules to tighten up CDS trading after the enactment of the Dodd Frank law in 2010 promised to rein in risky derivatives.

Dodd Frank came in part in response to the massive credit default swaps portfolio that was built up by insurance giant American International Group Inc., whose swaps tied to souring mortgage bonds faltered and led to a $182 billion government rescue of AIG.

In a blog accompanying the research paper, OFR’s deputy director for research and analysis Stacey Schreft also said that bank holding companies had gone from being net sellers of the default protection to buyers between 2013 and 2015.

The value of outstanding CDS contracts fell to $14.6 trillion in 2015 from a crisis-era high of $58 trillion in 2007, according to the Bank for International Settlements.

-END-

 

Dave Kranzler talks about the deteriorating state of affairs in the USA auto industry. He states that used cars are heading south in price and in quantity.

 

(courtesy Dave Kranzler/IRD)

 

The U.S. Economy Is Headed Into A Deep Recession

It has not been a seven-year “bull market” in stocks or housing prices, it  has been the biggest bull market in money printing and credit creation in history.

While the media clowns and Wall Street shills celebrate the seven year “bull market” in stocks, the fundamentals underlying the U.S. economic and financial system continue to deteriorate – quickly.

The most recent economic activity “end zone” dance was over February’s domestic auto sales, which seem to be occurring at an all-time high when viewed on an “annualized rate” basis.  Of course, no one wanted to discuss the fact that Ford’s sales would have been flat or negative if their huge jump in rental fleet deliveries were stripped out of their numbers.  GM’s sales were down slightly, and dealer inventories continue to balloon.

What’s worse, subprime auto loan delinquencies are spiking up to their 2008 pre-financial collapse level (click to enlarge):

UntitledIt’s no secret that the banks have been willing to extend to auto loans to anyone who can fog a mirror.  Credit score is largely irrelevant and there’s no requirement to show proof of income.

The prelude to the 2008 de facto financial system collapse, washed by trillions in QE and added credit, is now starting to repeat again.  An article in the Wall Street Journal (source: Zerohedge) is reporting that used car prices are headed lower again.   With over 32% of all car “sales” accounted for by leases, as these cars come off lease and flood the used car system, prices fall.  This in turn affects the amount for which someone with a used car can get paid in order to “buy” a new car.  Add that inventory to the already sky-high repo inventory, and the auto sector is set-up for a huge “pile-up” crash.   But go ahead and just conveniently ignore the record level new car inventory sitting on dealer lots…

Meanwhile, the wholesale trade “gap” – the difference between the level of wholesalerUntitledinventory and sales – is now at a record level.  Furthermore the wholesale inventory to sales ratio has spiked up to its late summer 2008 level (click to enlarge):

This ratio is spiking up from both excessive inventory accumulation at the wholesaler level of the distribution system and declining sales of this inventory to the retail sector, reflecting weak consumer spending and an outlook for continued weak consumer spending.

What’s perhaps the biggest factor contributing to what I believe is a rapid deterioration in economic activity?  “Americans are buried under a mountain of debt:”  LINK  Per findings in the article from Gallup:  “The amount of debt Americans carry is staggering and grows every day.”

The “celebration” of the seven year “bull market” is emblematic of the degree to which propaganda is being used to cover up the truth.   If you give me a printing press to print money or an ability to issue an unlimited amount of credit, I can make any object increase in value.  The big run-up in the stock market and home prices and in auto sales was enabled by $4.5 trillion in printed money from the Fed and the enabling of an insane amount of credit creation, including derivatives which are nothing more than another form of credit.

When this hits a wall – and I think the gold market action is telling us that the collision is occurring or is imminent – it will cause a systemic upheaval that will make 2008 look like a civilized tea party.

 

 

end 

Well that about does it for today
I will see you tomorrow night
Harvey.
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