April 5/Silver again has a huge 2.146 million oz “deposit” into SLV/gold and silver advance smartly today/Atlanta Fed lowers estimate on first quarter GDP to only .7%/Trade deficit advances/USA:Yen cross collapses which in turn decimates the yen carry traders/US Treasury outlaws inversions which causes a meltdown on some 80 hedge funds/Ticket sales in Brazil for Summer Olympics are horrible and thus the games are in doubt/Puerto Rico calls for a moratorium on its debt as they look to default/Puerto Rico bond yields now are above 12% and this will cause havoc in our money markets/

Gold:  $1,228.40 up $10.40    (comex closing time)

Silver 15.12  up 18 cents

In the access market 5:15 pm

Gold $1231.50

silver:  15.15


Today the silver open interest continues to rise, hitting 177,848 contracts despite silver’s fall yesterday.  We now have had 5 years of continue high OI with a low price.  This is totally unheard.  Generally when you have the above situation, it generally resolves itself. But not silver. We had heard that silver deliveries are being delayed in London and also they are having an extreme problem in locating metal.  Something is up in silver!


Let us have a look at the data for today.


At the gold comex today, we had a good delivery day, registering 145 notices for 14,500 ounces  for gold,and for silver we had 0 notices for nil oz for the non active April delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 212.89 tonnes for a loss of 90 tonnes over that period.

In silver, the open interest ROSE by 826  contracts UP to 177,848, despite the fact that the silver price was down 10 cents with respect to yesterday’s trading. SOMETHING MUST BE UP ON THIS! In ounces, the OI is still represented by .889 billion oz or 127% of annual global silver production (ex Russia ex China).

In silver we had 0 notices served upon for NIL oz.

In gold, the total comex gold OI fell by 1962  contracts down to 470,842 contracts as the price of gold was DOWN $4.20 with yesterday’s trading.(at comex closing).

We had another large change in the GLD, a withdrawal of 2.37 tonnes / thus the inventory rests tonight at 815.72 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. 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 had another huge  change, a deposit of2.146 million oz  into inventory tonight  and thus the Inventory rests at 334.724 million oz.


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


1. Today, we had the open interest in silver rose by 826 contracts up to 177,848 despite the fact that the price of silver was DOWN 10 cents with yesterday’s trading.Investors continue to flock into silver on the dovish Yellen speech where she indicated that she is reticent to raise rates. The total OI for gold fell by 1962 contracts to 470,842 contracts as gold was DOWN $4.20 in price from yesterday’s level and we are now entering a new active delivery month of APRIL.

(report Harvey)

2 a) Gold trading overnight, Goldcore


(Mark OByrne)


off today


.i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 43.53 POINTS OR 1.45% ON LAST 2 HR RESCUE /  Hang Sang closed DOWN 321.92 OR 1.57%. The Nikkei closed DOWN 390.45 POINTS OR 2.42% . Australia’s all ordinaires  CLOSED DOWN 1.42%. Chinese yuan (ONSHORE) closed UP at 6.4742.  Oil FELL  to 35.63 dollars per barrel for WTI and 37.59 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4742 yuan to the dollar vs 6.4814 for onshore yuan. lAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS LAST THURSDAY NIGHT. SOUTH KOREA REPORTS BAD MFG DATA. )



i) The central bank of Japan tried to intervene today by jawboning.  They stated that they might “debate further easing”.  Lowering the interest rate to NIRP squared is just not in the cards.  They are also running out of bonds to monetize.  It sure looks like Japan is out of ammo.  The USA/Yen continued to fall  (Yen rise). Also remember the theory we brought to your attention two weeks ago:  if the yen rises,  (Japanese citizens calling in all of their savings around the world which causes the yen to rise), gold will rise.

( zero hedge)

ii)This is big:  The entire yen carry trade totally collapsed after today’s 4 week bill auction.  Last week, we highlighted that the yield came in at .20% or 5 basis points lower than the Fed bottom rate of .25%.  Today, it was worse at .185% or almost 7 basis points lower.  It basically shows lack of confidence in the global economy/  Why would dealers lock up bills at yields 7 basis points lower than offering these to the Fed at 7  basis points higher?

Something is seriously wrong everywhere..
( zero hedge)


none today


i)Refugees are now flooding into Italy:

( Mish Shedlock)

ii)My goodness!! Italy and Malta agree to swap oil rights for the right to return refugees:

( James Burgess/Oil Price.com)

iii)Deutsche bank stock continue to falter.  Take a close look at how DB is doing relative to what happened to Lehman Brothers.  They have a huge problem due to the collapse in yield on the 10 year Bunds.  The yield curve is basically flat and they cannot earn any money.

( zero hedge)

iv) Yanis Varoufakis issues a major warning to the Greek people in light of the fight between the IMF and Germany.  The only loser will be the Greek people.

A terrific commentary
( Mike Krieger/Liberty Blitzkrieg.blog)


Last week, when we stated that the sports minister has resigned, we knew that the Summer Olympics are in trouble;
today:  disastrous ticket sales to the hardluck country:
( zero hedge)


Oil rebounds nicely on the biggest inventory drawdown:

( zero hedge)


i)A must read New York Sun editorial.  Here the paper comments on George Gilder’s new book where he states that the central banks are responsible for hurting Main Street to the benefit of Wall Street. He states that the world benefited greatly with honest money i.e. gold  (when under the gold standard) as the money supply increased dramatically with the rise in population.

( New York Sun/Gilder/GATA)

ii)New York Fed president refuses to respond to questions on gold swaps.  Why on earth do we not hear from the Wall Street Journal on this issue?( zero hedge)


Last week, when we stated that the sports minister has resigned, we knew that the Summer Olympics are in trouble;
today:  disastrous ticket sales to the hardluck country:
( zero hedge)


i)USA reports that its February trade deficit rose from 45.9 billion up to 47.1 billion.  The expected number was 46.2 billion.  This was the largest monthly deficit since August 2015 where the reported number was 5.05 billion. With much of the shale oil mothballed, expected this number to rise in the future. Also the Atlanta Fed will lower its GDP first quarter figures again:

( zero hedge)

ii)And sure enough the Atlanta Fed lowers its estimate of first quarter GDP to only .4% due to the lousy trade figures

(zero hedge)

iii)More conflicting data on Markit and ISM service reports:

( Markit/ISM service reports)

iv)Puerto Rico is in a mess.  Today bonds collapses with yields well over 12% after their senate passed a debt moratorium bill not to pay money owed. The money market will be in total disarray/ A real mess..

( zero hedge)

v)This will hurt a lot of people and the arbs who do doubt many blew up a few seconds after the Treasury announcement of an action to curb USA inversions:( zero hedge)

vi)And now the consequences of the treasury announcement to curve USA inversions:  Pay attention to the section whereby Goldman Sach’s Alec Phillip gives a detailed account of the Treasuries announcement and what it means to foreign firms operating in the uSA and also put future restrictions on the so called inversion transactions.  The bottom line:  less European tax revenue for our major companies domiciled in Europe.

(zero hedge)

vii)Humour time;  Valeant stocks soars after its own board clears itself of any more wrongdoing:

( zero hedge)

viii)Lately we have seen some major hedge funds move from Connecticut to say Florida where the tax treatment is better.  Today David Tepper announced that he was moving from New Jersey to the friendly confines of Florida:

( zero hedge)

Let us head over to the comex:

The total gold comex open interest was down to 470,842 for a loss of 1962 contracts as the price of gold was DOWN $4.20 in price with respect to yesterday’s trading.  We are now entering the active delivery month of April. 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. We certainly witnessed both parts today . In the front month of April we lost 800 contracts from 4871 contracts down to 4071.  We had 153 notices filed so we lost 641 contracts or 64,100 amount of gold ounces that will not stand for delivery. The next non active contract month of May saw its OI rise by 6 contracts up to 2587. The next big active gold contract is June and here the OI fell by 1482 contracts down to 355,225. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 184,075 . The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 98,371 contracts. The comex is not in backwardation.  .

Today we had 145 notices filed for 14,500 oz in gold.


And now for the wild silver comex results. Silver OI rose by 826 contracts from 177,022 up to 177,848 despite the fact that the price of silver was down 10 cents with yesterday’s trading.  We are now in the next contract month of April and here the OI  fell by 0 contracts down to 84. We had 0 notices filed yesterday so we neither lost nor gained any silver contracts that will not stand for delivery. The next active contract month is May and here the OI fell by 2239 contracts down to 111,747. This level is exceedingly high. The volume on the comex today (just comex) came in at 45,405 , which is very good. The confirmed volume yesterday (comex + globex) was very good at 45,722. Silver is not in backwardation.    In London it is in backwardation for several months.
We had 0 notices filed for nil oz.

April contract month:

INITIAL standings for APRIL

April 5/2016

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 6,372.65oz

Brinks, SCOTIA


Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil oz
No of oz served (contracts) today 145 contracts
(14,500 oz)
No of oz to be served (notices) 3926 contracts 392,600 oz/
Total monthly oz gold served (contracts) so far this month 932 contracts (93,200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 46,598.7 oz

Today we had 0 dealer deposits

Total dealer deposits; nil oz

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 0 customer deposit:

total customer deposits:  nil oz


Today we had 2 customer withdrawals:

i) Out of Scotia:5,787.000 OZ  (180 KILOBARS)

ii) Out of Brinks:  585.65 oz

total customer withdrawals; 6372.65  oz

Today we had 1 adjustments:

From Scotia:  3,000.000 oz was adjusted out of the customer and this landed into the dealer account of Scotia.  This lot of exactly 3,000.000 oz is for sale.  How could we have another exact weight like this??????

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 145 contracts of which 39 notices was stopped (received) by JPMorgan dealer and 43 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 (932) x 100 oz  or 93,200 oz , to which we  add the difference between the open interest for the front month of April (4071 contracts) minus the number of notices served upon today (145) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the April. contract month:
No of notices served so far (932) x 100 oz  or ounces + {OI for the front month (4071) minus the number of  notices served upon today (145) x 100 oz which equals 485,800 oz standing in this non  active delivery month of April (15.11 tonnes).
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
We thus have 15.11 tonnes of gold standing for April and 10.664 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 15.11 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes   = 23.099 tonnes still standing against 10.664 tonnes available.  .
Total dealer inventor 342,858.291 oz or 10.664 tonnes
Total gold inventory (dealer and customer) =6,844,564.649 or 212.89 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 212.89 tonnes for a loss of 90 tonnes over that period. 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
And now for silver


/April 5/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 90,933.55 OZ. CNT,Scotia
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil


No of oz served today (contracts) 0 contracts nil oz
No of oz to be served (notices) 84 contracts)(420,000 oz)
Total monthly oz silver served (contracts) 121 contracts (605,000 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 1,335,391.9 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 0 customer deposits:


total customer deposits: nil oz


We had 2 customer withdrawals:

i) Out of CNT: 29,317.04 oz

ii) Out of Scotia: 60,638.110 oz


total customer withdrawals:  90,933.55 oz



 we had 0 adjustments


The total number of notices filed today for the April contract month is represented by 119 contracts for 595,000 oz. To calculate the number of silver ounces that will stand for delivery in April., we take the total number of notices filed for the month so far at (121) x 5,000 oz  = 605,000 oz to which we add the difference between the open interest for the front month of April (84) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the April. contract month:  121 (notices served so far)x 5000 oz +(84{ OI for front month of April ) -number of notices served upon today (0)x 5000 oz  equals 1,025,000 oz of silver standing for the March contract month.
we neither lost nor gained any silver ounces standing in this non active delivery month of April.
Total dealer silver:  32.908 million
Total number of dealer and customer silver:   154.863 million oz
The open interest on silver continues to rise despite the low price of silver. It looks like we are heading for a commercial failure.

And now the Gold inventory at the GLD

April 5/ a withdrawal of 2.37 tonnes of gold from the GLD/Inventory rests at 815.72 tonnes

APRIL 4/a withdrawal of 1.19 tonnes from the GLD/Inventory rests at 818.09 tonnes of gold

April 1/no changes in gold inventory at the GLD/Inventory rests at 819.28 tonnes

MARCH 31/a small withdrawal of 1.19 tonnes/inventory rests tonight at 819.28 tonnes

MARCH 30/no changes in inventory/inventory rests tonight at 820,47 tonnes

March 29/a withdrawal of 3.27 tonnes of gold from the GLD/Inventory rests at 820.47 tonnes.  (No doubt we will see a rise in gold inventory with tomorrow’s reading)

March 28/no change in inventory at the GLD/Inventory rests at 823.74 tonnes

March 24.2016: a deposit of 2.08 tonnes of gold into its inventory/and this after a big drubbing these past two days??/Inventory rests at 823.74 tones

March 23/no changes at the GLD today despite the gold drubbing. Inventory rests at 821.66 tonnes

March 22./no changes in inventory at the GLD/Inventory rests at 821.66 tonnes




April 5.2016:  inventory rests at 815.72 tonnes



Now the SLV Inventory
April 5/ a deposit of 2.146 million oz of silver into the SLV/Inventory rests at 334.724 million oz/
APRIL 4/no change in silver inventory tonight/inventory rests at 332.578 million oz
Apri 1: we had a huge deposit of 2.189 million oz of silver into the SLV (with silver badly down?)/.Inventory rests tonight at 332.578 million oz
MARCH 31/ no change in silver inventory at the SLV tonight/inventory rests at 330.389 million oz
MARCH 30/no change in inventory/inventory rests at 330.389 million oz
March 29.2016: a huge deposit of 1.475 million oz of silver into the SLV/Inventory rests at 330.389 million oz
March 28/no change in silver inventory at the SLV/Inventory rests at 328.914 million oz
March 24.2016/no change in inventory/rests tonight at 328.914 million oz/
March 23/we lost 1.428 million oz as a withdrawal today/SLV inventory rests at 328.914 million oz
April 5.2016: Inventory 334.724 million oz
1. Central Fund of Canada: traded at Negative 6.6 percent to NAV usa funds and Negative 6.9% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.1%
Percentage of fund in silver:35.9%
cash .0%( April 5.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to  5.66%!!!! NAV (April 5.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises  to -0.34% to NAV  ( April 5.2016)
Note: Sprott silver trust back  into positive territory at +5.66%/Sprott physical gold trust is back into negative territory at -0.34%/Central fund of Canada’s is still in jail.

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

Trading in gold and silver overnight in Asia and Europe

By Mark O’Byrne

China’s Gold Intent – ICBC Bank Reclassified as an LBMA Market Maker

ICBC Standard Bank, China and the world’s largest bank, has been reclassified as a spot Market Making Member of the London Bullion Market Association (LBMA) with effect from today according to a note posted on the LBMA website last night at 2100 GMT.

According to the post:

“In order to qualify as a LBMA Market Maker, a company must offer two-way quotations in both gold and silver to the other Market Makers throughout the London business day. Reclassification is the responsibility of the LBMA Management Committee. In deciding on the issue of reclassification, the Committee takes account of the views of the other Market Makers on the performance of the candidate company during an approximately three month probationary period.

Total LBMA membership stands at 146, consisting of 13 Market Making Members, 67 Ordinary Members and 66 Associates Members. The membership list can be found on the LBMA’s website.”

ICBC becoming a new LBMA market maker in the gold market, while expected, is an important development and again shows China’s intent with regard to becoming a key player in the global gold market. We are surprised by the lack of coverage of this important event but this could be due to the fact that the note was published at 9pm London time.

Gold Prices (LBMA)
5 April: USD 1,215.00, EUR 1,068.80 and GBP 854.58 per ounce
4 April: USD 1,215.00, EUR 1,068.80 and GBP 854.58 per ounce
1 April: USD 1,232.10, EUR 1,080.69 and GBP 860.20 per ounce
31 Mar: USD 1,233.60, EUR 1,085.50 and GBP 857.62 per ounce
30 Mar: USD 1,238.20, EUR 1,094.12 and GBP 860.23 per ounce

Silver Prices (LBMA)
5 April: USD 15.19, EUR 13.37 and GBP 10.69 per ounce
4 April: USD 14.96, EUR 13.17 and GBP 10.52 per ounce
1 April: USD 15.58, EUR 13.92 and GBP 10.99 per ounce
31 Mar: USD 15.38, EUR 13.52 and GBP 10.68 per ounce
30 Mar: USD 15.38, EUR 13.58 and GBP 10.68 per ounce

Gold News and Commentary
– Gold snaps 2-day losing streak as Asian shares slide (Reuters)
– Gold Rebounds From Two-Day Drop as Stocks Decline, Crude Slides (Bloomberg)
– Gold rebounds in Asia amid risk-aversion, $1230 eyed (FX Street)
– Hedge funds aren’t wavering on gold price rally (Mining.com)
– China State Paper Sees `Powerful Force’ Behind Panama Leak (Bloomberg)

– Clashing Views on Gold (Barrons)
– Cash Is Still King in Switzerland (Bloomberg)
– Rise Of The Silver Price Will Be Quick And Sudden (Silver Seek)
– Industry Experts Agree: Gold Prices Are Headed Higher (Stansberry Resource)
– Rickards: 2018 – SDR World Currency Backed with Gold (Daily Coin on Youtube)

Read More Here


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

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

Thank you

Mark O’Byrne
Executive Director
Published in Daily Market Update
A must read New York Sun editorial.  Here the paper comments on George Gilder’s new book where he states that the central banks are responsible for hurting Main Street to the benefit of Wall Street. He states that the world benefited greatly with honest money i.e. gold  (when under the gold standard) as the money supply increased dramatically with the rise in population.
(courtesy New York Sun/Gilder/GATA)

New York Sun: The Gilder

Submitted by cpowell on Mon, 2016-04-04 11:50. Section: 

From the New York Sun
Monday, April 4, 2016

George Gilder’s brilliant new book — “The Scandal of Money” — underscores an odd fact. There’s an expanding list of newspapermen and writers who, having reached a certain age and covered the intellectual and political wars, have turned late in their careers and at the peak of their powers to the problem of money. They are riveted by the recognition that our abandonment of a system of honest money is at the root of our national travail.

James Grant does this in his famed bi-weekly, the Interest Rate Observer (the latest number opens with an essay on what he calls the “inflation cheering section”). Steve Forbes has brought out two late-career books on this head, including “Money,” which is a call for a restoration of the gold standard. The dean of American editorial writers, George Melloan, who spent a long career at the Wall Street Journal, has brought out “The Great Money Binge.”

What is so special about Mr. Gilder’s contribution is its radicality. He opens with a quote from Friedrich Hayek asserting that the “source and root of all monetary evil” is “the government monopoly on the issue and control of money.” He brings to the question an almost Supermanly X-ray vision that enables him to see through orthodoxy, and he opens by brushing aside the Federal Reserve, on which so many focus for its role in our long travail. …

… For the remainder of the commentary:




New York Fed president refuses to respond to questions on gold swaps.  Why on earth do we not hear from the Wall Street Journal on this issue?

(courtesy zero hedge)

New York Fed president refuses a question about gold swaps in public

Submitted by cpowell on Tue, 2016-04-05 07:21. Section: 

3:20p HKT Tuesday, April 3, 2016

Dear Friend of GATA and Gold:

Last week at a public forum the president of the Federal Reserve Bank of New York, William Dudley, was asked whether the Federal Reserve has engaged in gold swaps with other central banks. He refused to answer.

Yesterday when your secretary/treasurer e-mailed the New York Fed’s media relations director, Eric Pajonk, for confirmation of the incident and put the gold swaps question to him directly on GATA’s behalf, Pajonk provided the Internet link to a video recording of Dudley’s remarks but also refused to respond to the question. Indeed, he refused even to acknowledge it.

The incident may demonstrate how easy it would be for mainstream financial news organizations to expose the Fed’s surreptitious interventions in the gold market and other markets. No great investigative journalism would be necessary. Nothing more needs to be done than to ask the right questions — questions the Fed cannot answer honestly without betraying the market rigging done by central banks.

The incident took place Thursday, March 31, as Dudley addressed the Virginia Association of Economists meeting at the Virginia Military Institute in Lexington. Dudley’s address was titled “The Role of the Federal Reserve — Lessons from Financial Crises,” and the New York Fed published on its Internet site Dudley’s prepared text:


In the audience was a longtime GATA supporter, W. Ware Smith Jr. of Roanoke, Virginia, who, when Dudley invited questions at the conclusion of his address, rose to ask about the repatriation of the gold of other countries that is vaulted at the New York Fed. Dudley replied that there would be no trouble about such repatriation.

Smith then asked Dudley whether the Federal Reserve has swapped gold with the governments or central banks of other countries. Dudley replied: I can’t comment on individual customer kind of transactions.”

Though Smith, speaking from the audience without a microphone, cannot be heard, Dudley, at the podium, can be, and the exchange takes place at the 53:20 mark in the video of Dudley’s presentation posted by the Virginia Military Institute at YouTube here:


But of course Smith had not asked Dudley to comment on “individual customer transactions.” Smith had asked Dudley whether the Federal Reserve has engaged in gold swaps — that is, whether the Federal Reserve is secretly intervening in the gold market or facilitating secret intervention.

Ironically, just a few minutes earlier, in response to another question, Dudley extolled the Federal Reserve’s transparency, asserting that the Fed is “already audited” and undergoes “lots of scrutiny in terms of how we conduct our business” — just not scrutiny for gold business. (This can be heard at the 44:10 mark.)

In 2009, adjudicating GATA’s freedom-of-information request to the Federal Reserve seeking information on its gold transactions, Fed Board of Governors member Kevin M. Warsh acknowledged, if a bit inadvertently, that the Fed has secret gold swap arrangements with foreign banks:


But that was nearly seven years ago. How about now?

Asked by a mere citizen of the United States last week, the president of the New York Fed would not say. Asked by GATA yesterday, the spokesman for the New York Fed would not even acknowledge the question.

Would the New York Fed respond with such contempt to a similar inquiry from, say, The Wall Street Journal, New York Times, Reuters, Bloomberg News, or the Financial Times? The possibility of such critical and specific questioning about the Fed’s surreptitious intervention in the markets probably does not worry Fed officials in the slightest. At least such questioning has never happened before.

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




Gold trading today:


(courtesy Lawrie Williams/Sharp’s Pixley)


Gold and Silver bounce most likely!

Gold Today –Gold closed in New York at $1,214.90 down from $1,223.20 on Monday. On Tuesday morning in Asia, it rose to $1,226. London lifted it up to see the LBMA price setting at $1,231.50 up from $1,215.00 on Monday.

The dollar index is slightly higher at 94.72 up from 94.59 yesterday. The dollar is stronger against the euro at $1.1370 up from $1.1386 on Monday.

The gold price in the euro was set at €1,083.11 up from €1,067.19 on Monday.

Ahead of New York’s opening, the gold price was trading at $1,231.90 and in the euro at €1,083.32.

Silver Today –The silver price closed in New York at $14.92 down from $15.05 down 13 cents on Monday. Ahead of New York’s opening the silver price stood at $15.15.

Price Drivers

While sales from the SPDR gold ETF continued but purchases into the Gold Trust resumed, we appear to be seeing a bottoming in U.S. investor physical activity in the U.S. based gold ETFs.

Nevertheless, with it becoming clear that the dollar is no longer going to rise to new highs, COMEX is becoming cautious over moving gold and silver prices down at these levels.

It does appear that $1,200 and $15 on gold and silver respectively are strong support levels and ones from which both seem about to bounce.

Dollar consolidating After a period of weakness, the dollar is now consolidating at close to its lows. With the oil price falling again, the need for U.S. dollars is once again diminishing. All in all, the need for dollars has diminished considerably over the last couple of years.

With the international aggressiveness of the U.S. IRS chasing U.S. citizens across the world, some European nations have not only rejected U.S. clients but the use of the dollar in precious metal dealing, as well as in other transactions. So, when we said yesterday that “It does mean that the dollar has seen its peak against other currencies” we add to that the use of the dollar in international trade has also peaked.

The awareness of the global economy, oil factors and their state has impacted on Fed [and Treasury] policy and is feeding through to the dollar in amongst global currencies. Dollar hegemony is fading. The consequential impact on gold and, by extension, silver, will increase in favor of gold and silver prices over time.

Gold ETFs – We saw sales of 2.378 tonnes of gold from the SPDR gold ETF on Monday. There were purchases of 0.91 of a tonne of gold into the Gold Trust on Monday. This leaves their holdings at 815.715 and 187.24 tonnes in the SPDR & Gold Trust respectively.

It seems more than improbable that investors that have bought over 200 tonnes into these two gold ETFs would suddenly want to get out. Their moves into the market, at much lower prices, were clearly strategic positioning ahead of rises in the future. We would go as far as to say that their investments signaled a change of trend to the upside.

Silver – The silver price, as with gold is consolidating around $15 signaling that a bounce is most likely.



Your early TUESDAY 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 6.4742 / Shanghai bourse  CLOSED, UP 43.53  OR 1.45% / HANG SANG CLOSED DOWN 321.92 OR 1.57% 


3. Europe stocks opened ALL in the RED /USA dollar index UP to 94.69/Euro DOWN to 1.1362

3b Japan 10 year bond yield: FALLS   TO -.063%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.27

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  35.57  and Brent: 37.59

3f Gold UP  /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 DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.110%   German bunds in negative yields from 9 years out

 Greece  sees its 2 year rate RISE to 10.95%/: 

3j Greek 10 year bond yield RISE to  : 9.07%   (YIELD CURVE NOW INVERTED)

3k Gold at $1232.44/silver $15.15 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN 46/100 in  roubles/dollar) 69.03

3m oil into the 35 dollar handle for WTI and 37 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.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9583 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0888 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.


3r the 9 Year German bund now  in negative territory with the 10 year FALLS to  + .110%

/German 9 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 1.72% early this morning. Thirty year rate  at 2.55% /POLICY ERROR)

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

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

“Risk Off” – Global Stocks Slide As Yen Surges To 17 Month High; Bund Yields Plunge

The market’s slumberous levitation of the past month, in which yesterday’s -0.3% drop was the second largest in 4 weeks and in which the market had gone for 15 consecutive days without a 1% S&P 500 move (in March 2015 the same streak ended at day 16) may be about to end, after an overnight session, the polar opposite of yesterday’s smooth sailing, which has seen a sudden return of global risk off mood.

It all started in Japan, where the yen jumped to a 17-month high and government bonds climbed as increasing concern that global economic growth is faltering stoked demand for haven assets, catalyzed perhaps by yesterday’s shocking US Treasury announcement that tax inversion deals are all but dead, in the process send Allergan stock lower by 20% and crushing countless M&A arbs.Additionally, the YEN overnight appreciated even after Bank of Japan Governor Haruhiko Kuroda said he will keep monitoring foreign-exchange markets and reiterated the potential for additional monetary stimulus.

According to FX watchers the critical USDJPY carry pair may test a break of 110 as Suga’s FX remarks are unlikely to halt FX pair’s decline at this point as market players probably don’t believe Japan can intervene in market anytime soon, says FPG Securities CEO Koji Fukaya.

The surge in the Yen pushed Japan’s closely correlated Nikkei another 2.4% lower to 15,732 as it rapidly approaches its February 12 lows of 14,952. We wonder how much longer Abe and Kuroda will be content to comply with the “Shanghai Accord” whose only purpose was to stem Yuan devaluation at the expense of a strong Yen and Euro. Another 5% drop in the Nikkei and suddenly rumors will reemerge that Abe’s career-ending bout of diarrhea may be returning; and since Japan’s QE is critical to maintaining global asset prices, the recent bout of USD weakness (and Yuan strength) may be very short-lived.

It wasn’t just Japan and the Yen: in Germany bunds climbed after an unexpected drop in factory orders (down -1.2%, exp. 0.3%), with Bund yields sliding below 0.1% (0.07% to be precise) for the first time since April 2015, when the great Bund Tantrum struck which as even Goldman has admitted, was driven by ECB intervention. Will Draghi dare to sell European TSYs even as he is now actively buying Corporate IG bonds, in the process destabilizing the even more illiquid European bond market? We may find out soon.

European sentiment has also been dampened from the lacklustre PMI readings from European nations with the French services reading slipping into contractionary territory, while the final PMI for Germany, Italy and the EU composite all missed: Europe may be rolling over again.

“There are worries about the global economy,” Christian Reicherter, an analyst at DZ Bank AG in Frankfurt told Bloomberg. “In this environment, bunds are still the place to go”, and indeed, the chart below confirms just that.

Other were just as pessimistic: “Across Europe, the rally from Feb’16 lows is faltering and we expect
downside risks to dominate. Europe’s underperformance vs. the SPX (in
dollar terms) also shows no signs of abating”, JPMorgan analysts led by
Sunil Garg say.

As a result, stocks fell around the world, along with emerging-market currencies.  All 30 stocks in Germany’s DAX Index fell after an unexpected drop in factory orders. The Stoxx Europe 600 Index sank to a five-week low and U.S. equity futures pointed to a second day of losses. South Africa’s rand and the South Korean won led declines for developing-nation currencies. Gold advanced the most in a week, and oil dropped for a third day before stockpiles data.

This is where markets are now:

  • S&P 500 futures down 0.9% to 2040
  • Stoxx 600 down 1.9% to 329
  • FTSE 100 down 1.4% to 6081
  • DAX down 2.4% to 9583
  • German 10Yr yield down 4bps to 0.09%
  • Italian 10Yr yield down 1bp to 1.23%
  • Spanish 10Yr yield down less than 1bp to 1.46%
  • S&P GSCI Index down 0.2% to 310.8
  • MSCI Asia Pacific down 1.6% to 124
  • Nikkei 225 down 2.4% to 15733
  • Hang Seng down 1.6% to 20177
  • Shanghai Composite up 1.4% to 3053
  • S&P/ASX 200 down 1.4% to 4924
  • US 10-yr yield down 4bps to 1.72%
  • Dollar Index up 0.11% to 94.62
  • WTI Crude futures down 0.3% to $35.59
  • Brent Futures down 0.3% to $37.59
  • Gold spot up 1.5% to $1,233
  • Silver spot up 1.6% to $15.16

Top Global News

  • Pfizer-Allergan Deal May Be Imperiled by U.S. Inversion Rules: new rules may put a planned $160 billion merger between Pfizer and Allergan in jeopardy; Allergan Falls After Treasury Rules Announced; Pfizer Gains
  • UBS, HSBC Offshore Dealings Thrust Into Panama Papers Spotlight: report describes UBS’s dealings with law firm Mossack Fonseca; both banks say they comply with laws for vetting customers; ‘Panama Papers’ Train New Spotlight on Global Elites’ Wealth
  • Tesla Deliveries Miss Forecast as ‘Hubris’ Hurts SUV Supply: automaker sold 14,820 Model S cars and Model X SUVs in 1Q, short of the 16,000 it had predicted in February; Tesla Motors CIO Vijayan Leaves to Launch Own Startup: WSJ
  • Valeant Creditors Said to Resist Proposal to Relax Loan Pact: co. facing push back from some of its lenders as it seeks to waive a default, loosen restrictions on its debt; Valeant Said to Cut Libido Pill Sales Force in Reorganization
  • Disney Says Staggs Stepping Down as Chief Operating Officer: departure complicates efforts to find heir to CEO Robert Iger; executive is said to have struggled to gain support of board
  • Pimco Says Bill Gross Was Told He’d Lose $200 Million Bonus: firm responds in suit saying CEO and counsel warned co- founder
  • Sumitomo Mitsui to Charge Fees on Accounts of Overseas Lenders: goal is to recover costs of the BOJ’s negative interest rates; Mitsubishi UFJ, Mizuho considering similar steps
  • Vale Seeking to Trim Debt Exits ThyssenKrupp Steel Venture: ThyssenKrupp to gain full control of embattled Brazilian mill; Vale free from plant’s debt obligations
  • Lagarde Cites ‘Brexit’ Among Geopolitical Risks to Global Growth: IMF Managing Director Lagarde cited the U.K.’s June referendum on exiting the EU among threats to the global economy; U.K. Growth Subdued as ‘Brexit’ Hurts Confidence, Markit Says
  • Trump Faces Biggest Test Yet in Tuesday’s Wisconsin Primary
  • Samsung Bioepis Sues AbbVie Over Humira Patent: Korea Economic Daily

Looking at regional markets, Asian stocks resided in negative territory following a similar lead from Wall St. as declines in oil weighed on risk-appetite. Nikkei 225 (-2.6%) was the underperformer and fell below 16000, pressured by a stronger JPY and losses in index giant Fast Retailing following a decline in Uniqlo sales. Weakness seen in the commodities complex dictated sentiment in the ASX 200 (-1.4%) with energy the laggard after WTI fell below USD 36/bbl, while the Shanghai Comp (+1.5%) shrugged off its initial losses amid gains in defensive stocks and after the PBoC conducted a respectable liquidity injection. 10yr JGBs traded lower despite the downbeat tone and a firm 10yr auction which drew the highest b/c since 2014, as early weakness persisted following comments
from BoJ officials including Governor Kuroda who stated they are not placing particular focus on NIRP.

BoJ Governor Kuroda said it is technically possible to cut rates further into negative territory if required, but also added they are not placing particular focus on NIRP as possible future measures. Elsewhere, BoJ is considering downgrading inflation outlook in its economic outlook report later this month amid lower expectations from households and businesses.

Top Asian News

  • Rajan Cuts India Rates to Five-Year Low, to Stay Accommodative: RBI narrows policy rate corridor to 50 bps from 100 bps
  • ‘Panama Papers’ Train New Spotlight on Global Elites’ Wealth: Leaked files draw outrage from leaders named in group’s report
  • Race Against a Weaker Yuan Spurs Chinese Overseas Acquisitions: Outbound deals top $97 billion this year, 80% of 2015’s total
  • Bond Market ‘Exhausted’ as Kuroda’s Stimulus Enters Fourth Year: Low yields accompanied by high volatility, money market stress
  • China Reserves Slide Seen Easing, Yet Dam-Bust Still a Risk: Test will come if Fed tightening expectations return
  • Yen Climbs to Strongest Since 2014 as Kuroda Monitors Market: Yen is best performer among Group of 10 currencies this year
  • China Said to Plan $155 Billion of Sour Loan-Equity Swaps: Swaps may lift banks’ net profits by 4% a year, Huatai says

In Europe, risk off sentiments dominates price action in Europe with the Eurostoxx(-2%) hit by the slump in mining and energy names. Separately, financials have also underperformed so far today in the wake of the Panama Papers scandal, with Credit Suisse lower by 3.5%. Allied to this, sentiment has also been dampened from the lacklustre PMI readings from European nations with the French services reading slipping into contractionary territory, while Germany also posted softer than expected factory orders. Subsequently, Bunds gained on the back of flight-to-quality flow to make a firm break above 164.00 with the yield curve continuing its bull-flattening bias. As such, yields broke below 0.10% having fallen to its lowest level in a year.

Top European News

  • German Factory Orders Unexpectedly Fall on Exports Slowdown: orders fall 1.2% on month vs estimate of 0.3% increase; Feb. decline led by sluggish growth in global trade; German Growth at Risk Amid Global Economic Slowdown: OECD
  • Euro Area Growth Stays ‘Sluggish’ as Markit Index Revised Lower: euro-area economy grew slower than initially anticipated at the end of 1Q, according to Markit Economics, which revised down a key index of activity
  • Thousands of Icelanders Protest as PM Ignores Calls to Quit: protests after leaked documents suggested PM Gunnlaugsson allegedly benefited from offshore investment accounts in tax havens
  • Credit Suisse CEO Says ‘Best Time’ to Grow in Asia as Rivals Cut: CEO said now is the “best time” to expand in Asia because retreats by some competitors make it easier to find top recruit
  • Peugeot Tumbles as Expansion Spending Weighs on Profit Margins: co. predicted that spending on new models and technology would weigh on profit in coming years
  • Gemalto to Propose Vallee as Successor to CEO Piou: COO Vallee to succeed CEO Olivier Piou who will retire at end of Aug.
  • Europe’s Central Banks Begin Boosting QE Price Transparency: Bank of France to follow Dutch in taking steps toward greater transparency, person familar with plan says

FX markets active this morning, but with the JPY stealing the limelight as the USD rate pushes below the March lows to take out 110.50. 110.00 holds for now, but the price action since suggests a test of this key level is imminent. Large stops reported below, but official warnings (chief government spokesman) that markets are being monitored also been fired out there, but to no effect as yet. The Yen appreciated even after Bank of Japan Governor Haruhiko Kuroda said he will keep monitoring foreign-exchange markets and reiterated the potential for additional monetary stimulus.

AUD saw a brief relief rally post RBA, as the language remained very much the same, but as with the NZD and CAD, sellers have been back in since, and we have set fresh series lows in AUD and NZD, but CAD still holding off the Friday lows just ahead of 1.3150. UK services PMI came in as expected, but EUR/GBP continues to threaten .8000+ levels. Cable has held off 1.4200 for now, but no notable recovery to the likes of that seen in recent sessions. EUR/USD still poised for a breakout either way, holding inside Friday limits for now, but with a small bias to the downside after taking out the Monday base at 1.1355. The euro slid 0.2 percent to $1.1365, while the pound dropped 0.2 percent to $1.4229.

In commodities, a choppy session has seen WTI and Brent futures pare back losses seen in Asian and early European trade, with comments from the Kuwaiti OPEC governor suggesting a deal is still likely in Doha helping bolster WTI prices back above USD 35.50/bbl. Elsewhere, gold has been on the march overnight, climbing by over USD 15/oz to trade above USD 1230/oz in a flight to quality amid the USD/JPY softness. The metals complex was also underpinned on the return of Chinese participants which helped copper snap a 7-day losing streak, while iron ore underperformed on increasing supply from its main exporter nations.

Copper for delivery in three months was set to end the longest losing streak in two years, advancing for the first time in eight sessions. The metal was up 0.5 percent at $4,785 a metric ton. Aluminum was little changed, while zinc fell 1.5 percent.

On the US calendar today, we get the February trade balance reading where expectations are for a modest widening in the deficit. We’ll then get confirmation of those PMI numbers before the closely watched ISM non-manufacturing print for March is due to be released (expected to tick up to 54.2 from 53.4 the prior month) where there will be a close watch on the employment component in particular. The IBD/TIPP economic optimism reading for April and February JOLTS job openings data concludes the releases. Away from the data we’re due to hear from the Fed’s Evans shortly after we go to print.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • USD/JPY touches its lowest level for 18 months, with EUR/USD & GBP/USD heading into the North American crossover near their lows of the day
  • European equites trade firmly in the red, led lower by materials, financials and energy names
  • Looking ahead, highlights include US JOLTS, ISM Non-Manf and Services & Composite PM’s
  • Treasuries higher in overnight trading as global equity markets sell-off and WTI oil drops towards $35/barrel; economic calendar includes trade balance, JOLTS job openings.
  • The yen jumped to a 17-month high and government bonds climbed as increasing concern that global economic growth is faltering stoked demand for haven assets
  • Three months after predicting Goldman Sachs Group Inc. would put the tumultuous end of 2015 behind it and stabilize profits, analysts are reversing course and cutting projections again
  • Panama and the U.S. have at least one thing in common: Neither has agreed to new international standards to make it harder for tax evaders and money launderers to hide their money
  • UBS and HSBC — two of the banks hardest hit amid a U.S. crackdown on customers’ illicit funds in recent years — are now starring in a torrent of leaked documents detailing how they once helped clients set up thousands of offshore shell companies
  • China may approve as soon as this month a plan to make it easier for banks to convert soured debt into equity. The government may allow conversions of as much as 1 trillion yuan ($155 billion) of bad loans under the plan
  • France is planning to join the Netherlands in taking steps toward greater transparency in the European Central Bank’s €80 billion-a-month ($91 billion) QE program, according to a person with direct knowledge of the plans
  • Christine Lagarde said the International Monetary Fund will negotiate “in good faith” with the Greek government as she signaled that recent animosity over the latest review of Greece’s aid program will blow over
  • Sovereign 10Y bond yields mostly lower; European and Asian equity markets drop; U.S. equity-index futures fall. WTI crude oil drops; gold and copper move higher

DB’s Jim Reid concludes the overnight wrap

So with expectations for an output freeze from Oil producers at the Doha meeting later this month plummeting lower, away from that and the Fed/Data watch, another factor which will likely provide some near term direction for markets is Q1 earnings season in the US which is due to unofficially kick off next week when Alcoa reports on Monday. Our US equity strategists are expecting a difficult quarter for earnings and have a bottom up Q1 EPS growth decline estimate of -8% yoy, with markets exposed to banks and energy stocks in particular expected to perform poorly. Something we’ll be keeping a close eye on in coming weeks.

Switching our attention over to the latest in Asia now where this morning we’re seeing most major bourses (aside from China) follow the lead from Wall Street last night and trade lower. Japanese equity markets in particular have seen the sharpest declines with the Nikkei currently -1.92%. A stronger Yen isn’t helping matters there while the latest numbers from the March Nikkei PMI data showed the composite falling below 50 last month for the first time in a year, tumbling 1.1pts to 49.9. The services data declined 1.2pts to 50.0 which was also the lowest in a year. Meanwhile, the Hang Seng (-1.40%) has also seen a steep fall after reopening from a public holiday yesterday, although bourses in China (Shanghai Comp +0.97%) are reversing course as we type from a softish start. We’re also seeing more Bloomberg headlines of another potential corporate default in Greater China this morning, with China Green Holdings the latest in the limelight after the company advised it has insufficient funds to make its upcoming bond repayment in a week. Elsewhere the Kospi is -0.80% and ASX -1.26%. The Aussie Dollar is a touch firmer after the RBA held rates steady as expected.

Moving on. Yesterday’s batch of economic data in the US was generally a tad weaker than expected. The main focus was on the soft factory orders data for February. Headline orders were said to have declined -1.7% mom as expected however orders excluding transportation were down a heavier than expected -0.8% mom (vs. -0.5% expected). Meanwhile, core capex orders were confirmed as falling -2.5% mom in February which was slightly more than the initial flash reading had alluded to. Headline and core durable goods orders were down -3.0% mom and -1.3% mom having also been revised lower. Elsewhere we saw the labour market conditions index fall -2.1pts in March after expectations had been for a +1.5pts gain. That means the index has now put in its third consecutive monthly decline which is in contrast to the more positive picture that the headline nonfarm payrolls data is painting.

Staying with the US, yesterday we heard from the usually dovish Boston Fed’s Rosengren who became the latest in a long line of regional Fed Presidents to speak with a more optimistic tone. Rosengren noted that in his opinion the current market expectations for one rate increase this year and next ‘could prove too pessimistic’. He highlighted that ‘the US economy is continuing to improve despite the headwinds from abroad’ and that ‘if my forecast is right, it may imply more increases in short-term interest rates than are currently priced into futures markets’ and that ‘it will likely be appropriate to resume the path of gradual tightening sooner’.

There was also some Central Bank speak to note from the ECB too following comments from board member, Praet. In a speech in Rome, Praet made mention to the fact that ‘allowing inflation to re-anchor downwards comes with a high risk of credibility losses for the central bank, and especially when the objective is not being met’. Praet also noted that ‘the need for a superior policy mix is no excuse for central banks to be passive when their mandates are under threat’, before going on to state that ‘the ECB has demonstrated through its actions that it does not wait for others to move first’.

The European data added little to the debate yesterday with the Euro area unemployment rate printing as expected at 10.3% in February, while the latest Sentix investor confidence reading showed a smaller than expected 0.2pt gain this month to 5.7 (vs. 7.0 expected). The Euro chopped around in small range yesterday before ultimately closing flat although we did see further moves lower for Bund yields, with the 10y at one stage trading as low as 0.115% which is only a smidgen away from the 0.101% intraday low this year made back in late February.

Taking a look at the day ahead, we’ve got a slightly busier calendar to look forward to. This morning in Europe the early data is out of Germany where the February factory orders data is due. Shortly following this we will get the final revisions for the services and composite PMI’s in Europe (no change to the Euro area reading expected) as well as a first look for the indicators in Spain, Italy and the UK. Euro area retail sales covering the February month (0.0% mom expected) rounds off the data this morning. Over in the US this afternoon we kickstart with the February trade balance reading where expectations are for a modest widening in the deficit. We’ll then get confirmation of those PMI numbers before the closely watched ISM non-manufacturing print for March is due to be released (expected to tick up to 54.2 from 53.4 the prior month) where there will be a close watch on the employment component in particular. The IBD/TIPP economic optimism reading for April and February JOLTS job openings data concludes the releases. Away from the data we’re due to hear from the Fed’s Evans shortly after we go to print.



i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 43.53 POINTS OR 1.45% ON LAST 2 HR RESCUE /  Hang Sang closed DOWN 321.92 OR 1.57%. The Nikkei closed DOWN 390.45 POINTS OR 2.42% . Australia’s all ordinaires  CLOSED DOWN 1.42%. Chinese yuan (ONSHORE) closed UP at 6.4742.  Oil FELL  to 35.63 dollars per barrel for WTI and 37.59 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4742 yuan to the dollar vs 6.4814 for onshore yuan. lAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS LAST THURSDAY NIGHT. SOUTH KOREA REPORTS BAD MFG DATA. )



The central bank of Japan tried to intervene today by jawboning.  They stated that they might “debate further easing”.  Lowering the interest rate to NIRP squared is just not in the cards.  They are also running out of bonds to monetize.  It sure looks like Japan is out of ammo.  The USA/Yen continued to fall  (Yen rise). Also remember the theory we brought to your attention two weeks ago:  if the yen rises,  (Japanese citizens calling in all of their savings around the world which causes the yen to rise), gold will rise.

(courtesy zero hedge)

USDJPY Spikes On Reuters Story BOJ To “Debate Further Easing”

With the USDJPY crashing to a fresh 17 month low, sending the Nikkei down 2.3% and taking out levels during which we have seen direct BOJ intervention in both February and March, many were wondering how a panicking Japan would try to push its currency lower. The answer was revealed moments ago, with the following Reuters headlines:


More from Reuters:

Bank of Japan policymakers will likely debate the possibility of easing monetary policy further at a rate review this month, as a raft of gloomy data threatens their scenario that a moderate economic recovery will accelerate inflation towards a 2 percent target, sources familiar with their thinking said.

If the central bank were to act, it would more likely increase asset purchases than cut interest rates, the sources said, as financial institutions are still scrambling to adjust to a negative rate policy deployed in January.

But a decision on whether to ease at the April 27-28 review will be a close call as many BOJ officials are wary of using their limited policy tools again so soon, especially as the negative rate move has proved unpopular among the public.

“It will be a question of whether the BOJ feels it has forestalled risks in January or whether they feel that January’s action wasn’t enough,” said one of the people familiar with the BOJ’s thinking. (Reporting by Leika Kihara, Sumio Ito and Yoshifumi Takemoto; Editing by Ian Geoghegan)

Will the BOJ increase QE as this headline suggests? Most likely not, as there are simply no more bonds to monetize; it may increase equity purchases but that would make the Jaoanese market even more facrical.

What is troubling is that, as noted above, at previous key support levels for the USDJPY, the BOJ intervened directly in the market. This time, it couldn’t even do that and was forced to spread leaks via the traditional trial balloon conduit, Reuters.

Is the BOJ out of ammo?

After spiking to 110.80, the USDJPY has promptly filled almost the entire gap.

This is big:  The entire yen carry trade totally collapsed after today’s 4 week bill auction.  Last week, we highlighted that the yield came in at .20% or 5 basis points lower than the Fed bottom rate of .25%.  Today, it was worse at .185% or almost 7 basis points lower.  It basically shows lack of confidence in the global economy/  Why would dealers lock up bills at yields 7 basis points lower than offering these to the Fed at 7  basis points higher?
Something is seriously wrong everywhere..
(courtesy zero hedge)

Yen Carry Trade Snaps After 4 Week Bill Prices Deep Below Fed Funds

Moments ago the US Treasury priced its 4 Week Bill auction, which was unique in that at just $35 billion, was not only $10 billion lower than a month ago, but was the lowest since October 15.This may or may not explain why after last week’s curious auction yield of 0.20%, or 5 bps below the effective Fed Funds floor, today’s auction showed an even more dramatic scramble for short term liquidity, when the government sold 4 Week Bills at a rate of 0.185%, or 6.5 bps below the rate charged by the Fed!

Clearly some correlation algo in the market did not expect this because the moment the auction results were released, the USDJPY snapped lower to fresh 14 months lows, just above 110, from where it is only downhill.

The move in the USDJPY has in turn pressured stocks and all risk assets, as suddenly there appears to be a rather pronounced flight to safety and/or a fault with the Fed’s plumbing as primary dealers are willing to lock up funds with the Treasury for 4 week at a rate lower than the Fed Funds, something which shouldn’t technically be happening, and suggests the market is once again forcing the Fed to cut rates.



none today


Refugees are now flooding into Italy:
(courtesy Mish Shedlock)

Refugees Flooding Italy Surge 80%; Proposed Solution in Single Picture

Submitted by Mike “Mish” Shedlock of Mishtalk

Italy’s Interior minister Angelino Alfano warns the refugee “system is at risk of collapse” following an 80 per cent spike in the number of arrivals to Italy across the central Mediterranean Sea in the first quarter of this year compared to 2015.

Alfano fears that Syrians headed for Turkey will instead head for Libya for an even more hazardous Mediterranean Sea crossing to Italy.

How many tens of thousands of people can you keep, year after year? Without returns, either you organize real prisons, or it’s obvious that the system will collapse,” Mr Alfano said. “It doesn’t take a prophet to glimpse the future”.

Costs are about to soar. Alfano wants to secure new deals with African nations, offering economic aid in exchange for taking back their citizens. Here’s a picture that explains everything.

Refugee Crisis in a Single Picture

Taking into consideration fences and walls, boat lifts, airlifts, increase security, border checks, prisons, crime, retention centers, and bribes to countries for taking back refugees: what’s this going to cost?

Italy Seeks Greek-Style Solution

The Financial Times reports Italy Pleads for Greek-Style Push to Return its Migrants.

In an interview with the FT, Angelino Alfano, Italy’s interior minister, says the EU should move to secure deals with African nations, which are the source of the vast majority of migrants arriving in Italy, offering economic aid in exchange for taking back their citizens and preventing new flows.

Mr Alfano’s request reflects renewed nervousness in Rome about the migration crisis following an 80 per cent spike in the number of arrivals to Italy across the central Mediterranean Sea in the first quarter of this year compared to 2015.

If that increase holds through the warmer spring and summer months, it would smash the record 170,000 migrants who arrived in Italy in 2014, straining resources and creating a political problem for the centre-left government led by Matteo Renzi.

“If Syrians don’t want to stay in Turkey but want to try the trip to Europe, they will go around and try to get here from Libya,” Mr Alfano said. “We still don’t have any evidence that this is happening, but we are monitoring.”

“Irregular [migrants] have to be kept in closed camps from where they cannot escape. So how many tens of thousands of people can you keep, year after year? Without returns, either you organise real prisons, or it’s obvious that the system will collapse,” Mr Alfano said. “It doesn’t take a prophet to glimpse the future”.

Cost Analysis

Apparently it does take a prophet because Chancellor Merkel still doesn’t get it. And I have yet to see a complete analysis of the cost of these schemes, from anyone.

New and Proposed Processes

  • Greece will return refugees to Turkey
  • On a one-for-one basis, Turkey will take those refugees and send them to Germany.
  • Turkey, (off the record as the EI looks the other way), will send refugees back to Syria in violation of international law.
  • Seeking news ways to get to the EU, Syrian refugees will attempt to get to Italy instead of Greece.
  • Italy will send those refugees back to Turkey where they presumably will be part of the existing one-for-one swap with the coalition of the willing (Germany).
  • Italy will return non-Syrians to Tunisia, Libya, and Egypt after bribing those countries with money.
  • In an effort to spread around the refugees monetary bribes go out to at least 10 countries.

One country stands out in these preposterous scheme. Saudi Arabia, where art thou?

My goodness!! Italy and Malta agree to swap oil rights for the right to return refugees:
(courtesy James Burgess/Oil Price.com)

Did Italy And Malta Actually Agree To Swap Oil Rights For Refugees

By James Burgess of OilPrice

Did Italy And Malta Actually Agree To Swap Oil Rights For Refugees?

As the Syrian refugee crisis reaches a critical impasse, both in terms of European security and refugee human rights, Brussels has found itself having to deny accusations of a secret pact between Malta and Italy to swap refugees for oil exploration rights.

The Maltese opposition leader has claimed that Malta and Italy cut a secret deal in which Malta would surrender oil exploration rights in an offshore area disputed with Italy, while Italy would return the favor by picking up Malta’s share of migrant rescues at sea.

In late March, the European Commission was forced to respond to the accusations as the Syrian refugee crisis has hit a fever pitch, denying the accusations; but it’s a complicated issue.

Maltese opposition leader Simon Busuttil of the Nationalist Party, and a member of the European Parliament until 2013, accused the Maltese government late last year of allowing the Italian government to drill for oil in Maltese waters in a dubious oil-for-migrants swap.

His accusations were boosted by the reporting of an Italian newspaper, Il Giornale, which claimed that Italian Prime Minister Matteo Renzi had agreed to the deal with Maltese Prime Minister Joseph Muscat.

Last September, Maltese Home Affairs Minister Carmelo Abela stated that Malta had an informal agreement with Italy take on irregular migrants from Malta, but the minister later altered that statement to a situation of “close collaboration” between Italy and Malta, according to the Italian media report.

While Malta has admitted to close collaboration, the country’s officials maintain that there is no agreement concerning migrants or linking migrants to oil exploration.

Now the European Commission has had to step up to the plate.

Malta is the European Union member country that is closest to the Libyan coast. And with that in mind, Italian centre-right lawmaker Elisabetta Gardini has recently asked the European Commission to explain why there are such low migrant arrival numbers in Malta.

Her question was poignant.

Since 2015, out of the 142,000 people who fled their homes bound for Europe, leaving from the North-African coast, only around a 100 arrived in Malta. It’s an odd situation during this heightened refugee crisis.

In 2013, Maltese officials registered 2,008 arrivals. During the same period, Italy accepted some 150,000 refugees. The argument that there was no deal would suggest that refugees simply have no desire to try for Malta.

Late last month, the European Commission finally replied to the allegations, with European Commissioner for Home Affairs and Migration Dimitris Avramopoulos saying that it was “not aware of any such bilateral agreement… between the Maltese and Italian authorities concerning Search and Rescue (SAR) operations in the Mediterranean Sea.”

“Not aware” certainly does not put this issue to rest.

That said, as reported by the Independent, the Commission noted that coincidentally the area of oil exploration in question overlaps with the migrant rescue areas.

While not being aware of any agreement, the Commission said that if there was an agreement, it would be in line with normal burden-sharing.

“When it comes to the emergency relocation mechanism, the Commission sees it as establishing concrete measures of solidarity and contributing to the fair sharing of responsibilities between member states, in line with Article 80 of the Treaty on the Functioning of the EU,” according to the Commission.

What’s at stake here in terms of the oil play? Quite a lot, potentially. According to an independent review, Malta has a potential 260 million barrels. But Malta and Italy have been locked in dispute over offshore exploration zones as well as over what their migrant rescue zones are.

The crux of the issue is a 2012 law passed by Italy that essentially doubled Italy’s continental shelf southeastwards of Sicily and towards the Libyan coast. Malta balked because this cut into maritime territory it claims. In late 2015, Malta and Italy reached an informal agreement to suspend exploratory oil drilling in this area.

Perhaps one open-ended question is this: With an EU-Turkey deal in place that will see Turkey (in return for some EU favors and a bunch of financial aid) take back refugees landing in Greece, it will essentially cut off the Aegean Sea human smuggling route. It might mean a renewed interest in the Libya route. And if Malta has traded off its rescue area, it will mean problems for Italy, which would have to intercept them all.

Deutsche bank stock continue to falter.  Take a close look at how DB is doing relative to what happened to Lehman Brothers.  They have a huge problem due to the collapse in yield on the 10 year Bunds.  The yield curve is basically flat and they cannot earn any money.
(courtesy zerohedge)

Deutsche Bank Dead-Cat-Bounce Dies As Bund Yields Collapse Near Record Lows

We’re gonna need a bigger bailout…

Just when you thought it was safe to catch a falling knife and that all the systemic fears in the world had been washed away by coordinated central bank manipulation, this happens…

Deutsche Bank stock price is retesting record lows as – just like Lehman – all the soothing words merely enabled a dead-cat-bounce to let some ‘insiders’ out with less pain.

As Deutsche itself notes: What explains the weakness in banks?

Banks’ performance has been significantly weaker than the relationship with credit spreads would have suggested.

As a consequence, the relative P/E has dropped to the lowest level since 2000, while the P/B, at a 60% discount to the market, implies relative RoEs to fall back below the 2008 trough. The main explanation for banks’ underperformance is the sharp decline in 10-year Bund yields, with the resulting flattening of the yield curve putting further pressure on net interest margins.

The current level of the oil price points to upside for inflation expectations and, hence, bond yields.

Yet, while excessively bearish valuation levels and the scope for higher bond yields points to upside, we are nonetheless cautious on the outlook for banks, given downside risks for the credit market.

And since the easing jawboning stopped and the EU yield curve collapsed, EU banks have plunged back near record lows…

Yanis Varoufakis issues a major warning to the Greek people in light of the fight between the IMF and Germany.  The only loser will be the Greek people.
A terrific commentary
(courtesy Mike Krieger/Liberty Blitzkrieg.blog)

Yanis Varoufakis Issues A Major Warning To The Greek People

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Varoufakis said that Schäuble, Germany’s finance minister and the architect of the deals Greece signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not discussing the program – this was accepted by the previous [Greek] government and we can’t possibly allow an election to change anything.


“So at that point I said ‘Well perhaps we should simply not hold elections anymore for indebted countries’, and there was no answer. The only interpretation I can give [of their view] is, ‘Yes, that would be a good idea, but it would be difficult. So you either sign on the dotted line or you are out.’”


– From last year’s post:  Everything You Need to Know About the Greek Crisis and ECB Fascism in Two Paragraphs

By now, most of you have heard about Wikileaks’ release of internal deliberations between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

In nutshell, the two discussed whether or not a new credit crisis would be required in order to force EU creditors to agree with the IMF’s debt relief objective. Shedding some much needed perspective on the situation, former Greek finance minister Yanis Varoufakis has chimed in, and he makes one thing perfectly clear — no matter who comes out ahead in this dispute (the IMF or the EU), it will be the Greek people who lose.

Here are a few excerpts from his op-ed published at Der Spiegel.

The feud between the International Monetary Fund (IMF) and the European side of Greece’s troika of creditors is old news. However, Wikileaks’ publication of a dialogue between key IMF players suggests that we are approaching something of a hazardous endgame.Ever since the first Greek ‘bailout’ program was signed, in May 2010, the IMF has been violating its own “primary directive”: the obligation not to fund insolvent governments. As a result, the IMF’s leadership has been facing a revolt from its staff members who demand an exit strategy arguing that, if the EU continues to obstruct the debt relief necessary to restore the solvency of the Greek government, the IMF should leave the Greek program.


Five years on, this IMF-EU impasse continues, causing a one-third collapse of Greek GDP and fuelling hopelessness to a degree that has made real reform harder than ever.


To the uninitiated it looks as if the IMF-EU tussle is about some botched numbers. But the real issue behind them is deeply political and has ramifications well beyond Greece.


The IMF is right that the Commission’s numbers do not add up and, thus, engender the insufferable hypocrisy of a Commission pretending to prefer “lighter” austerity when its denial of debt relief translates into a primary budget surplus target (total tax revenues minus government expenditure, exempting debt repayments) of 3.5 percent of Greek GDP which, in turn, requires measures even harsher than the IMF’s.


Are the IMF’s numbers any better? Regarding the primary budget surplus target (a crucial number that must be kept under 1.5 percent of GDP to give Greece any chance of recovery) Thomsen and Velculescu embrace precisely the number that I was proposing to the troika last year.


Why then did the IMF not back me in 2015 but are adopting the same 1.5 percent surplus target now? Because they also wanted something that I would never grant: crushing new austerity which is inhuman and unnecessary but which, today, the Tsipras government (according to Velculescu) seems ready to accept, having already surrendered once in July 2015.


The IMF’s austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society’s weakest, and turbocharge the humanitarian crisis. And it is unnecessary because meaningful growth is much more likely to return to Greece under our policy proposals to end austerity, target the oligarchy, and reform public administration (rather than attacking, again, the weak).


To give a monstrously exaggerated but terribly instructive parallel of the IMF’s logic, if Greece is nuked tomorrow the economic crisis ends and its macroeconomic numbers are “fixed” as long as creditors accept a 100 percent haircut. But, if I am right that our numbers added up just as well, while allowing Greece to recover without further social decline, why did the IMF join Berlin to crush us in 2015?


For decades, whenever the IMF “visited” a struggling country, it promoted “reforms” that led to the demolition of small businesses and the proletarisation of middle-class professionals. Abandoning the template in Greece would be to confess to the possibility that decades of anti-social programs imposed globally might have been inhuman and unnecessary.


To recap, the Wikileaks revelations unveil an attrition war between a reasonably numerate villain (the IMF) and a chronic procrastinator (Berlin). We also know that the IMF is seriously considering bringing things to a head next July by dangling Greece once more over the abyss, exactly as in July 2015. Except that this time the purpose is to force the hand not of Alexis Tsipras, whose fresh acquiescence the IMF considers in the bag, but of the German Chancellor.


Will Christine Lagarde (the IMF’s Managing Director with ambitions of a European political comeback) toe the line of her underlings? How will Chancellor Merkel react to the publication of these conversations? Might the protagonists’ strategies change now that we have had a glimpse of them?


While pondering these questions, I cannot stem the torrent of sadness from the thought that last year, during our Athens Spring, Greece had weapons against the troika’s organised incompetence that I was, alas, not allowed to use. The result is a Europe more deeply immersed in disrepute and a Greek people watching from the sidelines an ugly brawl darkening their already bleak future.

Sad beyond words.



The first of many to resign:  Iceland’s Prime Minister

The First “Panama Papers” Casualty: Iceland Prime Minister Resigns

We suspect more than a few ‘prosecuted’ bankers will be smiling wryly today as, following the exposure of his offshore financial dealings – revealed in the Panama Papers – Iceland’s embattled Prime Minister Sigmundur David Gunlaugsson has just resigned. And after two days of denials and one protest, Notgunlaugssoon may be more appropriate.

Despite earlier refusal to step down, the decision, which was reported by national broadcaster RUV,followed street protests that attracted thousands of Icelanders angered by the alleged tax evasion.

Here is the official report, Google translated:

Sigmund David Gunnlaugsson, Prime Minister, gave to the parliamentary group meeting of the Progressive Party today Sigurður Ingi Jóhannsson, Minister of Agriculture, devices with the Prime Minister. Sigmund David will remain chairman of the Progressive Party. This Sigurdur Ingi informed the media after the meeting of parliamentary parties. Bjarni Benediktsson, chairman of the Independence Party, has been introduced this proposal.

Sigmund David did not want to talk to the media after the meeting – Karl Garðarsson said confidentiality rule of the meeting and Sigrun Magnúsdóttir said he was not aware that the government had ruptured

The FT reports adds that the new Prime Minister will be Iceland’s Fisheries and Agriculture minister Sigurdur Ingi Johansson.

Which is odd, we were expecting Goldman could at least spare a vice president for the role, if not a managing director.

This is humourous; the head of Transparency International, based in Chile resigns.
Their job is the route out corruption

Head Of “Transparency International” In Chile Resigns After “Panama Papers” Revelations

Define irony.

While the global media has been almost entirely focused on the “circle of close Putin friends” who have emerged as some of Mossack Fonseca’s clients, and moments ago the Panama Papers even had their first official casualty when the Iceland prime minister resigned, far more amusing examples of “shell firm” perpetrators have emerged, if deep under the radar.

As Reuters reports with barely a trace of humor, the president of the Chilean branch of Transparency International resigned on Monday after documents from a Panamanian law firm showed he was linked to at least five offshore companies.

For those who are unfamiliar, Transparency International is a German-based organization that seeks to monitor and root out corporate and political corruption worldwide.


Perhaps he should have used Bill Clinton to get the definition of the word “transparency”?

As much as he would have wanted not to, ultimately he had no choice: “Gonzalo Delaveau presented his resignation as the president of Transparency Chile, which has been accepted by the board of directors,” the national body wrote on Twitter.

The reason for his resignation is that Delaveau’s name was among the tens of thousands of people (most non-US) that were exposed in the Mossack Fonseca leak.

While Delaveau is not accused of illegal activity, the leaks called into question his post at Transparency International.

According to CIPER, Delaveau, a lawyer, acts as a representative for Turnbrook Corporation, DK Corporation, Heatlhey International Inc, Turnbrook Mining Ltd and Vizcachitas Ltd, all of which are domiciled in the Bahamas. Delaveau also serves as a director for Turnbrook Mining, which owns 51.6 percent of Los Andes Copper, a Canadian exploration and development company currently focused on a mine project north of Chile’s capital, Santiago.

Reuters adds that in response to questions from CIPER, he said he was a director only at Turnbrook Mining and that his relations with the other companies were consistent with his role as a lawyer and legal clerk. He added in an interview with a local radio station that he was “extremely surprised” by the “gray, dark area” of Mossack Fonseca.

We would be too.

Delaveau’s resignation came hours after Chile’s tax authority announced the beginning of an “intense follow-up” of the Chileans mentioned in the Panama Papers, who range from ex-soccer stars to newspaper magnates.

The disclosures come as Chile deals with political and corporate corruption scandals that have left Chileans angry with the entire professional class and eroded the government’s popularity.

Sounds very much like the US.



Last week, when we stated that the sports minister has resigned, we knew that the Summer Olympics are in trouble;
today:  disastrous ticket sales to the hardluck country:
(courtesy zero hedge)

Disastrous Ticket Sales, Ongoing Political Turmoil Put Brazil Olympics In Jeopardy

Brazil’s widely documented (and escalating) economic, financial, and political devastation has traversed a path from the tragic, to the farcical, to the absurd, and now appears stuck in surreal.

Because in addition to an imminent collapse of the Rouseff regime which will hopefully be peaceful while unleashing a period of a great unknown, in our last piece on the 2016 Summer Olympics we quite bluntly said that the thought of even hosting the games, in what is now only four months away, was a joke. Brazil’s economy is seeing depression like conditions, and political landscape is an absolute disaster.

To refresh your memory on the current state of Brazil, in the aftermath of China’s hard commodity landing, the country has sadly devolved to sub-banana status level. Last summer, the country descended into political turmoil and the economy sank into what might as well be a depression. Nine months later, inflation is running in the double digits, output is in freefall, and unemployment is soaring. Last Wednesday, the government reported its widest primary budget deficit in history and less than 24 hours later, the central bank delivered a dire outlook for growth and inflation.

Meanwhile, VP Michel Temer’s PMDB has split with Dilma Rousseff’s governing coalition, paving the way for her impeachment and casting considerable doubt on the future of the President’s cabinet.

Just last week, in the aftermath of all of… this,  we asked a few very serious questions that we believe have yet to be addressed, along with a quote from the acting governor of Rio de Janeiro saying that the situation is “the worst I’ve seen in my career”

After all, there are quite a few very serious questions swirling around the Rio games. For instance: Will the water be clean enough for athletes to compete in? Will there be enough auxiliary power to keep the lights on? And, most importantly, will the games take place at all?

Millions of Brazilian citizens have recently taken to the streets to call for Rousseff’s ouster and to protest the return of former President Luiz Inacio Lula da Silva to government. It’s exceedingly possible that if House Speaker Eduardo Cunha can’t manage to get the impeachment job done, the populace will simply march on the Presidential palace.

How any of the above is compatible with hosting the largest sporting event in the history of the world is beyond us and George Hilton apparently has reservations himself. As does Francisco Dornelles, acting governor of Rio de Janeiro. “This is the worst situation I’ve seen in my political career,” Dornelles said this week, referencing the state’s finances. “I’ve never seen anything like it.”

Now, less than a week later, there is more disturbing, if expected, news. As CNN reports, only half of the tickets have been sold. With just four months to go, this is a huge blow to the viability of the 2016 games.

Brazil’s new minister of sports Ricardo Leyser (replacing another guy who resigned just days ago) suggests that the Brazilian Government may buy the tickets and distribute them to public schools. But… with what funds? After all Brazil is fast approaching insolvent? Or is this the asset the Brazilian Central Bank will monetize in its version of QE, as it prints even more money, in the process unleashing the worst stagflationary episode in history?

Actually, this is not a joke: Leyser told Brazilian newspaper Folha that the Brazilian government may purchase tickets that will be distributed to public schools. He said public officials must also work to boost worldwide confidence in Rio’s ability to host the games and ensure travelers’ safety.

The Government already posted a record primary budget deficit, and as a reminder, construction workers who are building the venues for the games are already pissed off that they aren’t being paid for their work. It’s unclear whether construction of the Olympic facilities will be finished as organizers have faced steep funding constraints – the budget was slashed by $500 million in January.

For now, however, just like with the stock market, there still is hope.





Oil rebounds nicely on the biggest inventory drawdown:

(courtesy zero hedge)


Crude Spikes After Biggest Inventory Draw In 2016

WTI’s ‘mysterious’ spike into the NYMEX close extended after hours (almost as if someone knew something). Inventories drewdown 4.6mm barrels according to API (drastically less than the expected 2.85mm build). This is the biggest weekly draw since Jan 1. Cushing was expected to see a build of 100k (after 2 weeks of draws) but saw a considerably larger one at +620k. Distillates inventories built as Gasoline drewdown very modestly.


  • Crude -4.3mm
  • Cushing +620k
  • Gasoline -116k
  • Distillates +2.7mm

Ending the 7 straight weekly build streak…


And the reaction…


Charts: Bloomberg


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


USA/JAPAN YEN 110.27 DOWN 0.955 (Abe’s new negative interest rate (NIRP)a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP)


USA/CAN 1.3146 UP.0069

Early THIS TUESDAY morning in Europe, the Euro FELL by 25 basis points, trading now WELL above the important 1.08 level RISING to 1.1362; 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 NIRPand NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Chinese yuan was UP in value (onshore) The USA/CNY DOWN in rate at closing last night: 6.4742 / (yuan UP /

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 96 basis points and trading now well BELOW that all important 120 level to 111.66 yen to the dollar. NIRP POLICY IS A COMPLETE FAILURE AND ALL OF OUR YEN CARRY TRADERS HAVE BEEN BLOWN UP/SIGNALS TO THE MARKET THAT THEY MAY DO A U TURN ON  NIRP AND INCREASE NEGATIVITY

The pound was DOWN this morning by 59 basis points as it now trades WELL BELOW the 1.44 level at 1.4203.

The Canadian dollar is now trading DOWN 69 in basis points to 1.3146 to the dollar.

Last night, Chinese bourses AND JAPAN were MIXED/Japan NIKKEI CLOSED DOWN 390.45  OR 2.42%/HANG SANG: CLOSED DOWN 321.92 OR 1.57%/ SHANGHAI CLOSED UP 43.53 POINTS OR 1.45% ON LAST 2 HR RESCUE/    / AUSTRALIA IS LOWER BY 1.42% / ALL EUROPEAN BOURSES ARE STRONGLY IN THE RED, 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 TUESDAY morning: closed DOWN 390.45 OR 2.42%

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 321.92 OR 1.57% . ,Shanghai CLOSED UP 43.53 OR 1.45%/ Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED/IN THE RED/India’s Sensex in the RED /

Gold very early morning trading: $1233.20


Early TUESDAY morning USA 10 year bond yield: 1.72% !!! DOWN 5 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.55 DOWN 5 in basis points from MONDAY night.

USA dollar index early TUESDAY morning: 94.69 UP 13 cents from MONDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers TUESDAY MORNING



And now your closing TUESDAY NUMBERS


Portuguese 10 year bond yield:  3.15% UP 19 in basis points from MONDAY

JAPANESE BOND YIELD: -.053% UP 2in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.49% UP 3 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.27  UP 3 IN basis points from MONDAY

the Italian 10 yr bond yield is trading 22 points lower than Spain.




Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond: 2:30 pm

Euro/USA 1.1384 DOWN .0002 (Euro DOWN 2 basis points/still represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN

USA/Japan: 110.45 DOWN 0.777 (Yen UP 77 basis points) and  a major disappointment to our yen carry traders and Kuroda’s NIRP. They stated that  NIRP would continue.

Great Britain/USA 1.4151  DOWN .0111 Pound DOWN 111 basis points/(POOR ECONOMIC DATA/ Brexit concern.)

USA/Canada: 1.3162  UP  .0.0086 (Canadian dollar DOWN 86 basis points despite  oil being up (WTI = $36.00)



This afternoon, the Euro was DOWN by 2 basis point to trade at 1.1384   as the markets STILL REACT TO YELLEN’S DOVISHNESS

The Yen ROSE to 110.45 for a GAIN of 78 basis pints as NIRP is a big failure for the Japanese central bank/also all our yen carry traders are being fried.

The pound was DOWN 111 basis points, trading at 1.4151 ( BREXIT CONCERNS/POOR ECONOMIC DATA)

The Canadian dollar FELL by 86 basis points to 1.3162,DESPITE THE FACT THAT THE price of oil was UP today (as WTI finished at $36.00 per barrel)

The USA/Yuan closed at 6.4760

the 10 yr Japanese bond yield closed at -.053% UP 2 BASIS  points in yield

Your closing 10 yr USA bond yield: DOWN 4 basis point from MONDAY at 1.73% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.55 DOWN 5 in basis points on the day and will be worrisome as China/Emerging countries continues to liquidate USA treasuries ( HUGE POLICY ERROR)


Your closing USA dollar index, 94.65 UP 8  in  cents on the day at 2:30 pm

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY

London:  CLOSED DOWN 73.49 POINTS OR 1.19%
German Dax :CLOSED DOWN 258.72 OR 2.63%
Paris Cac  CLOSED DOWN 94.94  OR 2.18%
Spain IBEX CLOSED DOWN 209.80 OR 2.44%
Italian MIB: CLOSED DOWN 529.96 OR 3.00%

The Dow was down 133.68 points or 0.75%

Nasdaq down 47.86 points or 0.46%
WTI Oil price; 36.00 at 2:30 pm;

Brent Oil: 37.93
USA dollar vs Russian Rouble dollar index: 68.751 (Rouble is DOWN 18 /100 roubles per dollar from yesterday) EVEN AS the price of Brent and WTI OIL ROSE



This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:


BRENT: 38.35

USA 10 YR BOND YIELD: 1.718%

USA DOLLAR INDEX:94.61 up 5 cents on the day




And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form:


Bonds & Bullion Bid As More “Good” News Slams Stocks

2015’s positive return for The S&P 500 was rescued at the last second…


Better than expected PMIs prompted a rip and dip early on as good news ended up as bad news today… as opposed to bad news being bad news yesterday (and good news being good news on Friday)… and just like that all the jobs gains are gone…


And despite some ramp efforts, this…


Not only is the 2015 analog holding up – in an ominous way…


But the 2001 analog is looking especially ugly…

h/t @NautilusCap

As Deutsche’s systemic risk analog sends the loudest warning…


Since Friday’s exuberant ramp close, things have not gone according to The Fed’s plan…


and Obama’s address today scaring the merger arb crowd did not help..


Since payrolls, bonds are leading, gold and stocks are unch and oil is monkey-hammered…


Crude ramped dramatically at the NYMEX close, which along with a USDJPY ramp sent stocks soaring – and most importantly lifted S&P back into the green post-Payrolls… and then stocks dumped…


Treasury yields dropped on the day and flattened…4th day of 2s30s flattening in a row…


Commodity currency carnage offset JPY strength to leave the USD Index unch-is on the day…


And despite the relatively unch day, gold and silver rallied and crude was just bloody idiotic…


Crude close up…


Charts: Bloomberg

Bonus Chart: Fed Balance Sheet continues to be point of pivot suggesting 1965 FV…




USA reports that its February trade deficit rose from 45.9 billion up to 47.1 billion.  The expected number was 46.2 billion.  This was the largest monthly deficit since August 2015 where the reported number was 5.05 billion. With much of the shale oil mothballed, expected this number to rise in the future. Also the Atlanta Fed will lower its GDP first quarter figures again:

(courtesy zero hedge)

Q1 GDP To Be Revised Even Lower After February Trade Deficit Grows More Than Expected

As of this moment, the Atlanta Fed calculates Q1 GDP to be -0.7% (Bank of America has it at 0.6%). We expect this number to be promptly revised even lower following the latest disappointing trade data from the US, when moments ago the BEA reported that the US February deficit rose from $45.9BN to $47.1BN, missing the $46.2BN consensus estimate. This was the largest monthly deficit since August 2015’s $50.5BN, and the number is likely only going to increase as the US is once again forced to start importing more oil with its own shale industry increasingly mothballed.

From the BEA:

The U.S. monthly international trade deficit increased in February 2016 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit increased from $45.9 billion in January (revised) to $47.1 billion in February, as imports increased more than exports. The previously published January deficit was $45.7 billion. The goods deficit increased $0.9 billion from January to $64.7 billion in February. The services surplus decreased $0.3 billion from January to $17.7 billion in February.


Exports of goods and services increased $1.8 billion, or 1.0 percent, in February to $178.1 billion. Exports of goods increased $1.8 billion and exports of services decreased less than $0.1 billion.

The increase in exports of goods mainly reflected increases in consumer goods ($1.1 billion) and in other goods ($0.6 billion).

The decrease in exports of services mainly reflected decreases in transport ($0.2 billion), which includes freight and port services and passenger fares, and in financial services ($0.1 billion). An increase in travel (for all purposes including education) ($0.2 billion) was partly offsetting.


Imports of goods and services increased $3.0 billion, or 1.3 percent, in February to $225.1 billion. Imports of goods increased $2.7 billion and imports of services increased $0.3 billion.

The increase in imports of goods mainly reflected an increase in consumer goods ($3.6 billion). A decrease in automotive vehicles, parts, and engines ($1.5 billion) was partly offsetting.

The increase in imports of services reflected increases in travel (for all purposes including education) ($0.1 billion), in other business services ($0.1 billion), which includes research and development services; professional and management services; and technical, trade-related, and other services, and in transport ($0.1 billion).

Goods by geographic area (seasonally adjusted, Census basis)

  • The deficit with China increased $1.0 billion to $32.1 billion in February. Exports decreased $0.3 billion to $8.4 billion and imports increased $0.8 billion to $40.5 billion.
  • The deficit with Canada increased $0.3 billion to $1.0 billion in February. Exports decreased $0.7 billion to $21.6 billion and imports decreased $0.4 billion to $22.6 billion.
  • The balance with members of OPEC shifted from a deficit of $0.2 billion in January to a surplus of $1.9 billion in February. Exports increased $1.6 billion to $7.4 billion and imports decreased $0.4 billion to $5.5 billion.
The Fed cuts Q! GDP estimate only .4% due to the lousy trade data
(courtesy zero hedge)

Atlanta Fed Cuts Q1 GDP Estimate To 0.4%

Following this morning’s disappointing trade data (but… but… surveys showed that the workers in the service sector are more optimistic… just ignore the actual hard data) we asked if today’s Atlanta Fed GDP update would be above or below 0.3%.

Inline image 1

Moments ago we got the answer: it was over, but by the smallest possible increment. And the answer is….

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 5, down from 0.7 percent on April 1. After yesterday morning’s light vehicle sales release from the U.S. Bureau of Economic Analysis and the manufacturing report from the U.S. Bureau of the Census, the forecast for real GDP growth declined from 0.7 percent to 0.4 percent due to declines in the forecasts for real consumer spending growth and real equipment investment growth. The forecast for real GDP growth remained at 0.4 percent after this morning’s international trade report from the U.S. Census Bureau, as a slight decline in the forecast for real net exports was offset by a slight increase in the forecast of real equipment investment growth.

More conflicting data on Markit and ISM service reports:
(courtesy Markit/ISM service reports)

Markit, ISM Paint Conflicting Pictures Of US Service Economy; Market Focuses On The More Bullish One

One again it was a “good cop, bad cop” combination of the Markit and ISM service surveys.

First, it was Markit, which printed at the just barely expansionary Final March print 51.3, up from the preliminary 51.0, but the internals continued to deteriorate. As the chart below shows, and as the commentary confirms, the US service sector is barely hanging on by a thread.

Some of the highlights:

  • Service sector output rises in March, following slight decline in previous month
  • New work expands at slowest rate seen in six-and-a-half year survey history
  • Optimism about the business outlook also dips to a post-crisis low

The details:

U.S. service providers signalled a modest rebound in business activity and robust employment growth during March. However, incoming new business expanded at the slowest pace since the survey began in October 2009, which also contributed to a fall in business confidence to a survey-record low. Meanwhile, input cost inflation remained subdued in March and prices changed by service sector companies increased at only a marginal pace.

The seasonally adjusted final Markit U.S. Services Business Activity Index registered 51.3 in March, up from 49.7 in February and back above the crucial 50.0 no-change value. Nonetheless, the latest reading was still the second-lowest since October 2013 and pointed to only a marginal upturn in service sector output. Moreover, the average for the first quarter of 2016 (51.4) signalled the weakest expansion of business activity since Q3 2012.

The average index reading in Q1 2016 (51.5) was the weakest seen for any quarter since Q3 2012 (51.3).

Respondents were not happy:

Survey respondents noted that subdued growth of incoming new work persisted in March. The latest expansion of new business volumes was only marginal and the weakest in six-and-a-half years of data collection. Anecdotal evidence suggested that uncertainty about the economic outlook and cautious spending patterns among clients continued to hold back new business growth across the service sector.

Softer growth of incoming new business resulted in another reduction in backlogs of work during March. Work-in-hand (but not yet completed) has now fallen for eight months running, which firms mainly linked to a lack of pressure on operating capacity at their business units. However, service providers boosted their payroll numbers, which continued the upward trend seen in each month since March 2010. Companies that reported a rise in their staffing levels mainly commented on the launch of new products and long-term business expansion plans.

Service providers indicated sustained optimism (on balance) about the year-ahead business outlook in March. However, the degree of positive sentiment moderated for the second month running and was the lowest since the survey began in late-2009, reflecting heightened economic uncertainty and softer new business growth in recent months.

* * *

And then, as is customary, the traditionally more bullish ISM reported that in March, the non-mfg ISM rebounded from 53.4 to 54.5, modestly beating expectations of 54.2.

The all important New Orders series rose from 55.5 to 56.7, which makes it the highest print since December of 2015.

Other components likewise rose, with Business Activity rising +2 to 59.8; the Employment Index refuted the trend spotted by Markit, and also rose from a contractionary 49.7 to 50.3, while Prices Paid jumped from 45.5 to 49.1

The full breakdown:

And, as always, the responses which at key inflection points tend to be oddly cherrypicked to the upside, were just that:

  • “Nationally, business seems stronger than a year ago in Q1. Internal volume is better than expected and vendors report stronger Q1 than expected.” (Management of Companies & Support Services)
  • “[Business] conditions are moving at a slow, but positive pace in this market. Expansion efforts are back on the horizon for late 2016.” (Finance & Insurance)
  • “Macroeconomics, the world oil glut, Fed interest rates, foreign currencies in trouble, the slowing Chinese economy and a strong dollar will continue to place pressure on U.S. exports, especially food commodities. These situations have created lower domestic wholesale prices and lower hotel COGS [Cost of Goods Sold]; a win for us.” (Accommodation & Food Services)
  • “Stability/dependability of revenue sources and cost of healthcare continue to be drivers in government revenues and expenditures.” (Public Administration)
  • “Similar to last month, our company continues to look for ways to invest in lowering prices to attract cost-conscious consumers in a highly competitive grocery retail environment.” (Retail Trade)
  • “No new business, but existing business is up 5 percent month-over-month and 40 percent year-over-year, especially in our e-commerce fulfillment services. Subsequent purchasing is relatively flat as productivity improvements are creating more capacity with less incremental cost.” (Transportation & Warehousing)
  • “Lower volumes than expected at the start of the year.” (Arts, Entertainment & Recreation)
  • “Business remains the same with an increase in hiring.” (Information)

The market reaction, as expected, ignored the gloomy Markit release, and spiked on the far more bullish ISM print, with the Dow nearly wiping out all the day’s losses

Puerto Rico is in a mess.  Today bonds collapses with yields well over 12% after their senate passed a debt moratorium bill not to pay money owed. The money markets will be in total disarray. A real mess..
(courtesy zero hedge)

Puerto Rico Bonds Plunge After Senate Passes Debt Moratorium Bill

The ongoing feud between Puerto Rico and its mostly hedge fund creditors is promptly shaping up as the next “Argentina”, where “vulture investors” may well end up holding the island commonwealth hostage for years, during which time, however, they won’t get paid.

This is shaping up as the latest development in the saga in which earlier today Puerto Rico’s Senate approved a bill calling for a moratorium on a wide range of debt payments, including general-obligation bonds, through January 2017 in what Bloomberg dubbed “the latest escalation of the Caribbean island’s fiscal crisis.”

The measure, passed around 2:30 a.m. local time, would allow Governor Alejandro Garcia Padilla to suspend payments on debt backed by the government, the island’s Government Development Bank and other public agencies, according to a copy of the legislation obtained by Bloomberg. That includes the Sales Tax Financing Corp., known by its Spanish acronym Cofina. A default on those obligations would be a first for Puerto Rico, which so far has only failed to pay on bonds backed by legislative appropriation and rum taxes.

The bill has yet to be enacted: it remains to be reviewed by the island’s House of Representatives on Tuesday after stalling there previously. It’s the culmination of months of posturing by commonwealth officials and bondholders since Garcia Padilla declared that Puerto Rico’s debts were unpayable in June 2015. It reflects the governor’s long-held position that the island can’t continue to pay creditors on time – even those holding constitutionally guaranteed securities – while still providing essential services to residents.

Today’s latest gambit follows a February proposal by Puerto Rico which to repay creditors (who are owed a total of $70 billion) to the tune of 54 cents on the dollar, a move which we then dubbed “Puerto Rico’s opening salvo in what’s likely to be protracted battle to tackle the entire debt burden.”

The proposal then looked as follows:

Back then Puerto Rico proposed to offer “growth bonds” designed to make up for the losses. However, the payout on those securities will be tied to the island’s economy and as you might recall, things aren’t going so well. The following table from Moody’s Analytics provided some sense on how valuable these “growth bonds” would be:

As Daniel Henson, an analyst at Height Securities warned then, “Puerto Rico debt restructuring proposal isn’t credible. The targets are “wholly unrealistic,” and require creditors to trust Puerto Rico will make good faith effort to repay them.”

Fast forward to today’s escalation when the same Daniel Henson chimes in again:“We continue to believe there are political constraints on the consummation of a debt moratorium that impairs GO bonds, and, indeed, such an arrangement would appear to us to be wildly out of step with any reading of the local constitution. The reality is that Puerto Rico is an American jurisdiction, and its laws are not at the whims of political appetite.”

However, as of 2:30am local they are, if only for the time being.

As Bloomberg details, non-constitutionally protected bond payments would be suspended immediately under the proposal, while those backed by the constitution would be halted starting July 1, when Puerto Rico owes $805 million on its general obligations. The bill would also prevent creditors from suing the commonwealth for defaulting through January 2017, the same as the moratorium period.

The bond market was not enthused: general obligations with an 8% coupon and maturing 2035 traded Tuesday at an average price of 66 cents on the dollar, the lowest since the bonds were first sold in 2014, data compiled by Bloomberg show. The average yield was 12.8 percent.

As is known from previous coverage of the Puerto Rico debt crisis, investors holding general obligations had already been working with island lawmakers, excluding the governor, to come to a consensual plan, Andy Rosenberg, a lawyer at Paul Weiss Rifkind Wharton and Garrison, said in a statement. He represents a group of general-obligation bondholders in their negotiations with Puerto Rico and other creditor groups.

Bloomberg adds that lawmakers are considering separate legislation that would suspend principal payments on general-obligation debt for five years, while still paying interest during that time, according to a House lawmaker who asked for anonymity because the talks are private. The measure wouldn’t reduce the face value of the securities, the person said. Puerto Rico has about $13 billion of general-obligation debt.

There is more.

The legislation also addresses the GDB, which is facing speculation that it’ll lapse into insolvency. The bank’s receivership process, liquidity and reserve requirements and payment obligations would be suspended indefinitely, according to Hanson. The bill seeks to split the entity into a “good bank” and “bad bank,” he said.

Hedge funds holding debt in the GDB sued on Monday to stop the bank from returning deposits to local government agencies as it faces a growing cash shortage. The funds, which include affiliates of Brigade Capital Management, Claren Road Asset Management and Solus Alternative Asset Management, accused the bank of seeking to “prop up” local agencies at the expense of other creditors. The GDB has a $422 million debt-service payment due May 1.

The Government Development Bank serves the dual purpose of providing financial support to local governments and acting as a financial adviser to the commonwealth. The funds, which say they hold a “substantial amount” of almost $3.75 billion in the bank’s outstanding debt, blamed the entity’s deteriorating condition on a “hopeless conflict” between loyalties to Puerto Rico and to creditors.

In short: the situation is getting messier by the day with a compromise deal now seemingly impossible – absent a US government bailout – and meanwhile Puerto Rico’s money is running out, which will ultimately be the decisive catalyst that leads to the next step in the crisis.

Puerto Rico’s bondholders responded moments ago, and they are not happy:

“The governor has spent the last nine months rebuffing all overtures by the GO holders,” Rosenberg said in the statement. The deal proposed by investors “would give Puerto Rico additional liquidity by, among other things, deferring substantial principal payments. Most importantly, this consensual deal avoids a July 1 default on constitutional debt.”


This will hurt a lot of people and the arbs who do doubt many blew up a few seconds after the Treasury announcement of an action to curb USA inversions:

(courtesy zero hedge)

Allergan Implodes: Pfizer Deal In Jeopardy After Treasury Announces “Action To Curb Inversions, Earnings Stripping”

As if a million M&A arbs suddenly cried out in terror, and were suddenly silenced.

Moments ago the stock of Allergan imploded, crashing by 20%, plunging to $225 or the lowest level since late 2014, in the process blowing up countless M&A arb deals which were hoping the recently blowing out spread, which as of Friday hit a post announcement wide of $61, is attractive enough to take the risk of a Treasury crackdown on tax inversion deal.

Alternatively, maybe someone knew something.

Something, such as what the Treasury announced 5pm this afternoon in a release titled “Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping

As the title implies, the Treasury has just made it quite clear that any and all tax inversions, of which the Pfizer-Allergan deal is most notable, are no longer welcome. This is what it said.

Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping

Today, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued temporary and proposed regulations to further reduce the benefits of and limit the number of corporate tax inversions, including by addressing earnings stripping. By undertaking an inversion transaction, companies move their tax residence overseas to avoid U.S. taxes without making significant changes in their business operations. After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States, while shifting a greater tax burden to other businesses and American families.

Treasury has taken action twice to make it harder for companies to invert. These actions took away some of the economic benefits of inverting and helped slow the pace of these transactions, but we know companies will continue to seek new and creative ways to relocate their tax residence to avoid paying taxes here at home,” said Treasury Secretary Jacob J. Lew. “Today, we are announcing additional actions to further rein in inversions and reduce the ability of companies to avoid taxes through earnings stripping. This will have an important effect, but we cannot stop these transactions without new legislation. I urge Congress to move forward with anti-inversion legislation this year. Ultimately, the best way to address inversions is to reform our business tax system, which is why Treasury is releasing an updated framework on business tax reform, outlining the administration’s proposals to date as a guide for future reform. While that work goes on, Congress should not wait to act as inversions continue to erode our tax base.”

Genuine cross-border mergers make the U.S. economy stronger by enabling U.S. companies to invest overseas and encouraging foreign investment to flow into the United States. But these transactions should be driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of a parent entity to a low-tax jurisdiction simply to avoid U.S. taxes.

Today, Treasury is taking action to:

  • Limit inversions by disregarding foreign parent stock attributable to recent inversions or acquisitions of U.S. companies. This will prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition.
  • Address earnings stripping by:
    • Targeting transactions that generate large interest deductions by simply increasing related-party debt without financing new investment in the United States.
    • Allowing the IRS on audit to divide debt instruments into part debt and part equity, rather than the current system that generally treats them as wholly one or the other.
    • Facilitating improved due diligence and compliance by requiring certain large corporations to do up-front due diligence and documentation with respect to the characterization of related-party financial instruments as debt. If these requirements are not met, instruments will be treated as equity for tax purposes.
    • Formalize Treasury’s two previous actions in September 2014 andNovember 2015.

Treasury will continue to explore additional ways to address inversions.

Treasury is also releasing an updated framework for business tax reform, which revises the framework released in 2012. This lays out the key elements of the President’s approach to reform and details the specific proposals the administration has put forward, including a comprehensive approach to reforming the international tax system.

The Allergan-Pfizer spread now is basically to levels as if the deal never happened:

We can’t wait to find out how many M&A arbs, who had anywhere between 2x and 5x (or more) leverage on the arb spread (of which the most notable recent arb chaser is none other than Franklin resources whose Dec 31. $1.3BN pure arb stake is now worth 20% less in an instant) just blew up after hours with just this one simple press release.

The table below shows why Franklin Resources will be short one employee tomorrow:

We also wonder how this will impact the broader, and quite illiquid, market tomorrow.

And now the consequences.  Pay attention to the section whereby Goldman Sach’s
Alec Phillip gives a detailed account of the Treasuries announcement and what it means to foreign firms operating in the uSA and also put future restrictions on the so called inversion transactions.  The bottom line:  less European tax revenue for our major companies domiciled in Europe.
(courtesy zero hedge)

Is The Allergan-Pfizer Deal Over? What Wall Street Thinks

Yesterday’s stunning announcement by the US Treasury, which released a report titled  “Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping“, and which was clearly aimed at ending not only all tax inversions, but the biggest pharma M&A deal in history, Pfizer’s tax-inverting takeover of Allergan (pardon Actavis) hit AGN like a ton of bricks, sending the stock crashing 20%.

As we previewed last night, we expect numerous M&A arbs to be puking up blood this morning, following the biggest spread blow out in recent history in a $100+ billion deal that involved virtually everyone, from plain vanilla funds to the fastest of the fast money.

But is the deal over? Here are some Wall Street opinions (via BBG).

Citi:“Deal likely to be over”

  • U.S. ownership of combined Pfizer-Allergan will probably approach and may exceed 80% threshold under new Treasury Dept. regulation, “likely precluding” deal from taking place as an inversion, Citi analyst Liav Abraham says in note.
  • Even if domestic ownership is in 60%-80% range, Citi says PFE would probably have difficulty importing its offshore cash balances, providing sufficient cause for the deal not to move forward
  • Expects AGN will see multiple contraction over near term as deal had insulated stock from recent multiple contraction in specialty pharma; says AGN warrants premium to peer group due to earnings quality, growth profile and balance sheet,

Evercore ISI: “Pfizer-Allergan deal trading like it’s “95% dead”

  • Arbs focused on 3-year look back provision for AGN acquisitions, whether co. will be viewed as appropriately sized for a deal, Evercore ISI analyst Mark Schoenebaum says in note
  • Arbs note that the Treasury Dept. regulations released Monday are “proposals” and aren’t “implemented;” unclear whether cos. would litigate damages
  • Deal includes clause that may require only $400m breakup fee on “adverse changes in tax law,” Evercore ISI analyst Umer Raffat writes

Bernstein:  “distinct possibility” regs don’t end up jeopardizing the PFE-AGN deal

  • Bernstein analyst Tim Anderson says in note that there’s a “distinct possibility” that the new Treasury regs don’t end up jeopardizing the PFE-AGN deal
  • If AGN pact falls through, PFE could revisit AstraZeneca or Glaxo if rules don’t squash appetite for inversion deals

Jefferies: “Treasury may derail the PFE-AGN deal

  • Jefferies analysts led by Jeffrey Holford say in note that Treasury action may derail the PFE-AGN deal and could spell the end of PFE’s inversion attempts

* * *

But the best summary of what just happened comes from Goldman’s Alec Phillip, as explained in his overnight note “Treasury Releases New Inversion-Focused Tax Regulations.” The implications are substantial not only for Allergan, but the entire inversion space.

From Goldman:

BOTTOM LINEThe Treasury has released regulations that might increase the effective tax rate of foreign companies operating in the US and would put further restrictions on some pending and future corporate inversion transactions.


1. The Treasury released stronger-than-expected changes to tax rules related to inversion transactions. This marks the third set of inversion-focused rules changes since 2014. While the first set of changes in September 2014 was stronger than expected, the second set in October 2015 was much more incremental, creating an impression that the Treasury might not make any further significant changes. By contrast, the changes the Treasury proposed today (April 4) go beyond inversion transactions per se and focus on a practice that foreign firms—not just inverted companies—use to lower their US tax rate, as well as transactions that do not technically meet the definition of inversions but which the Treasury believes to be inversions in practice.

2. “Earnings stripping” changes are broader than expected but it is not yet clear how significant an effect on effective tax rates they will have. Under current law, foreign companies can lend to their US subsidiaries, which then pay tax-deductible interest in return. This has the effect of reducing taxable earnings in the US and increasing it in lower-tax jurisdictions. The Treasury raised the possibility of changing the rules in this area in its 2014 anti-inversion notice, but after more than a year of inaction many observers had concluded that the Treasury might not act. Ultimately, the Treasury has applied this change to all foreign-owned companies, but has not specified quantitative thresholds or ratios above which interest deductions would be disallowed (some tax experts have proposed tightening existing debt-to-equity and/or interest-to-income ratios). Instead, the Treasury is requiring greater documentation of, among other things, a reasonable expectation of repayment and a legal obligation to do so. It is not clear what effect this will ultimately have on foreign firms’ effective US tax rates, but it could result in incrementally higher tax liabilities (this does not generally affect US-based firms, because interest income earned abroad is usually taxed by the US as it is earned).

3. “Anti-stuffing” rules could change the tax treatment of pending cross-border transactions. Under the new rules, cross-border M&A transactions that involve a series of acquisitions would become more likely to be counted as inversions for tax purposes, even if under current rules they involve a large enough ownership change (greater than 40%) to avoid more restrictive treatment. Specifically, the Treasury states that it is focused on transactions, for example, where a foreign company acquires a US company, and the combined firm then acquires another US firm in a subsequent transaction. Treasury also states that how these transaction are treated “should not depend on whether there was a demonstrable plan” to undertake a series of transactions, i.e., the Treasury would consider unrelated transactions to nevertheless be related and thus subject to more restrictive treatment if the transactions occurred within three years of one another. The upshot is that pending and future transactions that would have previously avoided the more restrictive tax treatment applied to inverted companies could now be subject to them. For transactions that involve between a 20% and 40% ownership change, this can mean additional tax on inversion-related gains and greater tax consequences for accessing unrepatriated foreign earnings for ten years following the transaction; for companies with less than a 20% ownership change, this would mean continued treatment as a US-domiciled company despite the transaction. The rules will apply to transactions that close between April 4, 2016 and April 4, 2019.

4. These changes will be made unilaterally and no congressional approval is required. The Treasury is making these changes via regulation on the basis of existing laws, so the announced policies are essentially final unless the Treasury decides to revise its interpretation of the laws again in the future. That said, it is possible that some companies involved in transactions that would be restricted under the new rules could bring a legal challenge against the changes.


The arb damage explained:

Schrodinger’s Pharmageddon

For all those who are sitting on pins this morning (and there are many), following every twist in the ongoing drama involving what until yesterday was supposed to be the biggest M&A deal of the decade, we have some news. Moments ago Reuters blasted that:


The stock promptly sold off. And then, not even 5 minutes later, Bloomberg blasted the following:


The stock then promptly spiked but judging by the feeble response, not even vacuum tubes care much anymore.

So who does care? Well, as it turns out, a whole lot of people. RBC Charlie McElligott explains:

With AGN currently -19.0% against PFE +2.5% pre-open, the epicenter of the destruction will be felt within the arb community, where they have this trade on in size (ISI estimates +25mm AGN against -300mm PFE, with only 10% of that trading after-hours last night—i.e. “more to come” today) and lever it up 3 to 6 x’s.  One then turns to other deals which might see forced spread-unwinding (e.g. AET / HUM, TWC/CHTR etc) as merger-arb books are scaled-back across Street (you don’t have to be an event-fund to have a side-pocket).  Reminder, Merger Arb has been the only equity strategy posting a POSITIVE YTD return (HFR Merger Arb Index +1.6% YTD)…so you know a lot of funds were increasing the sizes of those books because it was working, against a much thornier long / short or market-neutral environment.

Speaking directly to this observation that this has implications far-beyond ‘just’ the risk-arb world: per the most recent GS HF Monitor (thru Q4 filings), AGN is ‘THE’ most consensually held stock across the broad hedge fund community (sampling of 860 funds): there are 80 hedge funds holding the stock as a top 10 largest position (tops of the VIP list), 107 HFs own it overall, it has an average 7% portfolio weight, and 16% of its equity cap is owned by hedge funds.

It’s highly likely that HC dedicateds won’t defend the stock for two reasons: 1) the broad question of ‘are the tax benefits still there to see the deal go through’ with these ex post facto changes to essentially what the acquirer is buying and 2) in light of the spec pharma pain YTD, low delta on managers sticking around to see how it plays out.  Clearly last night’s “shoot first / ask questions later” response shows that arbs feel same way.

and here are the 80 hedge funds crushed by the Treasury’s taxing  inversion
(courtesy zero hedge)

How The U.S. Treasury Just Crushed 80 Hedge Funds

The following list, according to Goldman Sachs, shows 50 stocks that most frequently appear among the largest 10 holdings of hedge funds. Spot the top one.


After today’s absolutely slaughter of Allergan, we expect the Goldman Hedge Fund VIP basket, whose constituents this table shows, to be absolutely obliterated.

And just like that, the US Treasury singlehandedly crushed the second quarter, and perhaps the year, for at least 80 (and as much as 107) hedge funds, which likely means more redemptions to come, more illiquidity, an even more volatile market in the months to come, and obviously, even more central bank intervention to offset it all.

Humour time;  Valeant stocks soars after its own board clears itself of any more wrongdoing:
(courtesy zero hedge)

Valeant Stock Soars After Its Own Board Clears Itself Of Any More Wrongdoing, Will File 10-K

Valeant may be on the verge of a technical default as its lender demand not one but two pounds of flesh, it may be suffering imploding sales, it may have fired the entire salesforce for the female libido drug Addyi (which it acquired late last year), and it may be trying to pin all of its allegedly criminal book-cooking on its former CFO (who used to be a fromer head Goldman banker), the same CFO who refuses to resign from Valeant’s board even though Valeant clearly wants him gone, but at least minutes ago, an ad hoc committee from Valeant’s board (yes the same board where the former scapegoated CFO is still present) has decided that upon reviewing its company, it has found nothing else that was glaringly criminal, and will therefore no restate results any further, and intends to file a 10K on or before April 29, 2016.

From the release:

Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) today announced that the ad hoc committee of the board of directors (the “Ad Hoc Committee”) believes that its review of various Philidor and related accounting matters is complete, and that it has not identified any additional items that would require restatements beyond those required by matters previously disclosed.

Given the completion of the review, Valeant’s Board has determined to dissolve the Ad Hoc Committee and that the 12 independent directors on Valeant’s Board, including the members of the Board’s Audit and Risk Committee, will assume oversight responsibility for remaining work associated with the completion of the Company’s current and restated financial statements and disclosures, as well as its assessment of related internal controls and remediation matters.  As previously disclosed, the company intends to file its Form 10-K on or before April 29, 2016.

Robert Ingram, chairman of the board and chair of the Ad Hoc Committee stated, “We appreciate the efforts of the Ad Hoc Committee and its independent advisors over the past five months. After conducting more than 70 interviews and reviewing over one million documents, the Ad Hoc Committee has not identified any additional items requiring restatements beyond those matters previously disclosed. We believe it is appropriate to transfer responsibility for any continuing work to the Board’s independent directors.  We continue to work diligently and are on schedule to file our Form 10-K on or before April 29, 2016.”

The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company’s Form 10-K for the year ended December 31, 2015, which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016.  The company believes that after giving effect to the restatement, it will have remained in compliance with all of the financial maintenance covenants in its credit facility at the end of each affected quarterly period.

Some questions:

  • Is Valeant’s clearing itself of any further fraud merely going to be the latest fraud in this epic saga of alleged criminality?
  • What happens when the next skeleton emerges from the closet?
  • Is this merely a last ditch effort to regain leverage in the covenant renegotiation discussions with lenders?
  • And just who can possibly take anything Valeant’s deeply entrenched board says seriously any more?

We will find out, for now however, a sudden short squeeze has pushed the stock up nearly 17% higher, from fresh multi-year lows around $25 to just over $30.

We doubt this price will last.

Lately we have seen some major hedge funds move from Connecticut to say Florida where the tax treatment is better.  Today David Tepper announced that he was moving from New Jersey to the friendly confines of Florida.  That will put New Jersey into deeper financial straits and yes one guy moving can cause terrific damage to the states funding:
(courtesy zero hedge)

New Jersey In Fiscal Peril As David Tepper Departs

Over the past several months, the recurring story of hedge fund billionaires taking leave their home states, and heading to tax-friendly Florida has led various pundits to focus on the deteriorating fiscal state of hedge-fund heavy Connecticut, where as we reported recently credit risk surged to record highs following a disappointing bond auction.


As we reported at the time, the likely culprit was the state’s $550 million general-obligation sale on March 17, which included debt due in 2026 that priced to yield 2.52 percent, compared with an expected 2.37 percent based on Bloomberg’s Connecticut index. The state’s office of policy and management said last week that the budget deficit for the current fiscal year is $131 million, an increase of $111 million from the prior month’s estimate.

The ongoing hedge fund exodus, as billionaires leave for states where their money is treated better, will only make things for CT worse.

Now another state is in the crosshairs following the imminent “exstatiation” of prominent hedge fund billionaire, Appaloosa’s David Tepper.

As Bloomberg reports, the decision by billionaire hedge-fund manager David Tepper to quit New Jersey for tax-friendly Florida has put the Garden State in fiscal peril, and  could complicate estimates of how much tax money the struggling state will collect, the head of the Legislature’s nonpartisan research branch warned lawmakers.

That’s right: one person can make or break the precarious fiscal balance of New Jersey.

According to Bloomberg, Tepper, 58, registered to vote in Florida in October, listing a Miami Beach condominium as his permanent address, and in December filed a court document declaring that he is now a resident of the state. On Jan. 1, he relocated his Appaloosa Management from New Jersey to Florida, which is free of personal-income and estate taxes.

His move has put NJ state official in a state of near panic.

“We may be facing an unusual degree of income-tax forecast risk,” Frank Haines, budget and finance officer with the Office of Legislative Services told a Senate committee Tuesday in Trenton.

The reason for the panic is that New Jersey relies on personal income taxes for about 40% of its revenue, and less than 1 percent of taxpayers contribute about a third of those collections, according to the legislative services office. A one percent forecasting error in the income-tax estimate can mean a $140 million gap, Haines said.

Tepper’s departure is unexpected: he has lived in New Jersey for more than two decades, initially as an executive at Goldman Sachs where he helped run junk-bond trading during the late 1980s and early 1990s, and then after founded Appaloosa in 1993. His fortune is estimated at $10.6 billion, according to the Bloomberg Billionaires Index.

That makes him as the wealthiest person in New Jersey. Or rather “made” him.

But the worst news is for New Jersey residents who already bear the country’s third-highest tax burden, according to the Tax Foundation in Washington. Along with the nation’s highest property taxes, it’s one of two states that levy both an estate tax on the deceased and an inheritance tax on their heirs. The income-tax rate for top earners is 8.97%. Democratic legislators have repeatedly passed a millionaire’s tax that would increase the levy to 10.75 percent, but Republican Governor Chris Christie has vetoed it each time.

With Tepper’s departure, Christie will have no choice but to comply.

Meanwhile, keep an eye on NJ CDS: already the riskiest state in the country, NJ credit default swaps are set to blow out further in the coming weeks.


Well that is all for today
I will see you tomorrow night


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